3 doctor groups plan to expand Deals may enhance networks' appeal among some insurers

Scrambling for advantage

Physicians seek to control care, affect business side

November 22, 1996|By M. William Salganik | M. William Salganik,SUN STAFF

Scrambling for advantageous spots in the changing health marketplace, three doctor groups announced deals yesterday aimed at making them more attractive to managed-care insurers.

Doctors Health System, already the largest physician-owned group, took another big step in size and geographical reach, announc- ing it is buying Medtrust Medical Group of Northern Virginia, bringing more than 450 additional doctors into the Doctors Health network. Doctors Health and Medtrust had announced a looser alliance in June.

Flagship Health, with 61 doctors, announced it is being merged into Physicians Quality Care Inc., a Boston-based group that says it has up to $30 million in venture capital. Flagship will become both a subsidiary and part-owner of PQC, which has a similar arrangement with a doctor group in Springfield, Mass.

Maryland Primary Care Physicians, based in Anne Arundel County, announced it was bringing in a 12-doctor Howard County medical group, beginning a regional expansion and bringing its number of doctors to 44, operating out of 16 offices.

Doctors are conglomerating for both financial and professional reasons, as HMOs and other managed-care plans seek to regulate doctors' fees and to set guidelines for practice, such as how long a patient should stay in a hospital for a given procedure. "The main reason is they want to maintain the ability to control patient care while having a voice in developing the business," said Donald Buntz, chief executive of Maryland Primary Care Physicians.

To do that, the groups are seeking contracts in which they assume financial risk -- they are paid a flat fee per member by insurers and are responsible for all care. If they can keep their patients healthy, care costs are low and the doctors profit. But to accomplish this, they need to be big enough to attract capital, to hire management expertise and to have enough patients to spread the risk.

"At 40 docs, you probably don't make a profit," said Dr. Scott Rifkin, chairman of Doctors Health. He said over the next year or two, he expects to see consolidation among some of the competing doctor groups, with those that lack sufficient capital being taken over by others.

Rifkin said he expects about 50 of Medtrust's 126 primary care physicians to merge their practices into Doctors Health in exchange for stock. Doctors Health has 258 primary care doctors who have exchanged their practices for equity or have exclusive contractual relationships. It has nonexclusive contracts with another 154 primary care physicians and TC obstetrician-gynecologists and more than 700 specialists, including those in the Medtrust network.

Although doctor groups from other states have expressed interest in joining, Rifkin said, his strategy is to concentrate on the Baltimore-Washington market. He said he would be looking for doctors in areas where Doctors Health does not have a large presence, such as Prince George's County, but "we don't have to cover every zip code."

The Flagship arrangement with PQC provides national business expertise to deal with national insurers, but ensures that "the clinical side is controlled by physicians," said Dr. Dana Frank, Flagship's chairman.

Flagship retains a local board and medical advisory panel and gets two seats on the 11-member PQC board.

PQC's plan is to create or affiliate with physician groups in three to five markets, and to "go broad and deep in each market," said Mark Mazak, PQC's director of strategic planning and marketing. Flagship is looking to add 150 doctors over the next year in Baltimore, Annapolis and the Washington suburbs.

PQC was created last year and affiliated with a 32-doctor group in Springfield earlier this year. The deal replaces a management agreement Flagship had with Kennedy Krieger Institute. Bain Capital Inc. of Boston is providing the venture capital.

Maryland Primary Care Physicians got capital from North Arundel Hospital, which holds a 16 percent interest. Buntz said the group is seeking other hospitals as partners, and "we expect the company will become regional. We are in discussions with doctors in other areas of the state."

Pub Date: 11/22/96

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