After failing to raise enough money two years ago, two doctors are back with a plan to get doctors to buy shares in a medical group that would own its own HMO.
Doctors have developed a number of ways over the past few years of organizing themselves to cope with an HMO world, such as organizing large groups to contract with health maintenance organizations or selling their practices to hospitals.
"But all those models are essentially subservient to the insurance company," since they are "assuming risk without controlling the premium dollar," said Dr. F. Graham Fallon, a surgeon and one of the founders of Maryland Medical Group (MMG).
So Fallon and Dr. Michael J. Naslund, a urologist, are asking doctors to pay $5,000 each to buy shares in MMG, which, in turn, would own 86 percent of an HMO called Renaissance Health Care Systems Inc. The money paid for the shares would go toward the HMO's start-up costs. The remaining shares in Renaissance would be owned by the founders and other investors.
xTC The doctor-owners would also serve as the physician network for the HMO. They would be free to contract with other HMOs as well.
"MMG believes that the only way physicians can regain control of the health care they provide their patients and of their own independence and economic livelihood is to gain control of the insurance component in health care," says a question-and-answer brochure with the prospectus.
A similar offering by MMG in late 1996 and early 1997 had pledges of "several million dollars," Fallon said, but not the $10 million sought.
Shares then cost $5,000 for primary care doctors and $10,000 for specialists. This time, the price is $5,000 for any doctor, and there are discounts for groups buying in together. "The biggest hurdle was the fee," in the last offering, Fallon said. He said he is "reasonably optimistic" that enough doctors will join at the lower price to raise $5 million, the goal this time.
The latest prospectus also "clarifies" the relationship between the medical group and the HMO, which some potential doctor-investors found confusing, he added.
The plan retains from the earlier version an innovative way of paying the doctors.
Doctors would receive a fee for each time they treated a patient, and would get a share of the HMO profits. But they also would receive compensation partly based on whether they can hold costs down, compared to the average for each specialty and condition.
For example, Fallon said, if it costs an average of $5,000 to treat an inflamed gall bladder, and a doctor is able to manage the patient for $3,000, "then $2,000 would go to the physician, to his peers and to the company."
The offering will last through June, with the option of extending another 90 days in an effort to meet the $5 million target.