Hospitals split from doctors' groups Sinai, Northwest drop struggling practices

GBMC arm dissolving

Health care

December 05, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

As doctor's groups formed for managed-care contracting continue to struggle, Sinai Hospital and Northwest Hospital Center are spinning off the doctors' practices they bought over the past few years, and Premier Medical Associates, a physicians' group tied to Greater Baltimore Medical Center, is dissolving.

In all three cases, doctors are expected to resume their old practices, in most cases continuing to accept the same insurance plans and care for the same patients.

While impact on patients may be small, the business world for doctors is undergoing a shakedown.

Doctors Health Inc., a large physicians' group based in Owings Mills, filed for bankruptcy last month. New American Health, the managed-care contracting arm of North Arundel Health System, dissolved a few months ago. And Pikesville-based Pioneer EyeCare is selling off the optometry practices it bought.

Groups such as Sinai's primary care unit and Premier's were built three or four years ago on the assumption that HMOs would switch most of their contracts to "capitation" reimbursement, in which the HMO would pay a flat fee per member per month to a physicians/hospital alliance, and the alliance would be responsible for the costs of care. That didn't pan out.

"The market didn't go that way -- capitation never developed into anything serious in this part of the country," said Warren Green, president and chief executive officer of LifeBridge Health, the parent for both Sinai and Northwest.

Hospitals or companies also bought doctors' practices on the theory that centralized professional management could save money. That, however, also proved fallacious.

"The assumption that there was a great opportunity to improve DTC business efficiency was not true," said Dr. John Lavin, Premier's chief executive officer.

Neither Green nor Lavin would disclose the magnitude of the losses.

Doctors Health, which does file public financial statements, reported $77.5 million in revenue, but $89.7 million in medical expenses from its capitated contracts.

Lavin said Premier has five administrators and about a dozen people performing functions such as billing. Although Premier will officially cease operations at the end of the year, the claims and billing staff will continue to work for several more months to close out accounts, he said. He said when the books are closed, he expects to be able to pay all creditors, but with virtually nothing left over.

Lavin said Premier's 48 doctors had considered several alternatives, including mergers with other physicians' groups, but in the end decided to disband.

Both Sinai and Northwest said some physicians have resumed independent practice, while negotiations are continuing with others. Sinai owned the practices of 25 doctors; Northwest, 20. Green declined to disclose the terms of any agreements releasing physicians.

Sinai President Neil Meltzer said some administrative employees will be absorbed into other hospital operations.

Pub Date: 12/05/98

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