The latest round of merger mania between physician group practices and healthcare providers in Southern California has created new alliances and expanded delivery networks.
In recent weeks, several healthcare organizations have formalized relationships with physician groups to establish provider networks or expand existing alliances. Executives engaged in the consolidation frenzy cited impending healthcare reform and local market forces as reasons for joining the integration race.
Hospital participants include internationally known Cedars-Sinai Medical Center in Los Angeles, a subsidiary of Medical groups
Burbank, Calif.-based UniHealth America and a network of three Adventist Health System West hospitals.
At Cedars-Sinai, executives soon will request approval from the Internal Revenue Service to establish a tax-exempt medical foundation to acquire the Medical Group of Beverly Hills (Calif.), a 27-physician primary-care practice that serves 16,000 managed-care enrollees.
Tax-exempt status for Cedars-Sinai, which has been slow to embrace integration, would allow it to establish the Cedars-Sinai Medical Foundation, marking the specialty hospital's first entry into the prepaid, or capitated, healthcare market. Cedars-Sinai is expected to submit its request for tax-exempt status to the IRS sometime this month.
In recent months, the IRS has ruled favorably on four occasions regarding the development of integrated healthcare delivery systems involving hospitals' creation of umbrella organizations that purchase physician assets.
Tom Gordon, the proposed foundation's executive director, said the acquisition is part of the hospital's plan to create a delivery network attractive to healthcare payers. Cedars-Sinai currently is eying other unnamed healthcare providers for possible network relationships, he added.
Under the proposed agreement with the Beverly Hills physician group, the Cedars-Sinai foundation would acquire the assets of the medical group for a sum yet to be disclosed. It would then lease those assets from the new physician corporation with which it will contract for services, Mr. Gordon said. Physicians would be paid a percentage of the foundation's adjusted gross income.
For many years, Cedars-Sinai has maintained an exclusive relationship with a 200-physician individual practice association, which served as its principal referral base. Though its affiliation with Cedars-Sinai continues, the IPA's physicians recently opted to break the exclusivity arrangement with the hospital in order to pursue multiple provider relationships with healthcare purchasers.
Meanwhile, UniHealth America expanded its physician network south to Orange County by establishing a long-term management agreement with 40-physician Northwest Orange County Independent Physician Association.
Though financial details of the transaction weren't disclosed, UniHealth executives said MedGroup Management, a subsidiary of Chatsworth, Calif.-based UniHealth America Ventures, will oversee all non-clinical aspects of the group's operations, such as administration, claims processing and marketing. The medical group, however, will be responsible for compensating physicians for medical services, UniHealth said.
Northwest Orange IPA, which serves 8,000 managed-care enrollees in Anaheim, Bellflower, Buena Park and La Palma, was the sixth physician group to align itself with UniHealth in recent months.
Another provider organization, the Southern California Healthcare Network Foundation, last month acquired Glendale (Calif.) Multispecialty Medical Group, an IPA comprised of 32 primary-care and 132 multispecialty physicians serving 23,000 managed-care enrollees, and Family Medical Associates, a newly established Glendale practice with 11 primary-care and 32 specialty physicians.
Though details of the transactions weren't available, Harvey Rudisaile, president of the network's foundation, said in a prepared statement that both deals were part of the network's ongo-Continued on p. 46
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Last year, the network acquired White Memorial Comprehensive Care Medical Group, a 109-physician IPA treating 21,000 enrollees at 10 sites throughout the Los Angeles area, and White Memorial Medical Group, a 20-physician multispecialty group based in East Los Angeles (Aug. 23, 1993, p. 19).
The network next will develop services that offer "one-stop shopping" for healthcare services, Mr. Rudisaile said. It also will work to grow to 200,000 enrollees from the current 50,000 by the end of the year, he said.
Formed in 1992, the provider network is a partnership between Glendale (Calif.) Adventist Medical Center, Simi Valley (Calif.) Hospital & Health Services and Memorial Medical Center in East Los Angeles. All three hospitals are owned by the Roseville, Calif.-based Adventist Health System West, which operates 19 hospitals in five Western states.
In another transaction, three San Fernando Valley medical groups have joined forces to expand their geographic appeal to healthcare buyers.
The Greater Valley Medical Group, a 38-physician multispecialty group practice in Northridge, Calif., has announced plans to merge with Simi Hills (Calif.) Family Medicine Group and Robles Hills Medical Group in Thousand Oaks, Calif.
Executives of the three groups said their physicians are joining forces in order to create a delivery network that's geographically appealing to healthcare buyers. The proposed merger would give the groups 11 practice sites in the San Fernando Valley.
The groups also revealed plans to bring two sizable IPAs into the proposed network.-Della de Lafuente
