If physician-hospital organizations are to succeed, providers will have to overcome the internal conflicts that often have hampered business relationships between hospitals and physicians.
One solution is to allow physicians to make a financial investment in the new systems and allow them representation on the governing boards, said Allan Fine, Chicago-based vice president and director of the Center for Managed Care of Quorum Health Resources, the managing and consulting unit of Quorum Health Group, Nashville, Tenn.
When both sides share risks while retaining some independence, it's often easier to develop common incentives and goals that will strengthen the new organizations and increase their chances of success, he said.
According to a national survey of 400 hospitals with more than 200 beds that were chosen at random by MODERN HEALTHCARE, of 43 PHOs created in the last 12 months, half required capital contributions from physicians before getting started.
On average, hospitals contributed 75% of the seed money to get the organizations up and running. In many cases, physicians likely would lose all of their investment in the new organization if it failed.
Capitation is another major hurdle for new integrated delivery systems to negotiate. It's a payment mechanism that seeks to reduce financial incentives to increase services.
Consultants say PHOs have little chance of succeeding if physicians and hospitals don't learn how to work together on a fixed budget.
One of the most spectacular examples occurred last year in Northern California, when 52 physicians, mostly specialists, bolted from the 137-member Sacramento Sierra Medical Group rather than accept cuts in monthly payments of as much as $2,000 from Sutter Medical Foundation, a unit of Sacramento-based Sutter Health (June 21, 1993, p. 4).
"It's inevitable that capitation will require organizations to commit resources to develop new structures to support such contracting arrangements," Mr. Fine said. How well they handle the pressures of change ultimately will determine their fate, he said.