Texas has been regarded as one of the last bastions of private practitioners, but that's ending as more physicians sign up with groups and devise integrated systems that are compatible with the state's tough laws against corporate-style medicine.
"Things have changed so much in just the last three to six months," said Ira Korman, new president and chief executive officer at DFW Physicians Group, a group recently funded by the Daughters of Charity National Health System. "Contracts are now being let out to doctors where historically they've gone to institutions."
The Daughters of Charity National Health System, the nation's fourth-largest hospital chain, last month agreed to invest $4 million in the new DFW organization. Since then, DFW has hired Mr. Korman, who formerly was CEO of two Dallas hospitals.
The Daughters' investment is in the form of convertible debt, which the St. Louis-based system has an option to increase to $15 million. The investment is the second by the Daughters in a physician organization, the first being a minority interest in Mullikin Management Partners, a subsidiary of Mullikin Medical Centers, Artesia, Calif. (May 17, p. 14, 1993).
The Roman Catholic system owns 600-bed St. Paul Medical Center in Dallas, although the chain has agreed to sell the hospital to Harris Methodist Health System, Fort Worth. Even so, Richard Kramer, the Daughters' west central regional executive, said the sale won't affect the chain's investment in the new physician group.
In addition, Baylor Health Care System is financing a new physician organization, Health Texas Provider Network. Baylor, which owns the city's largest hospital, 954-bed Baylor University Medical Center, declined to specify the amount of its investment.
Health Texas now has 11 primary-care physicians and plans to start signing managed-care contracts.
Providers such as Baylor also are focusing on primary-care physicians, who make up less than one-third of the city's 3,500 doctors. In addition to the new network, Baylor Medical Center at Garland, one of Baylor's suburban hospitals, will soon start recruiting its own primary-care physicians.
The hospital will begin a three-year family residency program next year, an effort that's estimated to cost about $2 million, said Gary Brock, the hospital's executive director and the Baylor system's senior vice president of managed care.
Carl Couch, M.D., a family practitioner working for Health Texas, said his medical group had been approached by venture capitalists, insurers and other providers. However, "we feel like Baylor's going to continue to be a leader here," he said.
Physician organizations are popping up so fast that the state is struggling to keep up with them. Texas is one of five states that forbid the "corporate practice of medicine." Such laws were passed decades ago and were designed to prevent medicine from becoming a purely profit-driven enterprise. For Texas, it means only physicians can hire physicians.
The State Board of Medical Examiners is charged with ensuring that groups now forming meet the state medical practice act criteria when they form not-for-profit physician organizations. According to the state, some 70 organizations have been certified and another 80 have applications pending.
Under state law, the board of such an organization must consist solely of physicians. However, hospitals or other institutions still can exert control.
For example, Health Texas is sponsored by Baylor, which appoints the physician board members.
Donald Mauldin, M.D., one of 24 physicians employed by DFW Physicians, said he believes the state's laws are out of step with health reform.
"I don't think they serve any real purpose right now except harming physicians," he said.
Dr. Couch, a Health Texas board member, agreed, adding: "It (the corporate-practice-of-medicine law) increases the formation costs."
In a related development for physicians involved in managed care, the Texas Medical Association last month lost a key battle in what physicians refer to as "de-selection" by managed-care plans.
The battle began last year when 37 Houston physicians were dropped as network providers by Aetna Health Plans. The medical association claimed that the physicians were unfairly cut from Aetna's provider network for economic reasons, noting one physician was dropped on the basis of an analysis of the treatment of two patients.
The TMA also argued that economic de-selection puts pressure on physicians to reduce treatment.
The lawsuit has been mentioned in connection with the American Medical Association's Patient Protection Act. That act, which the AMA has been lobbying Congress to include in healthcare reform legislation, would guarantee "due process" rights to physicians who are dropped or shut out of managed-care plans.
Last month, U.S. District Judge Melinda Harmon dismissed the Aetna case and ordered the plaintiffs, including five physicians, the medical association and the Harris County Medical Society, to pay Aetna's litigation costs.
Late last month, the Texas Medical Association said it will appeal the case to the 5th U.S. Circuit Court of Appeals in New Orleans.