Physicians who invested $4.5 million in an HMO founded by the Connecticut Medical Society will make a tidy return from a $101 million sale to Health Systems International.
Proceeds will go to 2,400 physician investors in the M.D. Health Plan. Those who paid $500 in 1988 will receive $4,000 worth of Health Systems stock. Physicians who invested $4,000 get back $56,000 in Health Systems stock. Shareholders are expected to approve the sale in December.
Despite the tremendous profit, M.D. Health Plan President Doug Hayward said, "Greed is not a consideration here by any means." Rather, he said, "It was a combination of being able to realize the value of their investment and having struck a deal to retain some level of control."
M.D. Health Plan was founded in 1988 by physicians who wanted some control in a world of increasing managed care. About 80% of physicians in the state participate.
It's the only financially successful HMO in the country established by a state medical society and has been a model for other physician-controlled HMOs, Mr. Hayward said. In October, for example, Long Island (N.Y.) Physicians Corp. was launched in the hope of attracting 2,500 physicians as investors and providers in an HMO similar to M.D. Health Plan.
Mr. Hayward said the deal was predicated on M.D. Health Plan's board of directors remaining intact and establishing its own nominating committee to select replacements.
M.D. Health Plan has more than 113,000 enrollees, placing it among the three largest HMOs in the state. For the first six months of 1994, it had net income of $1.7 million on revenues of $54 million. Mr. Hayward said 1995 net income is expected to be $6.5 million.
Health Systems International is based in Woodland Hills, Calif., and Pueblo, Colo. It operates HMOs serving 1.4 million people in six Western states and a PPO serving 2.7 million people in 20 states.