Two physician-driven managed-care initiatives in the New York metropolitan area demonstrate philosophically opposing views on whether physicians need to be directly involved in the insurance business.
In one fledgling effort, a small group of physicians is attempting to establish an HMO owned and controlled entirely by physicians. The HMO, called All Health, would serve enrollees in New York City and the counties of Nassau and Suffolk on Long Island.
But establishing All Health may require an initial capitalization of more than $20 million. That figure is a preliminary estimate; a precise calculation will be available next month.
The Garvey Group, a Merrick, N.Y.-based consulting firm, is advising All Health as well as physicians in New Jersey and Pennsylvania who are launching similar efforts. Tom Garvey, the group's president, served as an adviser to M.D. Health Plan, the North Haven, Conn.-based physician-owned HMO that recently was purchased by Health Systems International, a managed-care company with headquarters in Woodland Hills, Calif., and Pueblo, Colo. (Nov. 7, p. 38).
The Medical Society of the State of New York is taking a different approach to cracking the New York/Long Island market. Some 3,800 MSSNY members have formed an independent practice association in the region.
Instead of owning and operating their own managed-care plan, the physicians have agreed to serve as the local provider network for Independent Health, a Buffalo-based managed-care plan. The HMO recently announced that it will expand into New York and Long Island through the MSSNY agreement.
Because creating a physician-owned managed-care plan would require an initial capitalization of $30 million to $40 million, MSSNY decided "we would not go out and create our own insurance carrier," said Tom Donoghue, a spokesman for the 27,000-member medical society.
By simply contracting with an existing HMO, "the Medical Society of the State of New York is selling the physicians out," Mr. Garvey charged. To control their destinies and ensure the quality of patient care, physicians must control the insurance mechanism, he said. "It's the Golden Rule: He who has the gold rules."
All Health President Oleg Gutnick, M.D., a Brooklyn-based obstetrician and gynecologist, chose the physician ownership model because "the only way to control the situation is to control the dollar." He and an initial group of investors have put together $1.8 million in start-up funding. A private stock offering to 22,000 area physicians will begin in February. At a minimum, some 3,500 to 4,000 investors are needed.
But Mr. Donoghue believes MSSNY's approach avoids the costs and hassles of "reinventing the wheel" and takes advantage of Independent Health's experience. Separately, MSSNY is in the final stages of negotiating with Independent Health to manage a statewide network of physicians that the society is developing.
"If someone in Brooklyn thinks they have a better way to do it, then, `Mazeltov!"' he said.