Georgia's insurance commissioner is worried that the alliances physicians and hospitals are forming throughout the state may not be legal.
The alliances are designed to steer the rapidly growing managed-care market away from insurance-run HMOs.
Doctors say the physician-hospital organizations allow them to treat patients free from insurance company interference.
Insurance Commissioner John Oxendine recently ordered one Atlanta PHO to shut down. His office is asking questions about others.
Oxendine's office says PHOs may be assuming monetary risks by acting like insurance companies, which must submit to state regulation.
"Hospitals and doctors think they have found a way to get back on top of the heap," added Cliff Lorick, deputy commissioner in charge of healthcare. "PHOs are trying to cut out the middle man, cut out the insurers. We're not willing to let them do that. Cutting out the middle man is illegal."
Paul Shanor, executive director of the Medical Association of Georgia, the doctors' lobby, said Oxendine's decision "doesn't make sense.
"I suspect somebody over there simply does not understand what PHOs do and how their services are provided," he said. "To me, it sounds like the insurance companies have been able to get a favorable ruling that knocks out competition for them. It could be a major decision if it stands."
Estimates are that more than 20% of insured Georgians belong to HMOs, and that the figure could reach 60% by the end of the decade.
Hoyt Torras, of Augusta-based Health Care Consultants of America, said hospitals and doctors are "fighting for survival" in the increasingly competitive managed-care market.
"If they want to be a player in managed care, they have to offer something that's attractive," he said. "Hospitals would be crazy not to form one. Some of them are banking their whole future on PHOs."
It could be a major gamble.
Last year, the Alliance for Managed Competition, a group of the nation's biggest health insurers, poured $120,000 into the campaign that killed a proposed Georgia constitutional amendment that would have made it easier for doctors and hospitals to compete in managed-care businesses.
Oxendine joined the fray last month by telling Promina Northwest PHO to discontinue its healthcare program, arguing it had to be marketed through a licensed insurer. Promina is appealing Oxendine's decision.
The commissioner said Georgia law doesn't permit a hospital or medical group to provide services directly to patients for a monthly fee unless it's licensed as an insurer by his department.
Torras said many PHOs are contracting with insurance companies.
Promina and other PHOs argue they provide individual services for set fees, not monthly or yearly rates like insurers.
Because his office does not regulate PHOs, Oxendine isn't sure how many are doing business in Georgia. Georgia Hospital Association officials did not return phone calls seeking a list of PHOs.