Collaboration will be the name of the game this year as physicians, insurers and hospitals try to figure out how to lower costs and improve care.
But doctors have learned they need not be subordinate to hospitals and managed-care organizations in the process. Rather than selling their practices to entities in which doctoring is a sideline, physicians want to retain some autonomy by finding their own capital partners.
That, along with a realization that reform is inevitable, has generated a more proactive spirit among physician groups.
Physician practice management companies are a viable alternative. These firms grew in size and number in 1995, thanks to Wall Street, and will accelerate consolidation in 1996.
A good example is the merger late last year of Mullikin Medical Enterprises, a prepaid California group, and MedPartners, a public company that specializes in assembling small groups in less-advanced markets. The new company boasts the expertise to assemble physicians in any market environment.
Cross-fertilization is starting to take many forms. Ambitious medical groups are looking for financial security by partnering with venture capitalists in hopes of taking their companies public one day.
However, venture capitalists command high returns, and it remains to be seen how many practice management companies the market can sustain.
Physicians also are trying to organize themselves. In Washington state, the Washington Medical Group Alliance, a new limited liability company of 11 prepaid groups with 750 physicians, plans to share risk and do joint purchasing. In Hartford, Conn., 52 physicians announced an agreement to form a multispecialty medical group that plans to operate by April 1; the group formed a separate management company, a portion of which it intended to sell to outside investors to raise capital for expansion.
And 1996 is the year that several physician-sponsored managed-care plans intend to begin enrollment. These plans-several of them formed by state medical societies-will be tested against the large HMOs that so many doctors have scorned in the past.
Meanwhile, hospitals and insurance companies have had mixed results with their medical practices. Some hospitals have admitted they lost money on physician operations.
Last summer, Swedish Health Services in Seattle decided that running physician practices was a different business than operating hospitals. It took the unusual step of selling its extensive physician network to a multispecialty group, Pacific Medical Group. Swedish and Pacific crafted a partnership built on integrating services, conducting joint ventures and leasing hospital-owned space to doctors.
Robert Rowland, executive director of Swedish Medical Services, said the nonequity partnership "says we can be part of a virtual integrated network and do it with a series of agreements rather than owning each other."
Certainly, hospitals and insurers will remain strong physician practice players in many markets. But this year, expect to hear more from those who reject the notion that physicians and other healthcare functions must consolidate.