Equity vs. governance. In addition, the question of control plays on two fronts: equity and governance. Physicians may have 50% equity and 30% governance, which means they'll derive half the profits from the venture but will have little say in how it's run.
"I tell doctors if you have to choose equity (or) governance, take governance," said Ira Korman, a Dallas-based consultant who works with physician groups and is a former chief executive officer of Medical City.
Like any urban market, a battle for physician loyalties is fought on numerous fronts. Just down the highway from Medical City, four-hospital Presbyterian Healthcare Systems, Dallas, has formed a partnership with two other area hospitals to invest in the MSOs of primary-care physicians.
George Pearson, Presbyterian's vice president for medical affairs, said forming physician alliances is bound to create conflicts between specialists and primary-care doctors. "What we're trying to do is respond to what the marketplace wants," he said. "It's the manner in which such change is approached that sets up the conflict."
Also causing conflict are the different ways MSOs are structured and operated.
In some cases, the MSO actually owns the physician practices; in others, it simply provides a laundry list of administrative services or negotiates managed-care contracts.
This ambiguity led to some misunderstandings at Medical City. The MSO there won't own physician practices; it will merely provide administrative services for the IPAs, said Medical City CEO Michael Pugh.
The issue of control takes on importance for some doctors because MSOs are seen as the "golden egg" that may later hatch into a public company.
MSOs are the platform from which investment bankers launch publicly held companies in a hot niche: physician practice management. That's clearly on the minds of Dallas-area physicians who have seen Physician Reliance Network, a highly successful MSO, make such a transition.
Physician Reliance went public in 1994, and oncologists who owned a piece of it saw the value of their shares increase as much as 1,300%.
In such a situation, the MSO and the PHO have equal representation from physicians and hospital, and any decision takes a majority vote of the IPA members and the hospital members. "That way, neither side is able to force the other to do something," Pugh said.
Obviously, some physicians had a problem when they saw the Medical City MSO structured as a not-for-profit rather than for-profit corporation.
"There are groups of physicians who want to own the MSO because they see that as a stock play," Pugh added.
Highgenboten agreed that control of a potentially profitable MSO is a critical issue. "Some physicians think they're going to get rich," he said.
In addition, some physicians objected to Columbia's desire to have exclusive capitation contracts with the IPAs. The IPAs could contract with outside managed-care payers for other deals, but Columbia wanted to be the exclusive capitation provider.