In an unusual partnership, a Roman Catholic healthcare system and a prominent medical group have created a physician practice management company.
Tentatively named Preferred Physician Partners, its goal is to offer physicians an alternative to firms fueled by Wall Street or venture capital.
The company is owned by Cincinnati-based Mercy Health System, which brought $10 million in start-up capital, and Dean Clinic in Madison, Wis., which offers management expertise. It expects to sign its first contracts by early 1997.
Preferred Physician Partners stands out among countless new physician practice management firms because its capital partner is a hospital-based system.
Mercy has 17 acute-care hospitals and other facilities serving primarily Indiana, Kentucky, Ohio, Pennsylvania and Tennessee.
The move is part of the system's effort to diversify, said Richard Afable, M.D., Mercy's senior vice president of physician development.
Mercy's hospitals achieved limited success in their attempts to integrate with physicians by acquiring their practices and creating physician-hospital organizations, he said.
"We didn't have any knowledge or capability to do physician practice management, so we sought out a partner," Afable said.
Mercy contacted several prominent physician groups before it hit on Dean. The 400-physician Dean Clinic operates an HMO with a network of 1,000 physicians. Dean was looking to spread its expertise to new markets.
Dean's president and chief administrative officer is Mike Wilson, the respected president-elect of the Medical Group Management Association.
Dean and Mercy will take less than the 15% to 20% annual return extracted by some public companies, said Susan Isensee, M.D., Dean's assistant medical director.
Afable said the company has been marketing for about six months and physician groups "have been clamoring to get our attention more than we theirs."
One of their first two deals is a joint-venture management services organization with Defiance (Ohio) Clinic, a 34-physician multispecialty group in Northwest Ohio.
The other is a five-year management contract with an 80-physician independent practice association in Scranton, Pa.
Many hospitals have tried to manage physician practices without success, and Mercy decided its efforts were better directed at partnering with a physician clinic that would carry weight with doctors.
Dean's managed-care expertise was the No. 1 reason Defiance physicians picked the firm over other potential partners, said clinic President Allen Gaspar, M.D.
Other bidders for the clinic were PhyCor, a Nashville, Tenn.-based publicly traded physician practice management company; hospital chain Columbia/HCA Healthcare Corp.; and two local hospitals, Afable said.
The clinic will own 60% of the joint venture and will retain a majority on its board, with other board members coming from Dean and Mercy, Gaspar said.