MedPartners Chief Executive Officer Larry House recently described healthcare as a three-legged stool of physicians, hospitals and insurers that must achieve equilibrium. But when equilibrium arrives, the physician leg could be the longest.
Gradually, physicians are figuring out that if they can't defeat managed care, they should control it.
It's no surprise then that Birmingham, Ala.-based MedPartners, which last year became the world's leading physician practice management company in revenues, believes prepaid medicine is the magic bullet. With capitation, physicians profit as overall healthcare costs decline.
And that profit potential is huge. After all, we hear time and again, doctors control 80% of healthcare spending. MedPartners offers pharmacy and disease management, more tools physicians can use to control costs.
With MedPartners and PhyCor leading the way, Wall Street continues to advance its control of medicine. There are now 31 publicly traded physician practice management companies, according to Gwynedd, Pa.-based Sherlock Co., a financial advisory firm. More than 30,000 physicians, about 5% of the nation's total, are in medical groups or networks that are managed by these firms. Their growth feeds on the divestment of physician practices by HMOs and hospitals.
With such huge stakes, a few hospital-based organizations and multispecialty clinics will try to compete with Wall Street. Hospital purchasing alliance Premier and Scripps Clinic in San Diego are launching their own PPM companies, which they intend to take public in a few years. Cincinnati-based Mercy Health System and Madison, Wis.-based Dean Clinic recently created a PPM company that they say offers an alternative capital source for physicians who don't want to be beholden to profit-driven enterprises.
Also sure to grow in 1997 are physician networks, which received good news in the form of guidance from antitrust enforcers this year. Previously, physicians who wanted to price their services jointly believed they had to share risk through capitation or fee withholds to avoid an automatic charge of price fixing.
The Federal Trade Commission and the U. S. Justice Department clarified the rules, saying financial integration isn't necessary. Rather, doctors must at least increase efficiency through clinical integration such as shared information systems and clinical protocols.