An agreement forged last week between PhyMatrix and Beth Israel Medical Center in New York is the latest sign hospitals and physician practice management companies are warming to each other.
A few have aligned their interests, although in ways that vary according to the local balance of power.
In the hospital-dominated New York market, Beth Israel and PhyMatrix signed a letter of intent to form a regional management services organization. PhyMatrix will run day-to-day operations of the 50-50 joint venture, while long-term strategic decisions will be shared equally, said Ed Goldman, M.D., PhyMatrix chief medical officer.
As part of the deal, Beth Israel will sell its own management operations, U.S. Management Systems, to PhyMatrix. But Beth Israel will continue to employ 130 physicians through its DOCS network.
The deal gives Beth Israel a stake in a badly needed regional, full-service MSO, said Peter Kelly, chief operating officer of Beth Israel Health Care System. Also key, he said, is that it will usher the hospital's employed physicians into a broader network where they will be introduced to risk contracting.
That deal differs from a recent alliance between Santa Barbara, Calif.-based Tenet Healthcare Corp. and Birmingham, Ala.-based MedPartners. They're forming a network of 33 hospitals and more than 4,000 physicians in Southern California (April 14, p. 6).
Southern California has large multispecialty physician groups, and the opportunity for Tenet to develop a physician network around its hospitals has passed, said Bill Leyhe, Tenet's vice president of integrated delivery systems.
MedPartners hopes to negotiate similar, long-term agreements with hospital systems in other markets "as long as we're able to agree on our respective roles," said Mark Wagar, the company's president for western operations.
Not all companies have been able to negotiate satisfactory deals.
Nashville-based PhyCor has been inundated with calls from hospital systems that want assistance with their money-losing group practices, said Paul Keckley, PhyCor's vice president of strategic development. But, he said, hospitals don't want to give up control for fear an independent physician group would treat them "like a commodity."
PhyCor has been negotiating to buy several hospital practices but is moving slowly. It already manages physician-hospital organizations, and its physician groups do joint managed-care contracting and ancillary joint ventures with hospitals in local markets, Keckley said. "We don't want to be a vendor. We want to be a partner. Hospitals have tended to be more comfortable with vendor relationships," he said.
Beth Israel's physician operations have been profitable, Kelly said, and its MSO has netted several hundred independent doctors in the past few years, making it an attractive target for PhyMatrix.
The new regional MSO will market to all physicians, not just those on staff at Beth Israel and its partner in Greater Metropolitan Health Systems, St. Luke's-Roosevelt Hospital Center.
PhyMatrix, based in West Palm Beach, Fla., has more than 2,500 physicians in its independent practice associations and managed practices in Connecticut, New Jersey and New York, as well as risk contracts with local payers.