San Francisco-based Brown & Toland Medical Group, which is comprised of 1,250 physicians, has agreed to help shape a new generation of Internet-oriented technology in partnership with Healtheon, a technology company based in nearby Palo Alto, Calif.
The alliance is among the first between a technology company and a healthcare provider other than a hospital. Product testing is set to begin this spring.
The entrepreneurial marriage to Healtheon will give Brown & Toland a free, cutting-edge upgrade of its information systems. Without the alliance, the upgrade would have cost an estimated $25 million over the next three years, says Michael Abel, M.D., president of the medical group.
The partnership also will help the medical group break through a technological barrier that threatens to stunt its growth, he says.
For Healtheon, Brown & Toland offers an array of financial, administrative and clinical models in physician practices, says Charles Saunders, M.D., Healtheon vice president. The trial will give Healtheon, a two-year-old company with estimated 1998 revenues of $100 million, experience in the development of products for customers of varying sophistication.
Brown & Toland was formed in 1992 through the merger of California Pacific Medical Group and University of California San Francisco Medical Group whose physicians were associated with the two largest hospitals in San Francisco. Since then, it has grown at double-digit percentages annually.
Brown & Toland's physician services organization offers managed-care administration to independent practice associations as far away as Honolulu. And it manages 14 commercial and six Medicare HMO prepaid contracts covering 185,000 enrollees.
In addition to the usual financial and administrative services, Abel says the medical group expanded several years ago into such outcome-oriented services as disease management and deployment of "hospitalist" physicians, long before those approaches became widespread. But growth and innovation placed new demands on its collection of 1970s-era information systems.
As it happened, Healtheon was looking for a medical group to use as a testing ground for its new technology, which was based on Internet protocols and braced with transmission-security features.
Rather than work the fringes, such as marketing or routine automation of paper-based manuals, Healtheon was interested in providing services and transactions that are central to healthcare, Saunders says.
The initial concentration of effort will be in connecting physicians to a network for physician referrals, coverage eligibility, authorizations for care and claims processing.
Ordinarily, those services depend on a high degree of cooperation between providers and HMOs, which has been difficult for the healthcare industry to achieve. But Brown & Toland's operation is based on a model of capitation in which HMOs delegate a complex array of financial and insurance functions, Saunders says. The medical group also engages in a significant amount of direct contracting with payers.
That approach transfers the financial risk and its key aspects, such as eligibility for treatments, to the medical group. Other key business functions identified by Brown & Toland are authoriziations, referrals, claims processing and benefits, says Abel. It is, as Saunders says, "a take back medicine from the blue suits concept."
But the risks also increase the importance of forging multiple communication links to employers, health plans and providers. It is critical, Abel says, that the medical group develop rapid communication to and among physicians.
"We had climbed one mountain but could not climb the next," he says. Stringing cable in every office was an expensive proposition, but using the Internet made security a big obstacle. And existing systems were not pliable enough to operate in a capitated climate.
Healtheon proposes to develop the necessary new computer operations and mesh them with existing information systems, Saunders says. All in all, it appears to be a good match: The vendor benefits from continual feedback from physicians with a vested interest in a well-designed system; the provider gets an undisclosed interest in the commercial products arising from the partnership in addition to a new information system.
