Three of the Detroit area's largest hospital companies have joined ranks with their physicians to create a regional medical network to contract with group health plans.
The physician-hospital organizations of St. John Health System, Oakwood Healthcare, and Providence Hospital and Medical Centers have formed a managed-care services company called Michigan Health Partners.
Through the combined organization, the three hospital companies will market the services of more than 2,400 physicians areawide, providing the geographic coverage HMOs and other group health plans desire, said Vincent DiBattista, vice president for managed-care and primary-care development at Detroit-based St. John.
With that kind of strength, Michigan Health Partners also may try to negotiate managed-care contracts directly with employers and other healthcare consumers, DiBattista said.
St. John is a dominant hospital company on the east side of the Detroit metropolitan area with annual revenues of about $850 million. Dearborn-based Oakwood is the area's seventh-largest system with revenues of about $650 million, while
Providence in Southfield is eighth with $314 million in revenues.
Each of the hospitals has formed a PHO to act as an administrative arm to ease the management of physician practices and provide a vehicle to contract jointly with group health plans for patients.
Those PHOs now will work through Michigan Health Partners, said Brian Osberg, president and chief executive officer of Michigan Affiliated Providers Co., Oakwood's PHO.
The new company plans to seek contracts with group health plans that allow physicians and the hospitals to share the financial risks and rewards of managed-care contracts, Osberg said.
Often an HMO will pay physicians a fee for the services they provide to their subscribers without real opportunities for the physicians to benefit financially from tight management of services and costs, he said.
Under a risk-sharing contract, Michigan Health Partners would want to negotiate contracts for services that put physicians and hospitals at risk if medical costs exceed subscriber premiums but allow for greater profit if costs can be kept below premiums, he said.
A risk-sharing arrangement aligns physician and hospital incentives to keep costs in check while providing the most efficient level of care, Osberg said.
The 2,400 physicians in the three PHOs have about 200,000 regular patients, providing strong negotiating leverage under the Michigan Health Partners banner, he said.
As a combined organization, the PHOs are expected to move toward a common information system for clinical and patient management, providing an efficient conduit for the group health plans to monitor patient care, he said.
Of the 2,400 physicians, about 800 are primary-care doctors, while the remainder are specialists. St. John's PHO contributes about 1,500 physicians, while Oakwood's has about 500 and Providence's has 400.