Two major provider networks in managed-care-heavy Boston launched a venture last week to pool their collective clout with HMOs.
The seven-year agreement combines the managed-care business of CareGroup, a Boston-based system of six hospitals and 2,000 physicians, and Lahey Clinic, a three-hospital, 800-physician group practice based in suburban Burlington, Mass.
Together the two systems serve more than 400,000 managed-care patients of 2,800 physicians, 800 of them primary-care doctors. The patient base generates $625 million annually from HMO contracts.
"This agreement will not be a merger nor will it lead to a merger," said John Libertino, M.D., Lahey's chief executive officer. "Lahey and CareGroup doctors will continue to provide care under their own institution's banners."
But a single contracting organization will negotiate unified contracts with managed-care organizations.
Under terms of the pact, both systems are prohibited from cutting their own deals. The joint agreement will continue beyond seven years unless one of the partners acts to end the alliance, said Kim Saal, M.D., president of CareGroup Provider Service Network.
CareGroup's network, formed in July 1997, organized physicians and hospitals into eight "risk units" to manage medical and hospital care. CareGroup is the sole owner of the network, but Lahey has the option in three years of buying a 50% interest, Saal said.
For now, he said, Lahey will contribute three more risk units and work within the systems of risks and rewards established for CareGroup providers.
The deal adds to the size and geographic coverage of CareGroup in its campaign to compete for business and increase the contracting options it can offer HMOs, Saal said.
CareGroup's flagship hospital is Beth Israel Deaconess Medical Center in Boston.
"It gives us much more clout with the health plans," he said. The CareGroup network now will have more ability to set up a structure for medical management, a responsibility Saal said providers have been slow to embrace.
The alliance puts it in the same ballpark as Partners HealthCare System, Boston, which has built a primary-care network of nearly 900 physicians and a contracting organization that negotiates for 5,000 doctors. Partners was formed through the affiliation of Massachusetts General Hospital and Brigham and Women's Hospital.
Both healthcare systems are bulking up and reorganizing for capitated contracts in a bid to take back utilization review and decisionmaking latitude from HMOs, which have about 50% penetration in the market (Sept. 14, p. 56).
Saal said the CareGroup network will cut costs by using information systems to verify physician credentials, manage processes of care and distribute medical protocols to physicians in the risk groups.