Michael Fuchs, M.D., doesn't want to be smug, but it appears that in 1994, he was right and a lot of other Tucson, Ariz., physicians were wrong.
Instead of selling his practice to a hospital or physician practice management company when managed-care turmoil hit Tucson, Fuchs and five other solo practitioners formed a primary-care group called Arizona Community Physicians.
The founders weren't sure exactly what the group would end up looking like, but they knew it would offer all the benefits of a group practice-economies of scale, negotiating power and the like. And it would give doctors the same autonomy they had as solo practitioners. Physicians would not be paid to join the group, unlike the approach PPMs and hospitals had taken to attract doctors.
Five years later, Arizona Community Physicians is thriving, with 55 doctors and a local reputation as a physician-friendly group with managerial savvy. Fuchs says Arizona Community could be the future of how physician groups are organized.
"I hate to sound cavalier about it, but we would love to make available our model to other folks around the country and see if it fits them," says Fuchs, the group's president.
Doctors in Tucson are willing to try something new because PPMs and hospitals there have foundered. About 150 Tucson doctors in 1998 were affected by the closures of Thomas-Davis Medical Centers, which had sold itself to FPA Medical anagement, a PPM, and Group Health Management Associates, which had sold itself to Tucson Medical Center, a hospital.
Arizona Community has taken on 20 Group Health doctors and six Thomas-Davis doctors. More Thomas-Davis physicians want in, but the group has frozen hiring.
Arizona Community "is seen as a real hope because (the doctors) seem to be calling their own tune," says Steve Nash, president of the Pima County Medical Society, which includes Tucson.
Doctors in distress
Pulling off that mix of group-practice strength with solo-practice physician independence is quite complicated. To keep it manageable, Arizona Community does not have disparate specialties-all the doctors are primary care.
The point, Fuchs says, is to have a model that is always evolving; Arizona Community held a retreat Dec. 12 at a Tucson hotel to figure out the group's direction.
One item up for discussion is how many doctors the group needs to have negotiating clout with managed-care insurers. So far Arizona Community has not obtained the one thing elusive to every other physician organization: the power to demand more favorable financial terms in contract talks with managed-care insurers.
But the fact that Arizona Community seems to work at all--especially in giving physicians control over how they run their practices--is attractive enough for doctors. After a tumultuous 1998, physicians nationwide are hoping 1999 will be the year they find some stability.
The largest PPM, Birmingham, Ala.-based MedPartners, announced it is getting out of the business, and the No. 3 company, FPA, filed for Chapter 11 bankruptcy protection. These events led to a meltdown of the PPM industry. Even hospitals ran out of the means to support money-losing physician groups, as affirmed by the Chapter 11 filing of Allegheny Health, Education and Research Foundation in Pittsburgh.
Critics say one problem with PPMs and hospitals is they overpaid for physician practices-sometimes spending upward of $1 million per doctor--just to acquire size. Many hospitals and PPMs later acknowledged that this, in fact, was the case.
Meanwhile, physicians also criticized PPMs for taking away the autonomy they feel makes them good doctors. Culture clashes and power plays erupted between the new owners and the physicians over how things were going to be run, both clinically and financially.
Doctors nationwide sued PPMs and hospitals to regain their independence; one North Carolina group even declared bankruptcy to try to get out of its 40-year agreement with MedPartners.
"Doctors want to get back to controlling the destiny of their patients. And let's be honest about it, they want to go back to controlling their financial destiny as well," says Keith Rosenbaum, an Irvine, Calif., attorney representing healthcare clients.
Rosenbaum is representing a group of doctors who feel the best way to do that is to recreate their old clinics. About 200 physicians have put in bids that essentially would allow them to start over in their former groups. The doctors represent the Friendly Hills and Talbert medical groups, which were folded into MedPartners' Southern California Medical Corp. subsidiary. Rosenbaum says the doctors are afraid MedPartners will sell their groups to another large physician manager.
"They won't stand by and have the sequel, MedPartners II," Rosenbaum says. "They don't want to see that movie."
But now what?
When groups like Friendly Hills and Talbert originally sought outside help, it was because they were struggling to manage their practices while reimbursements from private and government payers declined.
It hasn't helped that there are no more locally based health plans in Tucson, thanks to purchases by outsiders like Foundation Health Systems of Woodland Hills, Calif., and United HealthCare Corp. of Minneapolis.
"In the old days--1991, 1992, 1993--if we had a problem, we could walk across town and meet with the CEO of the health plan," says John Sullivan Jr., M.D., chief medical officer of University Physicians, the 350-physician multispecialty practice of the University of Arizona Medical School faculty.
"We used to see him at our Christmas parties, sort of like the administrator of the hospital," Sullivan says. "Now you don't have that local control. There's no feeling that the company belongs with the community."
Fearing more trouble from outsiders, some doctors are considering offers from local hospitals, which say they have grown wiser about choosing doctors and structuring compensation. Big buyout deals with guaranteed salaries are out.
In Tucson, the demise of Thomas-Davis and Group Health Management Associates fueled the growth of Carondelet Medical Group, an affiliate of three-hospital Carondelet Health System. The group has grown to 75 physicians from 50 in August. Of those 25 new doctors, 15 came from Thomas-Davis and four from Talbert.
University Medical Center, the hospital affiliate of the University of Arizona Medical School, in the past two years has hired nine Thomas-Davis physicians and one Group Health doctor. The hospital started hiring primary-care doctors in 1997 to supplement the specialists employed by University Physicians.
It's still too early to tell whether these new alliances are working. Sullivan says the Tucson market is so convulsive nobody--including members of his own practice--has any idea how to plan beyond the next six months to a year.
"There's absolutely zero strategy in Arizona from anybody," Sullivan says. "People are running around like chickens with their heads cut off."
It's the autonomy, stupid
Brad Barnett, M.D., knew he didn't want to go back to a hospital when Group Health Management Associates shut down last April. The group's three-year association with Tucson Medical Center had been unprofitable for both sides.
The doctors blamed the hospital for not giving them practice management data; the hospital blamed the doctors for not being productive enough. They agreed to end the relationship early in 1998, but Group Health's doctors couldn't arrange financing to keep the group alive.
Barnett and 20 other Group Health doctors (about half the group) decided to join Arizona Community. Why? "One word--autonomy," Barnett says.
When joining Arizona Community, a doctor or small group maintains its equipment, staff, managed-care contracts, independent practice association relationships and anything else it already had.
"We don't own each other's tables and chairs or office leases," Fuchs says.
However, some operations are turned over to the group. Arizona Community will install a business software system created by a subsidiary of Bank One. The system's software is similar to that installed in automatic teller machines, a concept the Columbus, Ohio, banking giant premiered in 1973.
Also, the physician's staff will fall under the group's personnel and benefits policies.
"The only things the group owns are things common to the group--the lease for the central billing office, the labs, the imaging centers," Fuchs says.
Physicians are responsible for their own patient load and their own expenses, so they can see as few patients, hire as many staff members or buy as much equipment as they like (although any purchases and hires still are handled officially by the central office).
Doctors are responsible for covering a share of central office expenses and keeping cash reserves, but the administrative work is handled by the central office, assisted by outside manager Cornerstone Physicians Corp. Fuchs won't reveal how much the fees are but says they are less than the 15% of revenues many PPMs charge.
The three-member executive committee and 12-member board, all MDs, may elect to remove a physician who is having trouble meeting expenses, although Fuchs says that has never happened. Doctors also don't sign noncompete clauses restricting them from practicing in Tucson if they leave Arizona Community. Only one doctor has left in four years, Fuchs says.
The group does not release financial information, but Fuchs says the physicians' income is in the top 25% nationally for primary-care doctors.
How Arizona Community relates to hospitals, HMOs and other contractual partners
depends on the contracts and the partnerships, and whether they are at the corporate or individual physician level.
Bumps in the road
The autonomy Arizona Community offers continues to attract physicians, leaving it struggling to handle the resulting growth.
The group hit some snags when it added 20 physicians from Group Health in April. It attributed some of the problems to the doctors getting used to not having an income guarantee, as they did at Group Health, Barnett says. While the central office handles most of the paperwork, doctors still are essentially responsible for paying many of their individual practice expenses.
Another glitch, Barnett says, was the days- or months-long delays in installing computers, hiring staff and putting in a phone system. The result was the departure of thousands of patients.
At the same time, doctors sensed Cornerstone was starting to feel the pinch of financial problems at its parent company, FPA, which in July filed for Chapter 11 bankruptcy. Meanwhile, hospital and physician management suitors also are approaching Arizona Community, although Fuchs says the group has no plans to sell out.
Also, Southwest Physician Network, a Tucson-based IPA with 250 primary-care doctors (including a board member at Arizona Community) and about 800 specialists, wants to take over some of the group's functions, such as contracting, utilization management and computer network maintenance.
"Somewhere between them doing all the business for themselves and finding a relationship where the IPA has more value to them is what we're looking at right now," says Hugh Gallagher, M.D., president of Southwest Physician Network.
But Fuchs says no matter what happens, the doctors at Arizona Community won't be forced to do anything they don't want to do. "We're about being partners of each other and having a cultural and philosophical alignment that will allow us to deal with any business environment coming down the road," he says.