The 132 physicians of the Beaver Medical Clinic, a Redlands, Calif., multispecialty group, threw themselves an independence party last month after the doctors bought their management services organization back from their PPM partner, UniMed Management Co.
The physicians were willing to dig deep into their own pockets to regain control of their financial affairs, says Beaver Medical Director Ronald Bangasser, M.D.
"This gives our physicians the confidence that we're in control of our own affairs," he says.
UniMed, a Burbank, Calif.-based physician practice management company that manages about 3,000 physicians, is quitting the PPM business and is selling off the management service organizations of Beaver and five other large Southern California groups. San Diego-based Premier Practice Management is negotiating for two of the MSOs UniMed is selling, Buenaventura Medical Management in Ventura and Miramar Medical Services in Oxnard, says Premier President and CEO William Compte.
The other MSOs on the block are those of the Facey Medical Group in Mission Hills, Harriman Jones Medical Group in Long Beach and Huntington Provider Group in Pasadena.
Together the groups provide care for 650,000 Californians. No financial details on the groups or the sales are available.
UniMed is the for-profit arm of UniHealth Foundation, an integrated delivery system. UniHealth announced last year that it was going to reinvent itself as a charitable foundation and began selling off its hospitals and physician groups.
UniMed is just the latest PPM--and the largest one left standing--to bail out of California. Last November, Birmingham, Ala.-based MedPartners, then the nation's largest PPM, announced it was getting out of practice management and began unloading all of its physician practices, including about 1,000 in California. And in June, beleaguered and broke FPA, once the nation's third-largest PPM, sold off all of its physician practices to pay off creditors.
As the fallout from the PPM exodus continues, many of the state's physicians now find themselves shopping for a new partner or, like Beaver, coming up with the money to buy their practices or MSOs back.
In 1994, Beaver formed Epic Management to handle its contracting and administration. Shortly thereafter, Beaver sold 50% of the MSO to UniMed but retained control and ownership of the medical group. Bangasser says the doctors began working to buy back Epic as soon as UniHealth announced it was getting out of the management business.
"We have a long tradition of delivering high quality care, so I suppose we could have gone out and found somebody who might have wanted to invest in us, but we were more interested in coming up with the money to buy ourselves back," he says. Instead, the physicians invested their own money and borrowed the difference.
Although the physicians did not have a bad experience with UniMed, Bangasser says they're not sorry to see the relationship end.
"We thought we would get safety in numbers and better marketing power and buying power in contracts, but it just never really materialized," he says. "This will bring us closer to home and to our focus and to our patients."
The physicians from Beaver likely will be the exception, as most medical groups are battling their own financial troubles and may not be able to come up with capital. According to a new report from the California Medical Association, at least 34 medical groups or IPAs in California are expected to close up or go bankrupt before the end of this year.
Tom Mayer, executive director of managed-care education at the Whittier, Calif.-based Institute of Healthcare Advancement, predicts Beaver is one of the few groups that will purchase itself back.
"Physicians, although fairly well paid, rarely have the discretionary income necessary to pool together and turn (the groups) around. Even if I've been able to buy my practice back for dirt cheap, I still face raising hundreds of thousands and possibly millions of dollars to make sure this thing survives. I just don't see them being able to do that without a partner," Mayer says.
Frederick Russo, M.D., president of the 100-physician Facey Medical Group, says that his group's financial success may make it more difficult for the physicians to buy back their MSO.
"It's our bad luck that Facey has been solvent. Had we not been solvent, we would not command such a high price," he says.
Russo also says the tight financial picture makes going it alone less and less attractive.
"I don't think that many physicians feel terribly comfortable going out on a risk basis and going it alone," he says. "Physicians want more autonomy and to run their own business. But the other side of the coin is it's a much riskier proposition since a lot of the margins have been taken out of the business. There's not much room for error."
The environment is now ripe for smaller, regional PPMs to step in and clean up, says Paul DeMuro, a healthcare attorney in the San Francisco office of Latham & Watkins.
"Physicians are certainly anxious and afraid to go ahead and try to contract with PPMs, but they also don't want to go out and take a substantial amount of money out in loans," he says.
When MedPartners collapsed this spring, KPC GlobalCare, a previously unknown practice management group in Riverside, Calif., swept in and bought up 65 of MedPartner's practices. Likewise Premier, which is the for-profit arm of an alliance of not-for-profit health systems and a purchasing group, is picking up the pieces of UniMed. If the purchase of Buenaventura and Miramar goes through, Premier will manage around 1,300 physicians in seven states.
"We're not trying to be a big group," Premier's Compte says. "The industry is having its problems, but the reasons for the industry are still there," he says. "Many groups of doctors still need capital, still need access to systems. The industry need is still there."
Michael Guthrie, M.D., Premier's executive vice president, says the PPM's regional focus and relationships with health systems will allow it to succeed where national giants like MedPartners failed.
"We really go into a local partnership with the physicians. We don't try to run these partnerships from a great distance. We are at risk with the physicians--the idea is that we make our money as the physicians make their money--and that's different from other companies," he says.
"We are very selective about who we partner with. Because we're associated with Premier, we're quite focused on Premier shareholders, or prominent physicians who have some sort of working relationship with Premier. That delineates our market."