Troubles continue to pile up for embattled PPM PhyCor, once the nation's leading physician practice manager.
An affiliate of its North American Medical Management subsidiary, an IPA administrator, is drawing its last breath in the once-promising Houston market and another NAMM IPA is getting ready to close in Dallas. Meanwhile the Nashville, Tenn.-based parent company continues to shed assets to pay off massive debt.
Under pressure from insurance companies, the state of Texas and private investors of a competing firm, IPA Management Associates, the holding company for NAMM's Houston-area operations, will dissolve before the end of the year.
"They are moving forward with closure," says Dede Webb, spokesperson for the Texas Workforce Commission, a state job placement agency. The commission is funding retraining and placement efforts for NAMM claims adjusters and referral workers.
NAMM of Houston contracted with the Workforce Commission in October to provide services to as many as 150 furloughed workers. The contract expires Dec. 31, Webb says.
PhyCor disclosed in a Nov. 14 filing with the Securities and Exchange Commission that it also would close its IPA operations in the greater Dallas area during the fourth quarter because of mounting losses.
About 50 former NAMM employees in Houston have joined GulfQuest, a new third-party IPA administrator that opened in mid-September. That firm is owned and headed by Herb Fritsch, the founder of NAMM who parted ways with PhyCor in January. "We have negotiated with PhyCor to acquire assets and lease space from NAMM of Houston," says Murray Blackshear, corporate secretary of GulfQuest.
Blackshear, one of Fritsch's earliest hires at NAMM, runs GulfQuest's Houston operations.
After two months in business, GulfQuest had become third-party administrator for 10 Houston-area IPAs that once relied on NAMM's services. NAMM managed 1,600 physicians in 19 Houston-area IPAs, serving 215,000 patients.
The new company also has a key IPA risk contract that takes effect Dec. 1 with Secure Horizons, a Medicare HMO owned by managed care giant PacifiCare.
"We're expecting to sign two or three additional payers" serving commercial and Medicare customers, Blackshear says, though he understands that many health insurance firms have negotiated direct payment arrangements with physicians formerly served by NAMM.
PacifiCare had cut ties with NAMM of Houston in August and, under terms of a legal settlement, agreed to provide fee-for-service coverage to as many as 12,000 Secure Horizons enrollees in eight southeastern Texas counties through at least Feb. 5, 2001, for patients of physicians who do not join another IPA.
PacifiCare spokesperson Tony Salters says that the deal represents a break from the company's "preferred contracting model" of capitation but says that the fee-for-service arrangement was the best way to ensure continuity of care for enrollees.
Humana terminated its contract with NAMM of Houston on Sept. 30, 11 months before the three-year deal was to expire, and began negotiating directly with healthcare providers. Echoing PacifiCare, Ron Yarborough, president of Humana's Houston office, says, "Our major concern was the fact that our members' continuity of care was at risk."
Humana remains in arbitration with PhyCor in an attempt to reconcile 1998 insurance payments to the 19 Houston-area IPAs that then were affiliated with NAMM. "Whatever comes out of the arbitration, Humana is comfortable with,"
Yarborough says. He says that the Louisville, Ky.-based HMO just wants to get its 1998 books in order.
NAMM of Houston's woes started in late 1998, when it suffered the first of three major computer crashes within an 18-month period. Data was lost and a replacement computer network installed in 1999 was not compatible with several HMOs' systems, compounding the problems. "It's quite a mess and clearly no one (among providers and payers) understands what occurred," says Susan Waldron, executive director of Houston-based Texas Gulf Coast Medical Group.
Some of the group's 30 physicians also belong to Clear Lake IPA, a former NAMM affiliate. Waldron estimates that Clear Lake physicians are owed $1 million in insurance reimbursements that were never processed because of NAMM computer errors.
Because of the data management snafus, the third-party administrator last summer was buried under the constant stream of 10,000 claims per day coming in from its Houston physicians. The Texas Department of Insurance stepped in, placing NAMM's Houston operations under official supervision Aug. 31, forcing NAMM to get the state's approval for any financial transactions.
PhyCor said in an Aug. 14 SEC filing that it lost $11.2 million in the Houston IPA market during the first half of 2000, prompting the PPM to scrap plans for future capital investments there.
NAMM was left with just nine IPA associations in the Houston region, representing 350 physicians, as of mid-November. All the while, corporate parent PhyCor has followed a similar descent into near-oblivion.
PhyCor's long-term debt skyrocketed to $175.7 million as of Sept. 30, up exponentially from the firm's $2.9 million in liabilities a year earlier. The PPM has raised $56.7 million so far this quarter by selling six of its medical clinics back to independent physician groups, including its longest-standing affiliate, the Green Clinic of Ruston, La., which had been associated with the PPM since 1988.
"We are pleased to announce that we are physician-owned and operated again," South Texas Medical Clinic President Jeffery Gubbels says. He says that the Wharton, Texas-based group reached an undisclosed financial settlement to terminate its contract with PhyCor as of Oct. 31.
South Texas, with six clinics in two counties, comprises 53 physicians and 10 physician assistants and nurse practitioners. It had been a PhyCor subsidiary since November 1995.
PhyCor has been in financial trouble since peaking in November 1998 with 3,795 physicians at 57 clinics in 29 states and an IPA network of 26,000 physicians in 36 markets. It was delisted from the Nasdaq stock market earlier this year and reported a net loss of $516.8 million for the nine months ended Sept. 30.