Fighting fire with fire: physicians blazing new paths to autonomy.

William Thieler, MD, Winter Park, Fla., is one of about 50 general surgeons working in the Orlando area. He's in a group practice with five other general surgeons. Recently, one of the major insurance companies the group deals with reduced its reimbursement rate 40 percent below the Medicare rate. At the same time, some of the managed care companies the group contracts with cut fees almost in half Thieler decided he'd had enough.

He called the Justice Department to see how to start a union in Florida and found a union already existed, the Federation of Physicians and Dentists. Based in Tallahassee, the union is affiliated with the National Union of Hospital and Healthcare Employees and the American Federation of State, County, and Municipal Employees, which is part of the AFL-CIO.

The union, which has been around for about 50 years, provides disciplinary and legislative representation, labor relations, publications from affiliated organizations, and research materials, according to its brochure.

The union also represents private practitioners, but only on an individual basis, because collective bargaining is illegal for other than employed physicians. But, under the current climate, Thieler believes he and other private practitioners and groups fit the definition of employee. He conveyed his frustrations to union director Jack Seddon, who urged him to gain the support of the other surgeons in the area. Forty-two of the 50 surgeons have joined the union, paid the $500 dues, and want some action.

"When a (managed care or insurance) company can tell you when and where to operate, who to see, and what drugs to use, you're pretty much an employee," Thieler points out, adding that the surgeon group has retained an antitrust lawyer to put this definition to a legal test. Meanwhile, a group of OB\GYNs, orthopedic surgeons, otolaryngologists, and some primary care physicians in the Orlando area is looking into the feasibility of forming chapters of the union.

On Florida's East Coast, in Brevard County, there's more union activity simmering. Nearly 100 of the approximately 600 licensed physicians there have banded together and hope to form yet another union chapter to fend off impending managed care penetration.

More union activity is cooking in California, where the Oakland-based Union of American Physicians and Dentists is busy signing up California physicians for a risk-sharing IPA it started in July 1993. So far, about 650 have joined, says executive administrator Gary Robinson. "We just signed our first PPO contract with Prudential," says Robinson. "It's a whole new world for doctors in California. The old fee-for-service is dead; managed care rules everything."

The California union, which was founded in 1972, has 5,000 members, both in private practice and salaried physicians, out of a total of about 35,000 in the state, Robinson says. Services for private practice physicians include insurance grievances, medical staff matters, Medicare and MediCal audit assistance, and California Medical Board investigations.

The union surveyed its members in the 1980s to find out what sort of issues they needed help with and to gauge the penetration of managed care. It was surprised to learn that 90 percent of its members were under contract with managed care companies. The most bothersome issues were reduced fees, payment denials, inability to obtain treatment authorizations, lack of due process, and unexplained terminations from plans. As a result, the union added contract review and negotiation assistance to its services.

At the same time, some private physician groups and IPas approached the union for help with payer problems. The union responded by negotiating fee-for-service reimbursement in lieu of capitation, recovered more than $80,000 in capitation payments from an HMO, and worked with IPAs to expand their size and number of contracts.

In 1988, the union was investigated by the Federal Trade Commission for possible antitrust violations. Although no wrongdoing was found, many of the IPAs fled the union to avoid further scrutiny. But, as managed care activity increased, physicians returned to the union and pushed for the IPA it now operates. More and more private practice physicians rushed to huddle under the union's wing. Robinson says there was a 17 percent increase in this membership sector last year.

"I've had doctors call me and say, `Things are terrible. I'm going to be out of business if you don't help me,'" Robinson recalls. "These are doctors who have been established for 25 years, but patients can't see them because they didn't sign up with plans right away, or they weren't selected for plans. It's real cut-throat."

Medical Societies Forming Networks

As managed care has grown and affected the way physicians do business, many state medical societies have reacted to the frustrations of members by spearheading physician-sponsored managed care networks. According to a recent study conducted by consulting firm Towers Perrin, three out of four state medical societies are either developing or considering forming one of these networks. Another 18 percent have already implemented networks, which include HMOs, PPOs, EPOs, and multiple product offerings.

Connecticut's medical society pioneered the effort in 1987 when it launched a statewide IPA that contracts with an HMO that is physician-owned and controlled and that does business exclusively with the Connecticut Medical Society IPA. "It's working very well," says Jack Sizer, MD, Medical Director of M.D. Health Plan for the past two years. "Until a year ago, physicians were too lax in the application of policies and guidelines and in their approach to medical management, but now they're more businesslike in applying the policies and clinical guidelines more evenly, and consistently reducing utilization and cost. They reduced premiums by 10 percent this past year."

A total of 6,000 physicians participate in the IPA, which provides open access and has no gatekeeper. It assumes full risk and deals with state businesses. Policies and control ultimately rest with the IPA. "Other insurers will always tell you they had a panel of experts look at policies and guidelines and agree," says Sizer. "But we all know most of these people are paid. In our case, these are the board members who are elected by region by the IPA members to be their representatives. We take their input and go back and discuss it with the IPA. Even if they don't feel good about the decision, they know their own people made it."

Sizer says the venture was launched with $5 million in capital, which was barely enough in 1987. Now, he says, it would take closer to $20 million to get a comparable venture seeded. The profits of the IPA go back into the return of withhold, he says, and the for-profit HMO acts as the MSO for the IPA. Currently, enrollment numbers about 60,000 fully insured and 70,000 self-funded members.

The medical society's most recent activity has been to establish a workers' compensation program, and it currently contracts with every hospital in the state, Sizer notes. M.D. Health Plan is competing for the State Medicaid contract that is to be awarded later in 1995. It also seeks to attain National Commission on Quality Assurance accreditation. "I think one of the challenges in managing in this time of transition," Sizer says, "is trying to become more efficient in medical management. We have done a good job in reducing administrative overhead." In an effort to be more competitive, M.D. Health Plan has recently merged with Health Systems International.

Medical Society of New York Operates

PPO

Two years ago, the Medical Society of the State of New York developed a PPO and then spun off an IPA that "gives physicians all the possible options in managed care and protects fee-for-service," says Executive Vice President Charles Aswad, MD. "It was clear to us that, while New York had been insulated from managed care growth by virtue of its regulatory process, the trends that were going on in California and other places suggested that managed care was becoming a large segment of the market," Aswad notes. "We didn't want to wait too long before that trend hit New York."

Eight years ago, only northern New York was active in IPAs and HMOs. Physicians in cities such as Albany, Syracuse, Buffalo, and Rochester were heavily involved, but those in Manhattan and Long Island had made no move. "We determined that it would be inappropriate for the medical society to compete with upstate providers, so we organized downstate into the PPO and IPA, and our plan is to network with existing organizations upstate in a joint venture arrangement," Aswad explains. "We don't know of any other state doing this."

The medical society also has to maneuver around a quirky state law that mandates that an IPA can only serve one HMO. Aswad says the way to circumvent this is to "create as many IPAs as necessary to deal with as many HMOs as necessary. Physicians can join as many IPAs as they want. We're trying to change that rule; it's an unnecessary obstacle."

Florida Medical Association Working to

Start HMO

The Florida Medical Association (FMA) is working with county medical societies to launch Doctors' Health Plan, a statewide HMO that its members' IPAs would feed into. But planning is stalled while FMA officials decide how to best finance the proposition. "We're trying to figure out how much doctors would have to invest," says FMA spokesman Gerry Soud. "Should there be a third party on a risk-sharing basis to put up capital, or should it be funded internally with a $3 million start-up?" Also being considered are stock options to be sold for $1,000 each, with an initial offering to participating physicians. The largest stockholder would be the FMA.

Unique Arrangements

* Last October, 52 primary care physicians formed Primary Care Doctors of California, Orange. They transferred the value of their practices (worth $150,000-$200,000 each) into voting stock and formed a partially integrated group practice. They consolidated their 24 offices into 8, are continuing to see their own patients, and are partnering with St. Joseph's Hospital in Orange. Next, they plan to establish a central computer system so everyone in the group can access practice guidelines right at their desks.(*)

* There's a new statewide joint venture in West Virginia comprised of the West Virginia Accountable Health Plan, a consortium of vertically integrated delivery systems and 22 hospitals; Anthem Benefit Services Inc., an Indianapolis-based insurance company; and Primary One, a 600-physician statewide primary care organization. Acting as its Program Director, Bruce jacobs is guided by the SunHealth Alliance, headquartered in Charlotte, N.C., and Allegiant Physician Services, an Atlanta-based provider of staffing and management services. The insurance company owns 41 percent, the primary care IPA owns 39 percent, and Accountable Health Plan will own the remaining 20 percent. The players are contributing risk capital totaling $6 million to seed the venture and, on January 1, landed their first contract with 19,000 state employees, according to Allegiant's Executive Vice President of Managed Care, Bruce Jacobs.

* In the Dallas-Forth Worth area, a physician-owned and -controlled community health care delivery system was recently formed. This alliance also includes Allegiant Physician Services as its MSO; Primary Care Concepts, a 50-physician primary care group, which will provide clinical management of care; and Alliance Health Providers, a PPO with more than 2,200 physicians, 40 acute care hospitals, nine specialty care facilities, and other providers, which will manage and expand the care provider network.

Jacobs of Allegiant Physician Services refers to the arrangement as a joint venture between the three entities, which are creating a "limited liability corporation." He says the profit under this arrangement is passed back to the owners without being taxed. "What we're doing is taking a loosely defined PPO that's been in existence and conditioning it for a more rigorous market environment," he says. "We came up with the approach because primary care physicians saw the market becoming more competitive, and they were beginning to understand their role of clinical management and saw the need to focus on it and turn business management over to Allegiant, its partner. We're going to assist them in building a more cost-effective delivery system. We're working with the current network to identify and select a more flat, fast, and flexible delivery system that can be more competitive in the marketplace." There are plans to integrate the information system to link the primary care doctors, specialists, and the payers together in one program and cut the paper and telephone chase, he says.

Jacobs also foresees formation of an HMO-like organization in which physicians would own 51 percent of the corporation that will hold the HMO license. Practice guidelines will be established, and capitation is an eventuality. "The physicians have always wanted to work for themselves," Jacobs says. "This is an opportunity to work in a bigger group. This is the step physicians have to take. It's very important that you have physicians who are committed to managing themselves, who say, `Let's take control, and let's work with somebody who isn't afraid to give us that control.' The word `control' raises flags, but it's our belief that physicians are in control, and we believe health care is a local phenomena, and we want to have physicians in that position."

(*) Montague, J. "Profile: Laurence Wellikson, MD. Hospitals & Health Networks 69(1):56-7, Jan. 5, 1995.

Donna Vavala is Managing Editor of College Digest, the College's bimonthly newsletter for and about members, and a contributing editor of Physician Executive.