The old ways of doing medical business are passing.

Over two years ago, the doctors in our single-specialty group practice noticed that referrals were slowly but steadily declining in Ft. Lauderdale, a Florida seaside town of 147,000 people. As Vice Chief of Surgery at a 600-bed Catholic hospital, I was on the executive committee of the medical staff, which is composed of the chairs and vice chairs of the clinical departments, the chairs of various key committees within the hospital, certain members of administration, including nursing, and the chief of staff, appointed by the administration. The elected president of the medical staff is also a member of the committee along with the president-elect and the secretary-treasurer.

I decided to utilize the executive committee as a forum for my thoughts about what was going on in the physician community around the hospital. I delivered a three- to four-minute summary of what I believed to be the slow destruction of many of our primary care physicians' practices because of the creeping influence of managed care programs on these doctors' patient population. I theorized that our specialty work was being eroded by the decline in the pool of patients being seen by our referring doctors. I told the committee that I had visited the offices of many of these primary care physicians regularly over the years and had noticed a gradual decline in the number of patients sitting in their waiting rooms. My message was especially geared for the hospital administrators. I ended my oration with a plea for the hospital to somehow assist our referring doctors, practices.

The hospital assisted by buying these doctors' practices and integrating them fully within the hospital structure. Once two practices were bought, the dominoes fell rapidly. Almost every primary care physician within a three- to four-mile radius is now working for our hospital or for two other area hospitals that followed our hospital's lead in the buying of practices.

The administrators responsible for acquiring the practices asked me what I thought of the fledgling group after three to four practices were acquired. I stated that the hospital needed a few well-respected physicians who have more clout in the community and who have more successful practices. Bingo! More prominent physicians were brought on board rapidly. About 80 percent of them have referred to our surgical group over the years. So far no one has told these doctors to which specialists they should refer their cases.

About 10 months prior to the primary care practice acquisitions, the hospital appointed a steering committee to develop a physician-hospital organization (PHO). Many of us on the committee saw the hospital was willing to collaborate with the physicians in a manner that would suit the doctors. Attorneys and consultants presented their views on group practices without walls and on independent practice associations (IPAs), both of which quickly lost favor with the doctors on the committee. Eventually, the doctors opted for a PHO.

The hospital wanted a governing board of 10 people, six from the administration and four from the medical staff. I asked the CEO of the hospital why the doctors couldn't be an equal partner with the hospital in the PHO, as integration was the inevitable follow@up to collaboration. He said that, because the hospital would be using its funds to start the PHO, it should be in control.

Some physician members of the committee asked how much the hospital would be spending. The answer was hundreds of thousands of dollars. I asked the CEO if doctors could offer money for the PHO start-up costs in order to be equal shareholders with the hospital. When doctors were asked to join in the PHO financially, 215 doctors out of 400 on the staff took the plunge to offer $500. The physician mix is one-third primary care and two-thirds specialists. members from the hospital and five from the medical staff.

The initial composition of the steering PHO committee was somewhat top heavy with primary care doctors. There were, to be sure, specialists, but many were medical subspecialists with strong primary care practices. Later, we would discover that many of the internists and family practitioners on the committee would be the ones selling their practices to the hospital. Indeed, of the five members on the board of directors from the hospital, three would be doctors from the newly formed hospital group practice.

During the PHO negotiations, the hospital asked the surgical representatives if they would like a fee-for-service arrangement or a capitation arrangement. During that session, it clicked in my head that capitation would mean fewer specialists would be needed. The medical staff would cry, foul, and the specialists wouldn't bother to join. I suggested a fee-for-service arrangement to be worked out after the PHO board of directors was elected.

A few hospitals in the area have developed PHOs. Some are more advanced than others. All are in various phases of obtaining managed care contracts. The physician component of a PHO in an adjacent county is an IPA that negotiates multispecialty services with the PHO and obviously retains significant professional control over utilization, costs, and quality.

While the hospital looks to its newly formed primary care group as the foundation for capitated contracts, patients in the managed care program signed on by the hospital are also allowed to go to the doctors in the PHO, which is not owned by the hospital. When asked how patients will be assigned, the hospital gives vague answers and sometimes defers to the trite phrase "patient choice." One wonders who will be answering the phone when Mrs. Smith calls for an appointment because of chest pain or a belly ache.

I believe that specialists will play a minor role in the development of these new entities, for a while anyway. It,s the national trend now to take specialists from their preeminent role in American medicine and place them on the backburner. I don't believe they'll stay there for long. The gate-keeper theory works very well until 2 o'clock in the morning when Mrs. Green's abdominal pain no longer responds to a low-fat diet and a cheap medical liquid.

Specialists need hospitals much more than primary care physicians do. The latter need a pen, a stethoscope, and a highly organized brain. Specialists need the sophisticated services only a hospital can offer. Indeed. specialists belong in an office building on the hospital campus, primary care doctors are needed in the neighborhoods.

The subspecialists in the PHO have to make a choice: offer services in internal medicine as a primary care giver or enter the specialty pool if the decide to practice their subspecialty. No one can do both. One cardiologist has already signed on as a primary care physician. His other partners signed on as cardiologists. One wonders where his chest pain referrals will end up.

If specialists are to recommend nonsurgical treatment for traditional surgically treated diseases in managed care, the have to be compensated for taking the risk of not recommending surgery for Mrs. Turner's moderate fatty food intolerance and for Mr. Johnson's large aching groin hernia. Maybe, just maybe, insurance companies will come to believe that if a patient is sick enough for hospital admission, he or she is sick enough to be admitted by a specialist, as is done in some European countries.

Primary care givers may share the stage with nurse practitioners and physician assistants, who will open offices down the street, siphon patients, and bill Medicare and insurance 10 percent less than doctors. Quality of care may move over for the overriding concern of cost containment.

The final landscape of health care in America is blurred now. Hospitals are rushing to get involved in myriad delivery systems, hoping to be part of the ones that survive. Hospitals must move quickly to buy physician practices during this time of uncertainty. The fear of the unknown drives our colleagues into practice acquisitions by the hospital. When the dust settles, when the picture is in better and brighter focus, many doctors may opt for a different association.