University of Maryland Medicine and Doctors Health System, the state's largest independent physician group, said yesterday they will join forces to offer insurers a broad array of health services.
The affiliation -- not a merger or acquisition but a series of agreements to collaborate in a number of areas -- brings together one of the state's two academic medical centers (a medical school and teaching hospital) with a physician "mega-group" with more than 300 primary care doctors in Maryland and Northern Virginia.
It represents a move toward developing an "integrated system" of doctor and hospital care -- a model many expect to dominate health care in an era of managed-care insurance.
Within one to two years, the system could include 800 primary care doctors, eight to 10 hospitals "working with us in some fashion" and a variety of specialist networks that would together care for more than a million patients, said Dr. Scott Rifkin, chairman of Doctors Health System (DHS).
"What payers want is a broad geographical spread" of doctors and hospitals, said Dr. Robert A. Barish, chief executive officer of University Care, a joint venture of the University of Maryland medical school and hospital.
While University of Maryland Medicine (UMM) and DHS would work together to acquire some pieces of that system -- with some $70 million in capital available -- others would join under contractual arrangements.
"It's the way you ought to start an integrated system," Rifkin said.
Eventually, he predicted, "you're going to end up with two or three huge systems" in the region, with most hospitals and doctors lining up with one or another. Johns Hopkins and the five-hospital Helix Health system have also been assembling doctor groups, although structuring their arrangements in different ways. Community hospitals have formed smaller networks and assembled smaller doctor groups by purchasing practices and by financing physician groups.
In the short term, the UMM and DHS have agreed on the following: While each party is still free to deal on its own -- some potential partners might want to affiliate with one but not the other -- they will collaborate in seeking doctors and hospitals to join the system.
DHS doctors will refer patients to University of Maryland Medicine's specialists and hospital as a "preferred provider of advanced and complex health care." The doctors and their patients could still choose other hospitals sometimes -- and often would choose community hospitals for routine cases. "Clearly 95 percent of the cases in Cumberland will stay in Cumberland," Rifkin said.
They will work together to handle managed care contracts. DHS sees many of its patients moving into Medicare managed care plans, and DHS would refer those patients, as needed, to UMM. The university is planning to participate in a to-be-formed Medicaid managed care organization, in which DHS doctors could participate.
They will coordinate care by developing plans for the best ways to treat certain illnesses, sharing a computer information system to track patients both in the hospital and at doctors' offices, and coordinating the work of "case managers" -- people who follow cases through treatment.
The university's medical school will send students and residents to train in the offices of some DHS doctors, who will have faculty status.
Each would appoint a yet-to-be-determined number of members the other's board.
Era of managed care
"It's clear in this era of managed care that academic health centers must enlarge the base of their pyramid, involving as many primary care doctors as possible to generate referrals and keep the hospital beds filled," said Jonathan Weiner, professor of health policy and management at the Johns Hopkins School of Public Health.
While UMM gains a large primary care base, Weiner continued, "for Doctors Health there is the prestige of a relationship with an academic health center and the opportunity to enlarge the most influential doctor group in the state."
"It's a further maturing of the Doctors Health System network," said Leon Kaplan, chief executive officer of United HealthCare of the Mid-Atlantic, which has contracts with DHS. "It provides them with more resources than they had and allows them to get into more businesses."
As more and more people shift from traditional indemnity insurance to HMOs and other managed-care plans, health providers are joining together to form larger groups, said Richard J. Lohkamp, a principal in Longshore & Simmons, a Philadelphia firm that consults on strategic planning for doctors, hospitals and HMOs.
In general, according to Lohkamp, as managed care penetration rises in a market, hospitals move from small systems to larger, regional ones, and doctors move from solo practice and small groups to "mega-groups."
For HMOs, he said, integrated health systems provide "one-stop shopping -- the same thing you get if you go to Home Depot to do a project. I get all the parts I need, and the prices are good."
Variety of strategies
"What you tend to see in this market is a variety of strategies" for hospital-doctor collaboration, said Linda Bolton, vice president for managed care at Maryland Hospital Association.
Helix, for example, has provided financing for HelixCare, which buys practices. Hopkins contracts with more than 1,000 physicians off-campus, but generally doesn't buy practices.
More than half of Maryland hospitals have some type of #i physician-hospital organization, most often based on buying doctor practices, according to Bolton.
Assembling all the parts of medical care allows an integrated system to accept and manage "global capitation" contracts, in which the insurer or employer pays a flat fee per member per month in exchange for all needed care.
Some integrated systems have also sought to cut out the HMOs, contracting directly with employers or government payers. Both Barish and Rifkin said their organizations are not interested in direct contracting.
But both UMM and DHS have been assembling the pieces of an integrated health system over the past few years.
UMM, based at the University of Maryland Hospital and medical school on the western edge of downtown Baltimore, has acquired Kernan Hospital, a rehabilitation center, and Deaton Specialty Hospital and Home, a long-term care and nursing facility. It owns the second largest home health care agency in the state and has half a dozen primary-care clinics. In addition to 1,000 faculty doctors, it has built contractual specialty networks across the state, particularly in cardiology and neurology.
Three-year-old DHS, with offices in Owings Mills, has been growing rapidly, generally by merging practices into the company in exchange for DHS stock. Last winter, it bought Medtrust Medical Group of Northern Virginia, giving it greater geographical reach. While nearly all of its owner-doctors are in primary care, it has contracts with hundreds of specialists.
The two had their first conversations about teaming up at a medical conference in October, at Amelia Island, Fla. Rifkin, who was there to give a talk about "integrated system development from a physician perspective," began chatting at a cocktail party with Dr. Donald E. Wilson, dean of the University of Maryland School of Medicine. The conversation expanded to Barish and other deans at the conference, and talks proceeded from there.
Barish said the university was initially interested primarily in providing primary-care training for its students and residents. As the talks proceeded, he continued, it was also clear that an affiliation with DHS would provide UMM with an alternative to building a physician network by buying practices -- a strategy it had rejected.
It's possible the two would form a joint venture or other entity if needed to make or manage deals, but no new organization has been formed, and there has not been an exchange of money or stock. The initial agreement is for five years.
Pub Date: 4/13/97