MedStar cutting doctors and Medicare contracts; Physician groups costly, says region's largest care provider;Managed care


MedStar Health, the region's largest health care provider, is cutting the doctor network it owns and getting out of money-losing Medicare contracts.

Most of the 50 doctors who will be "released" by Columbia-based MedStar will continue to practice independently. MedStar will retain about 85 physicians whose practices it owns and continue to contract with about 700 physicians whose practices it does not own.

While the changes will not be apparent to most patients, some older people will find that their doctors no longer participate in their Medicare HMO.

Physician groups had proved "costly and disappointing across the nation," MedStar spokesman John Marzano said yesterday, and the health system had decided to "focus on the practices that strategically fit with MedStar."

MedStar lost $27 million on its physician group for the fiscal year that ended June 30. Overall, it posted a $70.3 million loss, but that included a number of one-time charges, including a write-down of physician practice assets and the closing of Church Hospital. Without the one-time charges, MedStar made $2.2 million in fiscal 1999, down from $17.6 million the previous year, according to Marzano.

In downsizing, the MedStar physician group is following others that foundered on the shoals of managed care contracting. Of the large doctor groups formed in the Baltimore-Washington market four to five years ago, nearly all have dissolved or filed for bankruptcy.

The doctor groups initially were designed to accept "risk contracts" in which they would be paid a flat fee per patient per month, and would be responsible for providing all the care that patients needed. This appealed to doctors because they thought they could profit from providing care efficiently, and appealed to HMOs, which were able to pass along the insurance risk to the doctors.

"But there was never enough money in the system" to pay for Medicare and Medicaid patients, said Robert A. Edwards, who was president of Maryland Personal Physicians Inc., which filed for bankruptcy in the fall. After "everybody along the way takes a slice," he continued, the doctor groups found they couldn't make a profit.

Also, he said, with Medicare HMOs offering expanded benefits and low or no premiums, they attracted sicker-than-average patients -- who cost more to treat. A number of Medicare HMOs have left the market.

MedStar was formed by a merger of Helix Health, which ran Baltimore-area hospitals, and Medlantic Health, based in Washington. The Helix doctor group, called HelixCare, was absorbed into what is now called MedStar Physician Partners.

Marzano said MedStar would continue to own the practices of physicians located near, and frequently admitting patients to, its hospitals. In the Baltimore area, those hospitals are Franklin Square, Good Samaritan, Harbor and Union Memorial.

Ernest A. Viscuso, vice president for network contracting at CareFirst BlueCross BlueShield, the state's largest insurer, said CareFirst's Medicare HMO has about 7,800 members served by MedStar doctors -- who represent about 15 percent of the physician network for the HMO.

The "released" doctors, who are being given their practices back, may contract with CareFirst's Medicare HMO, but otherwise their patients would have to find new doctors.

Viscuso said CareFirst has seen most of its risk contracts ended when physician groups dissolved. "We haven't changed our position on risk contracting," he said, "but there are fewer and fewer people to do risk contracting with."

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