Physician Practice Management Companies: What Do They Offer Physicians?

Abstract

In their article, Lawton R. Burns and James C. Robinson provide a detailed review of a recently prominent group of companies through which healthcare delivery systems are organized. One hopes that the article will be made widely available to physician readers: It should be mandatory reading for all doctors in group practices and individual practice associations (IPAs) and for all who individually contract with managed care companies. The arrival of physician practice management companies (PPMCs) is one of many ways that healthcare in has diversified since the 1970s. It was also an event that some physician groups hoped would help them regain a measure of control over the healthcare process. Burns and Robinson make it clear, however, that any expectations of physician control of healthcare through PPMCs is misplaced. Shortly, this commentary will touch on why such expectations may have existed in the first place and how PPMCs, as expressed in the basic organizational forms characterized by the article, offer little to physicians that they do not already have of their own initiative. Where Did PPMCs Really Come From? One premise of the article is that PPMCs are a new variety of that, by virtue of excluding inpatient capacity, differ from and compete with hospital-led integrated delivery systems (IDSs for the managed care dollar. Looking at these organizations from the point of view of physicians, however, one might include and exclude different organizations in the constellation of PPMCs, some dating considerably further back than those mentioned in the article. If we systematically examine the ways in which physicians' services are organized and extended beyond the local level, PPMCs may just as reasonably include all multispecialty medical practice groups that have geographically diversified. Thus, the fact that Burns and Robinson consider the physician services model the oldest of the PPMC models and date it back to the emergency services companies that arose in the 1970s is correct only if we exclude from the PPMC definition three other models. The Mayo model (the prototype was established in the 1890s as a physician-led group practice and expanded starting in the 1980s), the Henry Ford/ Geisinger model (established as hospital-based, multispecialty group practices in the 1910s and expanded in the 1970s) and the Kaiser/Permanente model (established as a quasi-staff model prepaid healthcare company and geographically diversified in the 1940s) all have roots in the relatively distant past. All provided physicians with the services PPMCs aim to provide, all claimed to fill the customer's needs better than cottage-industry private practice and independent hospitals, all served geographically diverse markets, and all curtailed physician autonomy to a variable extent. It is a little-known fact that the physician equity model, for which Burns and Robinson consider PhyCor the pioneer, was actually part of the business plan of the Federation of Western Clinics as early as 1980. This group of multispecialty clinics of the far west (including, among others, the Virginia Mason Clinic, the Palo Alto Medical Foundation, the Straub Clinic, and the Lovelace Medical Foundation), through their physician CEOs, entered into a venture that went as far as employing full-time staff to plan for the establishment of a physician-controlled equity model super organization of multispecialty clinics. The venture was abandoned when it became evident that despite the CEOs' vision, they were unable to convince the doctors back home to part with any element of local control over contracting, purchasing, capital investment, and earnings distribution. Shortly after the demise of this venture, one of the would-be organizers attempted to resurrect the idea as Physician Corporation of America (Ottensmeyer 1985). Although capitalization could not be arranged at the time, the idea obviously took root. Still, largely as a result of physicians' suspicion of any arrangement that shifts decision making away from the local level, PhyCor spent years using its equity capital to build an infrastructure before it was able to convince any major groups of physicians to sign on. …