arvard Vanguard Medical Associates,
a 600-physician multi-specialty group practice, spins off from its long-time owner, the Harvard
Pilgrim Health Plan. The event marks a peaceful parting of the ways for one of Boston’s prestigious
physician organizations and one of its most reputable HMOs. It also heralds the end of the staff-model
strategy on which the HMO had built its business.
The move frees Harvard Pilgrim from the responsibility of managing a large staff of physicians, and it gives Vanguard’s physician leaders control over their own organization, allowing them to open their practice to patients in other plans and enabling them to set their own rules for patient care.
For example, Harvard Pilgrim enrollees can now see any of Vanguard’s 400 specialists without a referral. Vanguard physicians are able to offer this option because they have taken on financial risk for these patients. Vanguard intends to negotiate this kind of benefit in future contracts with other plans, and sees this as a competitive advantage as the organization seeks to broaden its patient base.
At a recent HSC conference, David Blumenthal, director of the Institute for Health Policy at the Massachusetts General Hospital/ Partners HealthCare System, Inc., characterized the Vanguard and Harvard Pilgrim dis-integration as a move to give physicians greater autonomy and accountability. "The theory that will be tested," he said, "is that physicians who govern themselves can do better at controlling costs and improving quality than they could in a more complicated organization in which they had less governance control."
Vanguard doctors will also be testing the premise that providers can successfully take responsibility for care management policies that were once the exclusive domain of insurance companies. In doing so, they stake their future on being able to control costs, even as they move to a policy of less restrictive access.
While vertical integration was a defining trend in the health care system, some plans have been reconsidering the merits of owning various health care delivery entities. Some-as in the case of Harvard Pilgrim-are spinning off separate businesses and pursuing arrangements based on contractual rather than ownership relationships. Others are trying to focus their vision. Blue Cross and Blue Shield of Massachusetts, for example, sold all of its clinics to MedPartners, a national PPMC.
At the same time, many hospitals that launched their own health plans have concluded that there are too many inherent conflicts in being both a payer and a provider, and are exiting these new lines of business. In Seattle, Virginia Mason Medical Center launched a health plan to channel patients to its affiliated hospital and physicians. However, slow growth in HMO enrollment and consumer demand for broad networks limited the plan’s viability, while the challenge of operating the plan diverted the hospital from its core business. Ultimately, Virginia Mason sold its plan to Aetna.
It is not clear whether hospitals will remain integrated with their physician practice counterparts. Hospitals that own physician practices have found that the financial rewards of doing so have been scant, and although most have not spun off these practices, further acquisition has slowed considerably. Instead hospitals continue to explore new ways to work with physicians, and many are now seeking more arms-length relationships.
What does the future hold? Integration was seen as the linchpin of managed care,
enabling health plans to enhance quality and control costs by managing across the
care continuum. But
the disintegration of longstanding, prominent organizations such as Harvard Pilgrim raises
the question of what is the best way for plans
to manage care. And hospital acquisition of physician practices raises the issue of
how the range of providers is going to organize themselves to succeed in a managed care environment.
"Vanguard doctors have been willing to put themselves at risk in ways
that they weren’t when nonphysician managers were in control."
David Blumenthal, director of the Institute for Health Policy at the Massachusetts General Hospital/Partners HealthCare System, Inc., at HSC’s Physician Organization Conference
"The jury is still out as to whether physician organizations affiliated with hospitals will emerge as the most successful network model," said Joy Grossman, researcher at HSC. "One good indicator is that in southern California, where every imaginable physician network permutation exists, these organizations are still standing following the exodus of FPA (and MedPartners)."
Internal Medicine News
The HSC conference, Independent No More: How Effective Have Physician Organizations Been in Responding to Managed Care?, one of three conferences the organization holds each year, highlighted the variety-in structure and in success-of physician organizations around the United States. Using case studies from HSC sites, health care experts discussed recent struggles of national PPMCs and hospital-based integrated delivery systems and suggested that new strategies are needed in structuring the business side of medicine.
The experts agreed that while there are no established formulas for building successful physician organizations, doctor groups will best thrive in a managed care environment if they are modestly sized, locally governed, physician-run and physician-owned.