Big Hospital-PPM Alliance Announced For New York

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CEO SUMMARY: This alliance involves PhyCor and the New York and Presbyterian Hospitals Care Network. Like the MedPartners/Tenet deal in California reported in our last issue, this joint venture will have far-reaching impact upon the local healthcare marketplace it serves.

HOSPITALS ARE LEARNING that physician practice management companies (PPM) might be an effective way to organize physician practices within their healthcare system.

Should this prove true, then consortiums of hospital systems and PPMs could rapidly develop as buyers of laboratory and other clinical services in cities throughout the United States.

Just two weeks ago, PhyCor signed a letter of intent with the New York and Presbyterian Hospitals Care Network. PhyCor will organize several thousand physicians participating in the network. These physicians practice in 19 counties in Connecticut, New Jersey and New York.

It is expected that PhyCor’s exclusive deal with hospitals in the network will encourage physicians to merge their practices and create equity-sharing arrangements with PhyCor.

The direct consequence of the network agreement is that PhyCor and the network are forming a joint venture management company. PhyCor’s North American Medical Management subsidiary is to develop 21 new independent practice associations (IPA). North American will offer capital, medical management services and administration to both existing and proposed IPAs.

With all these IPAs under common management, it should be expected that a master contract for laboratory services would result at some point in the future. Covering thousands of doctors in 19 counties, it would represent a sizeable chunk of laboratory testing.

Joseph Hutt, PhyCor’s President and CEO, pointed out that the hospital network needed to quickly develop a response to managed care. The network realized that rapid organization of physicians was essential for contracting and service reasons.

“I think you’re going to see more of those around the country,” noted Hutt. “Hospitals are beginning to realize that the physician company is not a competitor, but that the hospital can work effectively with them.”

This is the third similar joint venture for PhyCor. Taken in context with the MedPartner/Tenet deal in Southern California, involving 33 Tenet hospitals and 4,000 MedPartner doctors, it illustrates how swiftly individual PPMs can become major players in regional markets.

Laboratory executives should be alert to similar arrangements in their own cities. Timely marketing to such ventures could generate worthwhile revenues.

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