Medical Group Looks For Bargaining Chip Vanguard Healthcare Says It Can Relieve Hmos Of Risk In An Obstetrican/gynecologist Network.

Posted: June 17, 1995

The medical group that says it handles 15 percent or more of all baby deliveries in Philadelphia wants to sign up 60 percent of the area's obstetricians and gynecologists in an effort to bargain with HMOs.

Vanguard HealthCare Group Inc. has created a subsidiary, Omnia Inc., to establish a network of some 750 physicians in New Jersey and the five-county Philadelphia area. Omnia would provide comprehensive services to about 100,000 women in return for a fixed fee paid by HMOs.

The Omnia venture is one of many being formed around the country in what health specialists describe as a kind of collectivization of physicians. Rather than work at the mercy of large, well-organized HMOs, more and more are banding together into networks of specialists that bargain independently with local managed-care companies.

"It's a kind of 'United we stand, divided we fall' philosophy," said Uwe Reinhardt, a health economist at Princeton University. "The physicians have said, 'We'll band together.' "

Omnia president and founder Kenneth Krieg said the industry has another name for it: a "carve-out".

Increasingly, he said, HMOs are "carving out" specialties from their general benefits packages and assigning them to groups of specialized physicians that provide a narrow set of services.

The practice has become widespread in California and other mature health- care markets, he said, particularly among specialties such as obstetrics/ gynecology, cardiology, oncology, orthopedics and mental health.

In the case of Omnia, the new company hopes to assemble a network of obstetricians and gynecologists that eventually operates in Pennsylvania, New Jersey, Delaware and Florida. It has sent letters to 450 Philadelphia-area physicians, as well as several hundred in New Jersey, Delaware and central Pennsylvania. And it is negotiating with an existing network of ob/gyn specialists in three South Florida counties, said Krieg.

By assuming the full ob/gyn care of the patients, Omnia would be absorbing the risk of paying for those patients with costly complications - a risk HMOs currently bear.

That's why HMOs like the idea, according to Krieg.

"The driving force behind this kind of construction is the assumption of risk," Krieg said. "The HMO would like to pass the financial risk to providers."

The HMO would pass the risk onto the physicians, who would spread the risk over their large patient pool and, theoretically, be forced to keep costs down.

Those physicians who performed too many costly procedures would be ''educated" to use protocols designed by the American College of Obstetrics and Gynecology, Krieg said - and perhaps, ultimately, they would be booted from the network.

"They would need to be weaned down," he said.

Omnia managers would make money by charging a management fee of between 10 and 12 percent of each contract negotiated, said John Reiff, a spokesman. In return, it would provide doctors with marketing, access to collective medical malpractice insurance and purchasing, medical research - and patients, of course.

Krieg said Omnia will announce its first contract next week, for 30,000 patients. Two or three others will follow in the next three months for a total of about 100,000 patients, he said. The company is also negotiating to sign up an existing network of ob/gyn doctors in Broward, Dade, and Palm Beach Counties in Florida.

Health-care specialists warn that Omnia may face legal problems, however.

By seeking to sign up 60 percent of the area ob/gyn doctors, Omnia runs the risk of violating antitrust laws according to the Justice Department, some health-care specialists say. Lately, the Justice Department has been viewing the increasing concentration in the health-care industry with wariness.

If Omnia became powerful enough, its negotations with HMOs might "be bordering on price-fixing," said Reinhardt. Similar groups in Georgia and California have been challenged, he said, but the law is still murky.

Krieg said Omnia does not violate antitrust laws because its doctors are free to join other networks, and, thus, Omnia is not an "exclusive" group. ''The question of antitrust is always one which looms with these endeavors," he said.

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