Independent Health, one of the fastest-growinghealth-maintenance organizations in the nation, is expanding itsoperations into the huge insurance market of New York City and LongIsland.
The Western New York company's move is part of an arrangementwith the Medical Society of the State of New York, the group thatrepresents doctors in the state, that will allow the physicians toband together to provide their own managed care programs.
'What's happening reflects today's political and economicrealities,' said Dr. James H. Cosgriff Jr., the Buffalo surgeon whoheads the state medical society. 'We want to ensure doctors are ina strong position to deal with the nation's shift to managed care.'
Managed care, which includes HMOs, describes health insuranceplans that attempt to cut medical costs by using networks ofdoctors and hospitals that agree to provide care for discountedfees.
The medical society wanted to start its own managed care plansto become an active player in the insurance business, which istaking on increasingly larger role in the doctor-patientrelationship. Physicians, for instance, don't like the way manyplans try to control costs by limiting the number of physicians whocan join.
Independent Health, meanwhile, wanted to expand into New YorkCity and Long Island.
State law requires companies of more than 200 workers toprovide employees with a choice of different types of HMOs. Thatlaw runs out next year, and employers will likely begin to paredown HMO choices offered to workers.
Faced with that prospect, Independent Health officials neededto look outside Western New York, where more than 40 percent of thepopulation already belongs to HMOs, if they wanted the company togrow. The company already operates an HMO in Westchester County andthe lower Hudson Valley, and provides management services to theCapital District Physicians Health Plan, an HMO in the Albanyregion.
'We were both going down separate roads trying to do the samething,' said William L. McHugh, executive vice president ofIndependent Health.
Anti-trust law barred the doctors from structuring fees forsuch networks. Independent Health, in turn, needed participatingdoctors to compete in New York City, where only about 15 percent ofthe people belong to HMOs.
Both found a solution in a deal in which Independent Healthwill manage two medical society managed care plans.
Independent Health's Hudson Valley not-for-profit HMO isexpanding into New York City and Long Island and has signed up morethan 3,800 doctors, all of them members of the medical society.That instant physician list gave Independent Health a quickopportunity to match up well against Aetna, Prudential and others.So far, the HMO has signed contracts to become an option foremployees of Nynex, Xerox, Merrill Lynch and Avon.
McHugh said he believes Independent Health's large network ofphysicians and low administrative costs will give it an advantage.
The other plan is a statewide for-profit Preferred ProviderOrganization, another type of managed care network. PPOs usuallyallow patients to receive services, at a financial penalty, outsidethe network. The PPO, which is aimed at companies with workersscattered across New York, will be created by an alliance amongHMOs in other parts of the state.
Medical societies in 29 states have formed or are consideringphysician networks, according to the New York doctors' group.
Cosgriff said it's an indication that the era of solopractitioners hanging shingles outside their offices is giving wayto one of physicians grouped together in business organizationsthat offer insurance in addition to medical care.
