Friendly Hills Medical Group: Managed Care Shook This Group to Its Core

By Azevedo, David | Medical Economics, September 22, 1997 | Go to article overview

Friendly Hills Medical Group: Managed Care Shook This Group to Its Core


Azevedo, David, Medical Economics


It's been a wild ride for the friendly Hills Medical Group. By embracing managed care early on, it thrived. But ownership twists and turns reduced it to just a spoke in a giant wheel Here's what happened.

If physicians have heard it once, they've heard it a thousand times: Only groups that welcome change and adapt to new market forces will flourish.

Well, there's change, and then there's CHANGE, and it's the latter that has engulfed Friendly Hills Medical Group in southern California. Doctors there have been as quick and aggressive as any in the country to recognize and capitalize on managed-care opportunities. So it's sobering to find that the result of those efforts is a group that has ceded its independent ownership interest, failed to make a go of it under a foundation model, and now finds itself under the control of a large multistate physician practice management company-a fate not entirely of the doctors' own choosing.

Don't weep for these physicians, however, because along the way about two dozen senior partners became millionaires, and every doctor in the group enjoyed many years of top-bracket income and a first-class national reputation.

While most FHMG doctors look toward the future with confidence, they have some adjusting to do. The group's longtime leader was fired last fall in a highly public way, giving rise to speculation that the action was intended to intimidate FHMG doctors into toeing the line. And its new parent, Birmingham, Ala.-based MedPartners, is folding Friendly Hills into the PPM's overall southern California operations.

Some FHMG physicians worry that the group's identity will be lost. Indeed, this past summer Friendly Hills doctors voted to dissolve their partnership and link with hundreds of doctors under a different corporate structure (which is technically the entity under MedPartners's management). FHMG leaders maintain that the group is still an influential force that is shaping its affiliates more than it is being shaped by them. Even so, the moves represent a new era for the group's physicians, who must get used to being part of a much larger organization.

Was the Friendly Hills upheaval inevitable? The intensity of health-care competition in southern California had plenty to do with the group's course, but its odyssey is instructive for any physician group that is facing market changes and struggling to maintain independence and viability.

Going full throttle into managed care pays off

Friendly Hills Medical Group began modestly enough in 1968 with four family physicians who wanted to share call. The group added a doctor here and there for the next few years, but it didn't stand out as a particularly unusual or innovative practice.

Radiologist Marvin I. Rice became the group's 13th physician in 1976. Shortly afterward, FHMG doctors began talking about a new type of contract being offered to them. "We had incredibly rancorous discussions about whether to sign up with a managed-care company," says Rice. "Some in the group thought it was like communism, and only when we all agreed to keep managed care a small portion of the practice could we go forward."

FHMG doctors didn't realize what a phenomenal market they'd entered. Local employers, many of them aerospace companies with young, relatively healthy workers, aggressively encouraged employees to sign up with HMOs. As one of the only medical groups willing and able to handle capitated populations, FHMG became indispensable to health plans, and it didn't take long before managed-care patients dominated the practice. By 1988, the group's 80 or so doctors took care of more than 60,000 managed-care patients-better than 90 percent of the practice.

FHMG approached managed-care finances with gusto. Although the group remained primary-care based, it accepted full-professional risk early on by contracting with outside specialists. It also participated in substantial hospital risk pools, and developed innovative programs to make hospital care more efficient and to get patients out of the hospital quickly.

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