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New Kid (Or Another Head)
on HMO Block
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Business New Haven
1/12/1998
By: BNH
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Was entrepreneurism in the region's health care sector eulogized and buried too soon? The founders of Physicians Care for Connecticut Inc. think so.
Organized last year as a statewide physician-owned and -managed health plan insurance company, or HMO, the company is seeking to raise at least $8 million in subscription shares over the next 90 days in order to open its doors to enrollees.
“Setting high standards of care, being physicians ourselves, and employing state-of-the-art information systems will allow us to care for patients first and not profits,” says Craig W. Czarsty, M.D., chairman of the company's board of directors.
But even HMOs that want profits first can't get them. Only six of the state's 16 licensed HMOs posted third quarter profits for 1997, and only five are financially ahead of where they were last year at this time.
Still, Physicians Care sees opportunity amid all that red ink. Czarsty's strategy hinges on the assumptions that a physician-directed HMO will be able to make money and retain its independence by using profits to reduce premiums to employers and individuals, reinvest in the company and to keep providers “equitably compensated.”
Central to the company's operating structure is the gatekeeper, or care manager, who approves referrals and controls how the system is used. However, unlike most HMOs, enrollees will not be compelled to call a care manager before seeking direct treatment, but are incented to do so with co-payment waivers and reduced deductibles.
Physicians Care, whose business plan forecasts profitability by the third year of operation, has an exclusive agreement with MedServe to manage day-to-day administrative and operational activities. Cheshire-based MedServe is a for-profit joint venture of the Hartford County and New Haven County Medical Associations.
Many New Haven-area physicians are unconvinced that another HMO, even one controlled by doctors, is either viable or needed in the marketplace. Some industry insiders say that Physicians Care is going to remain poorly funded, and like most of HMO players, will not be able to provide the kind of cost-effective and quality care to patients that will turn profits - particularly in its position as an independent newcomer. As one local physician put it, “In concept it's not bad, but look what happened to M.D. Health Plan.”
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