PhyCor expands Atlanta presence

Investment will fuel statewide growth

Nashville-based physician practice management company PhyCor has moved one step further into its new methodology of contracting with independent practice associations (IPAs) through its just-completed acquisition of Atlanta-based Morgan Health Group. Morgan's network includes 400 primary care physicians and 1800 specialists who provide services to about 57,000 managed care members in metro Atlanta.

The deal is the latest step in PhyCor's expansion through IPAs, in addition to its original mode of contracting with large multispecialty clinics in secondary markets. (See related story in Physician's Managed Care Report, November 1997, p. 146.)

"It will probably work well to everyone's advantage," says Michael Fleishman, a consultant with Atlanta-based Gates Moore & Co. "It will give physicians associated with Morgan an opportunity to be more proactive with a capital partner and to invest more in data management systems. As they do that, they'll function much better in managed care."

The move makes sense strategically for Morgan Health Group, as the group was seeking options for funding to replace its venture capital sources, says John Gastwright, MD, Morgan's president.

The IPA was started several years ago through venture capital funding, with the understanding that the investors would move their money somewhere else three to five years down the road. As that time approached, Morgan's physicians weighed several new funding options, ranging from affiliating with a hospital to affiliating with one HMO. Both of these options were deemed undesirable because Morgan Health Group wanted to remain first and foremost a physician organization.

PhyCor affiliation provides clout

The funding available through PhyCor gives Morgan the opportunity to expand to other Georgia markets, as well as bargaining clout with managed care organizations, Gastwright says. The company currently contracts with four managed care organizations and will seek out one additional contract at maximum because it prefers to contract with a select group of MCOs.

When a provider group is new, MCOs typically are concerned about financial stability of the group, Gastwright explains. The clout of affiliating with a nationally known multibillion dollar organization eliminates the need to prove that stability.

Morgan's leaders have not decided which market to expand to first as it attempts a statewide presence, but likely will go to the Columbus or Macon area first, Gastwright says. Many of the managed care organizations Morgan contracts with have a presence in multiple Georgia markets. n

· Robert McCann, MD; medical director, Independent Living for Seniors, Rochester, NY. Telephone: (716) 266-9040. Fax: (716) 266-9046.

· Richard E. Gable, PhD, MBA; Dynamic Health Connections, Irvine, CA. Telephone: (714) 250-7017.

· Steven Knox, MD; medical director, MMI companies, Deerfield, IL. Telephone: (847) 374-2498.

· Richard Mahood, MD; trustee, American Medical Association, Chicago. Telephone: (312) 464-5360.

· Neil Baum, MD; private practice of urology, New Orleans. Telephone: (517) 891-8454.

Aran Ron, MD, MBA; senior medical director, Oxford Health Plans North Metro Region, White Plains, NY. Telephone: (914) 467-3497.

Joseph A. Welfeld, FACHE; president, chief executive officer, Affiliated Physicians Network, Fort Lee, NJ. Telephone: (201) 947-8856. n