Healthy competition.

• Author: Spence, Annette
• Position: Carolina Physicians' Health Plan - Feature

It's a fate they hate, but a group of Tar Heel doctors decided the best way to compete with HMOs was to form their own.

Raleigh obstetrician Randall Williams has been in private practice for three years, but it didn't take him nearly that long to learn why griping about insurance companies is a favorite pastime of physicians.

Delivering babies is only part of Williams' job. He and his peers find themselves up to their stethoscopes in insurance forms, unpaid claims, cost-control guidelines and peer reviews, all of which directly affect doctors' decisions and incomes.

"But instead of taking the attitude that this is wrong and we're not going to participate," Williams, 34, says, "a new generation of doctors is saying, 'If I have to deal with this, I'm going to do it the best way possible for me and my patients.'"

For Williams and 1,400 other North Carolina doctors, that's meant becoming the insurance company. They are 71% owners of Raleigh-based Carolina Physicians' Health Plan. Including its subsidiary, Carolina Physicians is the state's second-largest managed-care organization, with nearly 60,000 members. In its seven years, the company has undergone tumultuous change as its doctor-owners have learned about the difficulties of staying financially solvent in the current health-care system. But improved management and an investment by a New Hampshire-based health maintenance organization have steadied its finances. Now it is aggressively expanding into Charlotte, where the medical establishment has shown tepid support for HMOs.

The decision to switch rather than fight has attracted relatively little publicity, but it is noteworthy considering doctors' traditional abhorrence of HMOs. Until the U.S. Supreme Court put a stop to it in 1943, the American Medical Association expelled doctors who worked for HMOs. Though nearly 40 million Americans are HMO members, top AMA officials had never publicly embraced HMOs until Executive Vice President James Todd did so in June. Many doctors still prefer the traditional pay-per-visit system to the HMO, which is built around two concepts: that providing people with easily accessible health care will promote preventive medicine and reduce costs and that a central organization supervising care is more efficient. An HMO, in the view of many doctors, is just another form of managing care, if not rationing it -- tantamount to turning the practice of medicine over to the bean counters.

"All of us would love to go back to the so-called good old days when we didn't have this managed care," says Robert Bilbro, Carolina Physicians' chairman. "There were |fewer~ restrictions, regulations and hassles."

CEO Bob Greczyn says doctors "aren't 100% converts to managed care because it means giving up freedom. Basically, physicians go into HMOs for defensive reasons."

When six doctors gathered in 1985 in the waiting room of Durham radiologist Larry Crane's office to discuss forming an HMO, they realized the good old days were over.

"Our feeling was, if there's going to be managed care in the area, let's find a way to direct it," Crane says. Within a year, Carolina Physicians had a state license, an ownership group of 650 Triangle-area doctors and initial capital of $700,000.

What happened in Larry Crane's office, Greczyn says, happened all over the nation in the past decade. "It was becoming clear that health-care costs were escalating too quickly, and HMOs are one of the primary approaches to addressing that problem." As more employers enrolled in HMOs, "physicians felt the necessity to join in order to maintain and expand their patient bases."

"It's never been what you would call an exceedingly happy relationship," Greczyn says, "but the...