Changing market squeezes insurers, providers, patients.

• Position: North Carolina health care - Illustration - Statistical Data Included

Through the gray, Gothic halls of west Durham and along the stone walls of East Franklin Street in Chapel Hill, tension is in the air. The old rivals are squaring off again. Duke vs. Carolina.

Forget basketball, this is the big stuff -- medical care. When UNC Health Care System bought Rex Healthcare Inc. of Raleigh last summer, only a year after Duke University Health System Inc. bought competing Raleigh Community Hospital, Triangle medicine was concentrated in two powerful teams.

How powerful? When Duke quietly began trying to sell its WellPath Community Health Plans Inc. health-mainintence organization late in the year, analysts say it wasn't merely because the plan lost $12 million in 1998. "Duke now controls hospitals, employs the physicians and sells the insurance," says Stephen Leary, physician consultant with Professional Management Inc. of Raleigh. "They realize they're approaching antitrust."

The year for North Carolina's $25 billion healthcare industry was another in a troubled string. One of the state's largest HMOs capsized, angry physicians saw more patients for less money, and HMOs began to sweat a revolt by their 1.6 million members and the doctors who treat them. The stunning HMO casualty was Kaiser Foundation Health Plan of North Carolina, licensed in 1984. After years of losses, including $12 million in 1998, the company sold its 40,000-member Charlotte operation in October to Coventry Health Care of the Carolinas Inc. (formerly Principal Health Care of the Carolinas Inc.), leaving behind a vacant, nearly new $23 million medical center. A few months later, Kaiser announced it would unload its 73,000 Triangle-area members on Partners National Health Plans of North Carolina Inc.

Late in the year, newcomers Carolina Summit Healthcare Inc. in Raleigh and One Health Plan of North Carolina Inc. in Charlotte were preparing to enter a stark landscape. By year-end 2000, fewer than a dozen HMOs will remain in the state, down from almost two dozen in 1995. The industry lost $93 million last year in North Carolina. To combat losses, many HMOs are offering new plans, including open-access HMO models. They dispense with the gatekeeper physicians and pre-authorization managers that patient advocates say HMOs have used to discourage members from seeking care.

As for doctors, they are "in a vise," says Robert Seligson, CEO of the North Carolina Medical Society, which is exploring how its 10,000 members can organize to protect their...