Physician organizations and physician-hospital organizations: models for managing change

The health care environment is expected to undergo significant change in the coming years. The continued growth of managed care, in particular will exert a profound impact on medical practice. This trend will be accelerated if a managed competition approach to health system reform is adopted at the federal level. As physicians continue to consider possible strategies by which to adapt to the changing practice environment, two options may merit special consideration: first, integration with other physicians, particularly through formation of a medical group and, second, vertical integration with a hospital, through formation of a PHO. Although PHOs are a relatively recent phenomenon, they represent a potentially powerful strategy by which physicians and hospitals can combine forces to take a leadership role in managed care contracting. Through careful planning, development of a sound legal structure and efficient governance process, and implementation of effective criteria for participation in the PHO, it is possible to further the goals of the physician and hospital participants, while meeting the needs of payers.