July 1995 Bulletin

AMA aids physicians on networks

The American Medical Association (AMA) has developed Physicians Capital Source, a program designed to help physicians build and lead "quality first" health care delivery networks.

The Physicians Capital Source program gives physicians access to managed care, business, financial, and legal experts who can help them develop business plans and links them with potential capital sources. "Forming networks gives physicians the legal and financial responsibility to manage patient care and ensure quality," said Thomas R. Reardon, MD, AMA secretary-treasurer.

Many physicians lack experience in forming their own health care organizations and networks. Those who are interested and have sound business plans find it difficult to obtain financing. Beginning in 1990, banks, venture capitalists, and other investors began to realize the financial viability of physician ventures. In 1993, there was an 80 percent increase in the amount venture capital firms invested in health care service companies. Many of those dollars went to medical groups.

The first step for physicians participating in Physicians Capital Source program is the completion of a detailed Request For Information which serves as a blueprint for developing a business plan. Physicians whose business plans are approved are linked to potential capital sources, such as banks, investment banks, and venture capital firms.

"With increasing incorporate ownership of health insurance and managed care companies, we're concerned that the focus of health care delivery is shifting from quality patient care to profit," Dr. Reardon said. "Physician ownership and involvement will assume that quality remains the goal."

The cost of starting up a physician organization varies widely, depending on the type. For example, the cost of starting up a "group practice without walls" ranges from $100,000 to $1 million, according to a study by The Advisory Board, an independent, not-for-profit health care think tank. The costs of starting up a staff-model health maintenance organization can be as high as $15.8 million to acquire information systems, office space, medical equipment, legal fees, personnel, and the purchase and/or start-up of medical practices.

Members of the Physicians Capital Source Advisory Committee offer participants advice and counsel during the application process. Initial business plan reviews and consultations are provided to AMA members at no charge for professional time. Subsequent consultations, at participants' direction, are billed at regular rates. The initial consultation costs $1,000 for nonmembers.

For more information, call the AMA's Managed Care Helpline at (800) AMA-1066.

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