An Ontario-based medical company has acquired the management contracts of seven independent doctor groups in Los Angeles and Orange counties, making it one of the largest managers of physician groups in California.
The deal announced Tuesday will give North American Medical Management ownership or management responsibilities over doctor groups serving 517,000 patients in California. The company already owns nine independent medical practice associations, mostly in San Bernardino and Riverside counties.
Medical group management companies such as NAMM are an increasingly important element of the nation's restructuring health-care system. They handle administrative responsibilities of physicians' groups, including patient claims and purchasing of supplies, allowing doctors to focus on the practice of medicine.
They also represent doctor groups in contract negotiations with managed-care companies in return for a fee or a percentage of the doctors' income.
Many of these medical groups failed when they were unable to master the management duties on their own and because of low fixed payments from HMOs and other managed-care companies.
Some industry officials said NAMM may face similar challenges in California, where reimbursement rates for medical care are among the nation's lowest.
NAMM also may have trouble overcoming negative perceptions of its parent company, PhyCor Inc., a Nashville-based company that at one time was the nation's second-biggest manager of doctors' practices. PhyCor filed for bankruptcy protection in January.
NAMM's prospects in California "are worse than they would be in other states and overall medical practice expenses rose faster than inflation and the economy at large last year," said Dr. William Jessee, president and chief executive of Colorado-based Medical Group Management Assn., a trade group.
Jessee added that medical practice revenues are down and that many in California "are already operating on a razor-thin margin. It will be tough to find success in California."
NAMM Chief Executive Rene Moret, however, said the acquisition is "a good move for us" that will help give the company greater clout in negotiations with health plans over payment rates.
"It put us into L.A. and Orange counties. It was a growth opportunity," Moret said.
Under the deal, NAMM acquired certain California-based assets and management contracts of Medical Pathways Inc., a Cerritos-based health-care management company. Terms of the deal were not disclosed.