Articles | Home
HEALTHCARE LAW
		August 2002 Arizona Healthcare: The One Constant Is Change Arizona's interesting times in the healthcare market do not look to change any time soon Steven M. Goldstein

The healthcare market in Arizona is constantly changing. Hospitals throughout Maricopa County are in the process of affiliating in an attempt to become larger and stronger.

Samaritan Health System is proceeding to complete its planned affiliation with the Lutheran Health Systems, combining the Samaritan Hospitals with Mesa Lutheran and Valley Lutheran Hospitals in the East Valley. Catholic Healthcare West, the parent of St. Joseph's Hospital & Medical Center, recently announced an affiliation with Chandler Regional Hospital, creating a counterpoint to the Samaritan/Lutheran system in the East Valley. Tenet Health System, the owner of several Valley facilities, including St. Luke's Medical Center, Tempe St. Luke's, and Mesa General Hospital in the East Valley, is currently seeking a buyer or an affiliate partner. Several other hospital systems in the Valley are rumored to be for sale.

On the physician side, doctors throughout the Valley continue to congregate into larger groups in order to exert some pressure on the marketplace. National physician management companies have entered the Maricopa County marketplace, acquiring physician clinics and physician practices in various specialties as part of a national effort to aggregate physician practices. Locally, physician groups continually seek to merge with their competitors in an attempt to become larger. Physicians in Tucson formed a physicians' union to bargain with insurance companies, and a physician union is being discussed in the East Valley as well.

Insurance companies also continue to see their share of change. Premier Healthcare, an insurance company owned by eight hospital systems or physician hospital organizations throughout the state, was recently sold to MatureWell. Physicians in the East Valley are in an uproar over contracts offered by various payors, and are taking the drastic step of refusing to become part of networks put together by those payors. This is a significant change from the days when it was vitally important that a practice be a part of numerous health plans in order to have access to as many patients as possible.

What does all of this mean from a legal perspective? First, exit strategies become critical, because changes in the healthcare industry are cyclical. Once it was the rage for hospitals and physicians to join together in physician hospital organizations. Now, most of those organizations have been dissolved or are in the process of winding up, after suffering substantial losses or creating tensions rather than cooperation between the hospitals and the doctors. Once physicians could not wait to be the next practice acquired by a publicly traded physician management company, and now many have expressed dissatisfaction with those arrangements, and some are starting to seek to unwind them. The changes we see today most likely will lead to more changes tomorrow.

Second, bigger is better in the healthcare sector. It is the rare hospital, physician, or other provider that could stand by itself in the face of constant pressures from health plans and competing providers. Payment and reimbursement rates will continue to be squeezed in the absence of some ability to exert market power. Of course, the antitrust laws have something to say about this type of exertion, and that balance will continue to be a fine line to walk.

Finally, like it or not, Arizona is ahead of the curve with respect to managed care and the changes in the healthcare market. HMO and managed care penetration is high here in Arizona compared to most other parts of the country, and Arizona experiences changes in the healthcare market well before most other places. Some areas, such as our neighbor to the west, California, are ahead of even us, so we can learn from their mistakes. However, often we in Arizona are treading in uncharted legal and strategic waters when it comes to these issues.

There is an old curse which says, "May you live in interesting times." As with most things, such times are both a curse and a blessing. Arizona's interesting times in the healthcare market do not look to change any time soon.

These materials are designed to provide general information prepared by professionals in regard to the subject matter covered. It is provided with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. Although prepared by professionals, these materials should not be utilized as a substitute for professional service in specific situations. If legal advice or other expert assistance is required, the service of a professional should be sought.