The sale of MD-Individual Practice Association, one of the area's largest health-care programs, fell through yesterday after furious objections were raised by doctors fearing the loss of their professional autonomy.
Cigna Healthplan Inc. had agreed in December to pay a reported $40 million for MD-IPA, which provides health care and insurance for 75,000 Washington-area residents. The proposed sale, however, narrowly failed in a Monday night vote to obtain the requisite two-thirds vote by its doctors and other shareholders holding a controlling interest in the health plan, officials said yesterday.
The unusual vote went against the recommendation of the health plan's boards of directors and capped off a frenetic last-minute campaign by some doctors to derail the sale. These doctors had tried unsuccessfully to obtain a court order delaying the shareholders meeting, but in meetings and telephone conversations over the past two weeks, they were able to persuade enough of their colleagues to vote against the plan.
"A unique happening occurred. Here was a group of physicians who turned down a minimum of $40,000 each, and turned it down for a matter of principle," said Dr. Ronald E. Greger, a MD-IPA physician who helped organize opposition to the sale. "We don't want to see medical care controlled by big business. . . . We want to maintain some semblance of independence in the marketplace."
MD-IPA management, which had pushed the sale as a means of helping the health organization position itself in an increasingly competitive field, issued a brief statement saying that it "will maintain operations as a locally managed, regional, independent practice association."
Asked whether the organization will seek to renegotiate the deal or to find a new buyer, an MD-IPA spokeswoman said it is too early to decide. A Cigna executive said the company, a subsidiary of the Philadelphia insurance giant, Cigna Corp., may seek to "resurrect" the deal and is currently reviewing its options.
Like many health maintenance organizations around the country, MD-IPA has enjoyed rapid growth in recent years. Members pay a set fee for MD-IPA's comprehensive health services, as opposed to the fee for each service called for under traditional insurance plans. Unlike doctors in traditional HMOs, however, MD-IPA doctors work out of their own offices, rather than a clinic, and offer their services to non-members.
Although MD-IPA has proved successful financially, the company's management and board raised fears that its limited capital base may hinder its ability to compete with the growing number of national firms seeking to enter the HMO market. They have also said they believe that linking up with Cigna, one of the largest national operators of HMOs, would help them in marketing MD-IPA's services.
Doctors opposed to the sale, however, disputing the financial concerns and charging that the sale would disproportionally benefit a small number of board members and others who hold large blocks of stock. They also said they were concerned that Cigna would interfere with their traditional control over treatment of patients.
"It is really an amazing coalition of physicians who are saying we want to keep some stake in our practice," said Dr. Seth R. Eaton, another MD-IPA doctor who opposed the proposed sale.
But Steven J. Shulman, Cigna Healthplan's vice president for development, said it was in the doctor's "best interest to align with us." He said that the company has traditionally given its doctors wide latitude in running their operations.
"We are very disappointed with the results," he added. "We continue to believe that MD-IPA is an excellent organization, and if there is the possibility of working with them on a positive . . . basis, we would welcome that."
He stressed that Cigna Healthplan is coming into the Baltimore-Washington area regardless of the demise of the deal with MD-IPA, and has already performed feasibility studies and taken other steps towards starting its own HMO.
Boyles and Jeff C. Goldsmith, a management consultant who tracks the health-care industry, agreed that the doctors rejection of the plan was highly unusual, if not unprecedented.