When it was founded here 40 years ago with just 1,000 members, the Group Health Association of Washington seemed an exciting experiment in prepaid health care by physicians employed by their patients. In those simpler times, recalled one doctor who worked for GHA back then, the physicians occasionally would end their day by doing out bowling together.

But times have changed. Today, GHA has 100,000 members and is the largest health maintenance organization in Washington (and one of the largest in the country). It is also seriously troubled by excessive costs, in-internal dissension and management problems.

Two years ago, GHA was forced to raise substantially the fees its members pay and to lay off 15 per cent of its staff, including doctors. Further to fight rising costs, GHA eventually had to take most of its patients out of George Washington University Hospital and move them to Doctors Hospital, which has a mixed reputation in the medical community.

Because of continuing friction between GHA doctors and the health maintenance organizations board of trustees, the doctors there have sought and won, for the first time in American history. National Labor Relations Board recognition as a labor union.

Big as it is, GHA also has been comparatively unsuccessful in building its membership roles. The Group Health Cooperative of Puget Sound, which began 10 years after GHA in Seattle, a metropolitan area with half the population and little of the government workers' presence of Washington, now has twice as many members as GHA and two hospitals of its own.

"There's no reason why (GHA in Washington), properly managed, shouldn't take off and thrive," Dr. Frank Newman, the former director of the Puget Sound cooperative said in an interview.

GHA's outgoing executive director, Louis J. Segadelli, does not disagree. "Compared to the really good outgfits - Kaiser and Puget Sound - we are not successful," he acknowledged.

Some of the problems confronting GHA are difficulties that any organization founded as much out of principle as practicality faces in its second generation of leadership. Other problems of GHA, according to its officials, involve its inability to realize the full benefit of a prepaid group plan because of its back of its own hospital and unified medical facility.

But the most vexing and troublesome problem, according to several knowledgeable persons, is the form of organization. GHA's distinguishing characteristic - active control by the membership - also is its greatest source of difficulty. GHA, according to these observers, has come to a crossroads of sorts, having to decide not only what its relationship to its physicians will be, but how much authority it will cede to the men and women it hires to run organization.

Last spring, following the annual election of members to GHA's board of turstees, the board rejected a proposal by a group of GHA physicians to form a corporation and contract with GHA for their services, including the medical director, resigned their administrative posts.

Segadelli, the executive director, also has tendered his resignation effective next June. Segadelli had supported the physicians. He is staying on only while the hunt for his successor continues. The board is looking for a physician with managerial capabilities, according to GHA President Harold Wool.

"The tragedy of GHA for me is that it's trying its hand behind its back and not reaching the full potential of an HMO," Segadelli said in an interview.

GHA's physicians are employees of the plan. Although they are given some ability to influence decisions, final authority rests with the board. The result, according to one physician formerly on GHA's staff, is similar to what might happen "if we let Ralph Nader run General Motors."

According to this physician, Dr. Paul Lenz, the structure of GHA encourages a "civil service, nine-to-five mentality" among its physicians. "The physician becomes very concerned with what he is supposed to do with his hours," Lenz said in an interview in New Brunswick, N.J., where he is now medical director of the Rutgers Community Health Plan, another prepaid group medical plan.

"At GHA," Lenz said, "the physician who was nasty to a patient was rewarded. He got home earlier. He had fewer appointment."

Lenz, like others who have looked at GHA from the inside and the outside summed up the problem with a simple observation: "The physician has to feel that he is part of the health care system (The board) "can't control the medical group. They run it, but they can't control it."

The issue as several persons pointed out, is not over money. GHA physicians, depending upon their specialty and length of service, are paid between $32,000 and $71,000 a year. That puts them roughly in the same average range as physicians in private, fee-for-service practice.

Although he defended the quality of medical care given at GHA, a point generally conceded by all but its severest critics. Segadelli said he agreed with Lenz "on the basic point . . . GHA has produced a civil service climate among its physicians."

Part of the reason for that climate, Segadelli said, is that 70 per cent of GHA's members work in the civil service here themselves and the physicians picked up work attitudes from their patients.

The problem of the physicians' relationship to the board, Segadelli said is "basic, no question about it." That issue, he said, was the reason for his resignation.

Although many prepaid group medical plans hire physicians to serve as employees, the idea of physicians contracting with health plan is not unusual. The Kaiser Foundation Health Plan, for example, contracts with the separate Permanente Medical Group which is owned and operated by physician-partners for its medical services.

Kaiser pays the medical group a fee, negotiated annually, based on the number of health plan members. Out of that fee, the medical group pays for its physicians' salaries and the support personnel needed to operate outpatient facilities. The arrangement works relatively smoothly, according to both doctors and others in the Kaiser system.

Arthur Rosenbaum, chief of medicine at GHA from 1949 until 1976 said he had supported the idea of a separate corporation for the physicians. Rosenbaum, whose association with GHA began in 1940, said that it became clear in the late 1960s "that the doctors should have a clear voice in matters."

A medical council was formed, its members elected by the GHA physicians. The council dealt with pay, privileges and other matters, and negotiated annually with the board of trustees on an overall fee.

But the council was disbanded in 1976 when it became clear that the NLRB would rule it to be a violation of the National Labor Relations Act.

Rosenbaum, widely respected as a physician and a leader of other doctors at GHA, said he personally was not "enamored" of the idea of separate organization for GHA physicians. "I was satisfied with the medical council. It suited me," he said, emphasizing the last word. "But I recognized that it did not suit many of the younger physicians. So I went along with it for that reason."

The board's decision to reject the physician corporation forced the doctors to try to gain a voice some other way. The idea of a labor union for the physicians, however, was generally seen as making matters worse at GHA, driving the physicians and the trustees farther apart.

Those who belong to GHA and persons who work for other health maintenance organizations also find that the board, composed of GHA members, gets too involved with day-to-day management, usurping the authority of its staff.

"The board ought to show more confidence in its executive director, whoever in its executive director, whoever that is," said Jan Lodal, former GHA board member and president. "If they don't like want the executive director is doing in a basic sense, they ought to get a new one. If they do like what he is doing, they ought not to nitpick every little individual managerial and administrative decision that he takes. The board had tendency to do that. And it still does."

The board's intervention, Lodel said, leads to "fragmented management," a lack of continuity in policy. "That upsets the physicians as well as upsetting management, it leads to management problems - so they're all tied together."

Despite past and present difficulties, GHA is growing. Its president, Wool, rejects any suggestion that disagreements with physicians have affected treatment of patients. "I don't buy the argument that there is any evidence that the quality of care has suffered," he said. Such as suggestion, he added is "unfair to the physicians."

Both Segadelli and Woll said the growth in GHA's membership - 30,000 in the last five years and 5,000 new members are satified with the medical care they are receiving.

Wool said the feeling on the part of some physicians that they have no voice in decision is "at least in part communications, partly leadership . . .

I think that there's more smoke than substance in terms of what the position of the board of trustees, in terms of the willingness of the board of trustees to involve the physicians much more directly in many aspects of management.And we have made that abundantly clear, that we favor it. We encourage it, and we have and are willing to develop the organizational mechanisms for doing it."

The one issue that almost everyone associated with GHA agrees on is that ists financial difficulties would be eased considerably if it were permitted to buy or build its own hospital. But the Washington area already is seriously overbedded and GHA's repeated efforts to get a hospital of its own have not been successful.

GHA's future and continued operation is a source of concern to persons outside the organization, including some competitors. Dennis Falk, Director of the George Washington University Health Plan, said "If GHA fails to survive, it will be a disaster for the other two plans," (George Washington's and the Georgetown University Community Health Plan). According to Falk, business persons on his board would ask how a smaller, newer plan like George Washington University's could survive if the older far larger GHA could not. "I dread that something disastrous will happen to GHA," he said.

Despite his fears, Falk said he thought the situation at GHA was still "salvageable."

Woll also expressed confidence that "one way or another, we're going to work this thing out."

"I suspect that in the end things will come out all right and that we will muddle through sort of like the British do," Lodal said. "But there are many, many, changes ahead for Group Health. These changes are going to be Massive changes."

Next: Public policy towards HMOS.