Panel to Health Industry: Heal Thyself or Die : Reform: 400 doctors and administrators warned to work together to control costs or risk being decimated by managed-care programs.

As the Clinton Administration wrestles with reforming the nation’s health care system, a panel of industry experts Thursday described the present system as a mishmash of disconnected components that must integrate to survive.

“The traditional segmentation of health care really doesn’t work anymore,” said E. Albert Barnett, a physician and chief executive of La Habra-based Friendly Hills Medical Group. “The trend is clearly toward integration and managed care.”

But managed care--controlling health care and costs--can only work effectively if fewer institutions provide a wider range of services, the panel concluded.

In a two-hour session at UC Irvine, Barnett and other health care executives warned an audience of nearly 400 doctors and health administrators to work together or risk being decimated by managed care.

Russell B. Carpenter, a legal adviser to the medical industry, and Patrick G. Hays, chief executive of Sutter Health, a Sacramento-based health organization, also spoke as part of the university’s two-day Health Care Forecast Conference, which concludes today.

The panelists suggested the Integrated Healthcare Organization, or IHO, as a solution to bringing diverse components--such as hospitals, outpatient clinics and independent medical groups--together under one cost-effective and streamlined delivery system.

IHOs are similar to health maintenance organizations, considered to be a key component to Clinton’s health care reforms, but offer a wider range of services. Both Friendly Hills and Sutter Health are considered models for such a system, since they integrate multiple services under one administrator.

Hays said medical integration appears to be the next wave in the medical industry.

Health care is now dominated by independent doctors and small organizations, who are not always as concerned with maintaining costs as larger institutions, such as health maintenance organizations.

By the early 21st Century, according to the panel, medical services should have consolidated and consist of a relatively small number of IHOs, diverse enough to incorporate hospitals, outpatient surgery, general family practice, home health care, insurance coverage, retirement centers and hospices.

Like health maintenance organizations, or HMOs, effective IHOs would put ceilings on medical costs.

Organizations that do not limit costs inevitably pit physicians against administrators--to the detriment of the patients.

“Obviously there is a real clash of incentives,” Barnett said.

The traditional concept of “fee-for-services,” where patients pay for medical services as needed, is too expensive and has caused an exponential rise in health care costs, according to the panel.

Hospitals, already hurt financially by the insurance industry’s cost reduction efforts, are beginning to accept this integration concept, joining forces with physician organizations and stand-alone medical centers to expand services under a cost-controlled system.

“There is a race going on with the hospitals trying to grab up the unaligned groups (of physicians),” Carpenter said. “But there are hospitals who never got in the race. They are just sitting there wondering what to do. They will lose. If you aren’t in the race, there are no options.”