Doctor Stepping Into Driver’s Seat With Health Systems Deal : Health care: A decade ago, Malik Hasan was in private practice. Now he’ll run nation’s biggest publicly held HMO.

Health care executive Malik M. Hasan has prospered by driving hard bargains with doctors and hospital executives.

Now he will have to do more of the same as the chairman-designate of the company to be formed through the merger of WellPoint Health Networks and Health Systems International.

The success of the proposed $1.8-billion deal, announced Monday, will depend partly on the new company’s ability to find an estimated $200 million in cost savings annually. A big chunk of those savings, officials said, will have to come from medical cost cutting, such as persuading doctors and hospitals to accept steeper discounts in their fees.

“Without medical cost reductions,” Hasan said in an interview, “the deal becomes marginal.”

Hasan, a neurologist and 57-year-old chief executive of Health Systems, is well suited to the task, health care executives say.

“He’s extremely brilliant . . . and has a good grasp of medical issues. And he’s also a remarkable businessman who has tried to find a middle ground between good medical care and good business practices,” says Kenneth R. Pelletier, an associate professor at Stanford University’s Medical School who is also a director of Health Systems.

David Drucker, chief operating officer of the Palo Alto Medical Foundation, who has sat across the negotiating table from Hasan, describes him as “a very smart, tough, hands-on executive and negotiator.”

It is Hasan’s skills as a dogged negotiator that have many California doctors and hospital executives worried.

“Malik has tried very hard to ratchet down the costs of medical services,” said one executive of a large Southern California medical group. “But he’s done it so much that many medical groups are having difficulty meeting their financial commitments and are having to cut programs that are probably very valuable to patients.”

Some medical group officials say that Health Systems, under Hasan’s leadership, has gained a reputation as willing to build market share at almost any price. They say Health Net will aggressively cut premiums to gain favor with employers, then make up for the lost revenue by squeezing the profits of physicians and hospitals. Meanwhile, these officials say, Health Systems continues to wrack up strong profits itself.

Earlier this year, Health Net slashed medical premiums for its biggest customer, the California Public Employees Retirement System, by 7%.

Hasan’s emphasis on cost cutting rubs many doctors and hospital executives the wrong way. And his fondness for arriving at doctors’ meetings in large, white, chauffeur-driven limousines “sends exactly the wrong message,” says one medical group executive.

Hasan acknowledges his reputation as a tough negotiator but says he is not anti-physician.

“It’s obviously in our interest, and our members’ and shareholders’ interests, to get the lowest price we can get,” Hasan says. “But it’s not in our interest to drive doctors out of business, because then who’s going to take care of my patients?

“I would like to describe myself as tough, thoughtful, involved and fair,” he adds. “It’s not like you can go in there with a cannon and say, ‘This is what I want you to do.’ ”

Hasan was born in 1938 in a suburb of New Delhi and was reared in Pakistan. His wealthy landowner parents did not encourage his ambition to become a doctor. But he persevered, studying medicine in Pakistan and neurology in England.

Hasan and his wife, Seeme, immigrated to the United States in 1970, settling first in Chicago, where Hasan practiced for five years, before moving to Pueblo, a mid-sized industrial city in southern Colorado.

In 1985, Hasan and a small group of doctors founded Qual-Med Inc. to fend off a new health maintenance organization that was sharply cutting back on doctors’ fees. Qual-Med found it could cut medical costs by putting doctors in charge of case management and focusing on quality of care, Hasan says.

At Qual-Med, Hasan developed a computer system that tracks patient records so company medical directors can quickly review requests for referrals to expensive specialists. The system also ranks monthly doctor-care costs for each patient as well as things such as use of lab services, outside specialists and hospital services.

Qual-Med grew quickly by acquiring ailing HMOs and returning them to profitability with the help of its cost-control system. Lower health care costs translated into lower prices to Qual-Med’s corporate customers.

Qual-Med startled the industry by going after the much larger Health Net in 1993. After a prolonged court battle, Qual-Med and Health Net agreed to merge, forming Health Systems. Hasan shared power with Roger Greaves, who had built Health Net into one of the nation’s largest HMOs.