Foundation Health to Sell 2 Physician Groups to FPA Medical

A San Diego company that manages doctor practices said Monday that it has agreed to buy two Foundation Health Corp. physician groups and 30 health-care centers for $220 million in cash and stock.

Foundation, one of California’s largest HMOs, said it decided to sell the physician groups to FPA Medical Management largely as a cost-saving move. Instead of managing the groups itself, Foundation would now contract out those services to FPA Medical.

The sale affects roughly 100,000 Foundation members in California and 150,000 in Arizona. But health plan members should expect no changes, Foundation spokesman Kurt Davis said. “They’ll see the same doctors and get their care at the same centers.”

Foundation, based near Sacramento, is one of several health maintenance organizations that have decided recently to relinquish control of physician groups in which the doctors work exclusively for members of one HMO.

Instead, the dominant type of HMO organization in California contracts with many doctor groups, which in turn see patients from numerous HMOs and other insurers. That arrangement gives HMOs a lot of flexibility to negotiate discounts with medical groups or more quickly respond to market changes.

Meanwhile, there has been rapid growth of “physician practice management” companies, such as FPA, that organize groups of primary care doctors, handle paperwork and other administrative chores and negotiate contracts with HMOs on their behalf.

FPA “wanted our business and they will manage it well,” Davis said.

The acquisition, expected to be completed Oct. 1, would increase the company’s HMO business by 294,000 members, to a total of more than 630,000.

Under the deal, the San Diego firm would purchase physician practices in Arizona and Florida and health-care centers in California, Arizona and Florida. FPA said the deal should boost its 1996 revenue by $60 million.