Doctors group ready to compete

About 300 doctors in the suburbs north of Boston woke up to a lonely new world this week: They have been thrown out of Partners HealthCare , the largest medical network in the region.

But executives representing Northeast Health System doctors and the 227-bed Beverly Hospital say they are ready to compete on an even financial footing with their former colleagues at Partners. The state's major health insurers have given them three-year contracts that will maintain payments at the same level as if they had remained with Partners, Northeast executives said.

Blue Cross Blue Shield of Massachusetts , Harvard Pilgrim Health Care , and Tufts Health Plan would not discuss the new pacts in detail, but they are key to the viability of Northeast Health System. The system owns the physicians group, Beverly Hospital, Addison Gilbert Hospital in Gloucester, and facilities for the treatment of mental health and substance abuse and care of senior citizens.

Partners said early last year that it planned to oust Northeast Health System from the Partners network by Dec. 31 in a dispute over North Shore referrals, and Northeast doctors worried they would face insurance reimbursement cuts of up to 20 percent. A decrease in payments might have tempted doctors to break from Northeast and sign up with Partners or another healthcare network in the fiercely competitive Boston market.

The reason for the payment disparity is Partners' dominant size. With 1,000 primary care doctors and 3,500 specialists, it is able to negotiate the most lucrative insurance contracts in the state. Partners said it wanted to drop Northeast physicians from its network because Northeast management had been sending some patients outside the Partners network. Northeast has clinical relationships with Lahey Clinic in Burlington, for advanced cardiology care, and Beth Israel Deaconess Medical Center in Boston, for advanced cancer care.

Partners said the referrals made it difficult to monitor and improve care since it had no control over doctors and hospitals outside its network. But critics, including Beth Israel Deaconess chief executive Paul Levy, said Partners simply didn't like losing business.

Northeast Health System chief executive Stephen Laverty said he spoke with other physician networks about forming new alliances, but ultimately decided to go it alone. He said his healthcare network is financially stable for now, after a difficult year.

"This was a tumultuous period of time," he said. To win the insurance contracts, he enlisted political support from North Shore legislators, who wrote letters of support to insurance executives. Laverty said he made a personal plea for strong reimbursement from the insurers, despite the system's loss of market clout.

Laverty said he told them, "Just because we went from wearing a red hat to a blue hat, why would you pay us less?"

Now, with Northeast doctors' reimbursements set for three years, a David and Goliath tussle for patients on the North Shore is set to continue. Beverly Hospital competes head-to-head with the Partners-owned North Shore Medical Center , which operates Salem Hospital .

North Shore Medical Center and Massachusetts General Hospital, one of Partners' two Harvard-affiliated teaching flagships in Boston, are set to escalate the battle with a $100 million outpatient facility in Danvers that is still in the planning stages. Northeast Health System has responded by building its own outpatient center in Danvers, at a cost of $30 million.

Laverty said the Mass General/North Shore Medical Center outpatient facility is an attempt by Partners to use its financial resources to dominate healthcare in the region.

"I feel comfortable we can compete on skill and services," he said. "The other side can outspend us. If they get bigger and bigger and throw more money into taking away our business, then ultimately we can't compete."

But North Shore Medical Center chief executive Robert Norton , who is struggling with financial problems at his hospital after racking up a $29 million deficit in 2005 and breaking even in 2006, said many of the services planned for the new Danvers facility are just being relocated from elsewhere in Partners' North Shore system.

"I think there has been competition here on the North Shore forever," Norton said. "It's us and Beverly and Lahey together. All three of us have been in the marketplace for many, many years, giving patients choice. That will continue. Patients having choice is a good thing."

Christopher Rowland can be reached at crowland@globe.com.