Independent Health, the region's largest HMO, has reorganized its relationship with the physician-run group that represents its doctors.
Independent Health negotiates annual budgets with the Independent Practice Association, an independent group that also credentials, conducts reviews of and handles physician appeals.
In the future, however, the physician group will remain a separate entity within the health maintenance organization's corporation.
Officials said the restructuring stems from tension between the two groups over budgets and fees, as well as changes in health care that necessitate greater emphasis on devising medical policies and managing disease.
They also said the change is needed to respond more quickly to new government regulations, hospital negotiations and shifting financial pressures on doctors.
"The two organizations need to be more closely aligned. We can be more responsive to improving the outcomes of care and reducing variability in care if we don't let as many financial issues get in the way," said Dr. Sanford Hoffman, interim executive director of the Independent Practice Association.
The organizations have encountered difficulties in recent years over Independent Health's decision to withhold fees from doctors who went over annual budgets.
Many physicians argue that the budgets were set unrealistically low to keep premiums down, and did not reflect the true cost of health care in the community. The HMO countered that many physicians here hospitalize patients more often, order more tests, do more procedures and prescribe more drugs than doctors in other cities.
The restructured association board of directors will be smaller, but the HMO has agreed to place more physicians on its board of directors. In addition, the association will operate with a permanent executive director.
Independent Health also said that part of the reason for its recent decision to raise premiums for members was to satisfy the physicians' desire for increased reimbursement.
As a result of the changes, officials said, physicians will no longer be 100 percent at risk if they go over budget. Instead, the HMO will accept a portion of future cost overruns.