SUMMARY * INTEGRATING PHYSICIANS INTO the Healthfirst administration through employment sowed seeds of mutual understanding among these two groups that would benefit the system immeasurably over the next several years. The immediate future, however, saw only cultural upheaval between our hospitals and newly employed physicians, hospitals and nonemployed physicians, employed and nonemployed physicians, as well as specialists and primary care providers. Traditional physician-relationship-building efforts became difficult, if not impossible, to maintain. Essentially, administration was forced to scrap ten years of physician-development plans in order to reconfigure a relations effort that would maintain hospital support from all sides while restructuring the employed medical group. This article describes the evolution of Healthfirst's approach to maintaining effective physician relationships within our healthcare system and its affiliated entities over the past decade. Specifically, the article details the manner in which our system has evolved physician-relations activity to maintain an effective strategy during times of significant change in the healthcare industry. HISTORICAL PERSPECTIVE Healthfirst Physician Management Services, Inc., was originally formed in 1993 as an Oklahoma for-profit corporation residing under the corporate umbrella of SSM Health Care of Oklahoma (SSMHCO), a not-for-profit Oklahoma corporation. SSMHCO operates as a subsidiary corporation to the SSM Health Care System, a multistate healthcare system based in St. Louis, Missouri. Healthfirst was originally created to provide managed care network formation, practice management support, and physician development/ relations for St. Anthony Hospital, a 644-bed not-for-profit tertiary-care facility located in downtown Oklahoma City, Oklahoma; and Bone & Joint Hospital, a national leader in the provision of inpatient orthopedic services. As was the case with many hospitals in the early 1990s, SSMHCO aspired to solidify our market position by developing a primary care and subspecialty network to use in protecting our market and managed care position. Healthfirst was utilized to manage this network. From 1993 to 2003 the network has grown from 10 employed or managed physicians to a network that includes 70 employed or managed physicians and an additional 350 network-contracted physicians who use SSMHCO facilities. BACKGROUND For Healthfirst and St. Anthony Hospital, the 1990s ushered in a new era of hospital-physician relationships. SSMHCO followed the trend of most multihospital systems aspiring to provide efficient services in a world thought to be soon dominated by capitated medicine. Resources were heavily invested in developing components of integrated healthcare delivery systems, including the acquisition and development of a primary/specialty care physician network. Healthfirst, on behalf of our parent hospital system, set about to construct a large physician network capable of sustaining SSMHCO. Our acquisition and development department worked diligently from 1993 to 1996 to acquire physician practices that would serve as the core medical group for our system. Physicians became employees of our system, and Healthfirst eventually employed, managed, and operated more than 80 physician practices. Developing a large physician-employment model required significant investment of both monetary and operational resources. SSMHCO, through Healthfirst, developed a management company to provide operational support for our newly employed physician group. Administrative resources were allocated to the group, including traditional physician-relations activity originally designed to build relationships with our general medical staff. Hospital management that had previously rounded to staff physicians now placed much of their time and attention on the newly employed and managed physicians. Special time and attention was paid to primary care physicians who at that time were thought to be the most critical component of medical groups in the new era of capitated medicine. …