Beech Street Corp., one of the nation’s larger preferred-provider-style managed-care organizations, has taken about 70% more office space in the Pacific Vista development in Lake Forest.
Beech Street signed a five-year lease valued at $4 million, according to real estate sources. The deal expands Beech Street’s presence in Pacific Vista by 36,000 square feet and brings the company’s total space in the five-building campus to 88,000 square feet.
Beech Street took the new space for three reasons, according to Bill Hale, the privately held company’s chief executive: consolidation, “normal synergies, (including) some financial efficiencies,” and growth.
Because Beech Street is private, Hale declined to disclose financial information on the firm.
But he did expound a bit on how the industry is faring:
“The PPO industry is very vibrant. People are very pleased with the PPO world; they’re occasionally challenged with the HMO world,” he said. In terms of Beech Street, he mentioned deep discounts, broad access, “limited oversight and control” and technological advances as things that differentiate it from competitors.
Preferred-provider organizations have gained increasing favor among employers in recent years, perhaps as a reaction to provider and consumer disdain for HMOs. Figures from the American Association of Preferred Provider Organizations, an Indiana-based industry group, showed that in 1999, 106.8 million Americans were enrolled in such organizations, an 8.6% hike from 1998. The data also showed that PPO-eligible enrollment topped HMO enrollment, which totaled 104.5 million in 1999.
Among other things, the association found that the number of large employers offering PPOs increased by 70% during 1999.
Like HMOs, PPOs organize doctors into a network. But HMOs are traditionally more restrictive on issues such as physician choice and using a “gatekeeper” method to govern access to specialist doctors.
Cost control at a PPO works like this: members who receive their healthcare from an “in network” provider get most of the costs of care paid for by the PPO; members who choose to receive their care from “out of network” providers are required to pay a larger part of the bill.
On the physician side, the PPO works like traditional health insurance plans, but pays them less. Doctors are paid for each visit and procedure, but PPOs pay a discounted, negotiated rate.
Nasty public contracting spats between hospitals and HMOs have roiled Orange County’s healthcare industry for the better part of the past year. But Hale said hospital providers are willing to accept discounted rates for healthcare if a plan is able to provide a large volume of patients.
Other recent Beech Street developments include signing a contract with Focus Healthcare Management Inc., a Dallas-based manager of workers’ compensation provider networks, and the introduction last summer of e-Par, an Internet-based system that is designed to allow healthcare providers and patients an alternative way of starting pre-certification for procedures.
Beech Street was founded in 1951. It has around 600 employees companywide, with 410 in Orange County.
The company has more than 16 million people enrolled in its PPOs, Hale said, with 340,000 providers and 3,300 hospitals under contract.
“That represents 90% of the healthcare system that we know,” Hale said.
Stephen Bay and Kevin Bender of Insignia represented Beech Street in the lease negotiations. John Harty, Jim Bannan and Mason Hopkins of Trammell Crow Corp. represented the landlord, Riggs Bank. n
