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Two experts on the relationship between physicians and hospitals agree that dealing with the economics of healthcare today will be the issue that ultimately forces cooperation between the providers and that heals their sometimes contentious bond.

“As the economics of healthcare get tight, and as reimbursements continue to get ratcheted down by Medicare and Medicaid, and as the payers and the dollars become scarce and as the patients for admissions become scarce, hospitals all around the country are asking, ‘How to do we maintain and enhance and add the physician relationships we need to keep our hospitals busy and full?’” said John Phillips, president and co-founder of Brentwood-based PivotHealth, LLC, a physician practice management and consulting company. He said that “the predominance of our business is helping hospitals do whatever they need to do or want to do or want to do better with their physicians.”

Participating with doctors on ancillaries is a sure-fire way to “glue” physicians to the hospital while helping them boost revenue, Phillips
said. Laboratory and imaging services
are two options.

Forging a different kind of business arrangement is another way to “bridge the gap,” Phillips said, and help physicians at the same time who struggle with
the administrative side of the practice equation. Last year, Pivot-Health launched a concept called the Physician Services Company (PSC), which Phillips
described as “the old medical service organization on steroids.” A PSC arrangement can, under a hospital’s auspices, offer a practice a host of services including coding and compliance, medical malpractice insurance, employee benefit management, financial and operational benchmarking and reporting, and electronic medical records (EMRs).

“The federal government is allowing hospitals to fund up to 85 percent of the
software costs associated with a doctor’s office’s electronic medical records. They’re doing it because they want doctors to get EMRs. They’re way behind,” Phillips said. A bonus is that records are then coordinated among physicians in the community and the hospital, which is a convenience for patients and more closely aligns the physicians with the hospital.

PivotHealth is in discussions with five different hospitals, Phillips said, to
create PSCs for physician groups in their markets. “That’s aligning incentives
and having the hospitals and doctors walk closely together without actually
being in an employment relationship,” he said.

The employment route is certainly making a healthy comeback and offering
hospitals and doctors a new relationship option. Phillips recalled that during the 1990s hospitals attempted an employment model driven by managed care that
was “incredibly poorly implemented” – and it left a bad taste in the mouth
of both hospitals and physicians. That memory is fading, however.

“More and more and more, hospitalists makes sense and allow doctors to remain in their office and see more patients,” Phillips said. PivotHealth is carving a niche in that market.

Another Brentwood company, Cogent Healthcare Inc., is a player in the sector by employing hospitalists and other clinicians, as well as administrators, and offering turnkey hospitalist programs to hospitals. “The medical staff structure is changing pretty dramatically, and certainly the medical staff of the future is going to have a very different look than it has had in the past. Hospitals are going to be in a position where they have to build stronger relationships
with their physicians in order to be successful,” said Dr. Ron Greeno, Cogent’s chief medical officer.

Just like Phillips, Greeno said economics — in particular, the way payers will operate in the future — drives this need for cooperation. An example is Medicare’s value-based purchasing initiatives, such as pay for performance. “Medicare is even talking about bundling payments to hospitals and physicians
for an episode of care in the hospital,” Greeno said, adding, “Medicare is trying to transform themselves from a payer of claims to a purchaser of services. They want to encourage hospitals and doctors to work together to provide a higher level of care and better outcomes. For the ones that do, they’re going to pay them more money.”

This fiscal reality is “driving a real change” in the way medical staffs at hospitals look — with fewer primary-care physicians inside the hospital walls. “The old model where there is an independent medical staff that would basically be visitors to the hospital and spend the rest of their time in their outpatient offices is going to have to change because hospitals are going to be asked to perform at a higher level and to compete with each other for dollars based on performance,” Greeno said.

That’s one reason why the fastest growing field in the history of medicine
is the hospitalist field, which is seeing 50 percent of its growth from doctors
right out of training. “It’s a very young field. The average hospitalist in America is 37 with five years of experience as a hospitalist,” Greeno said. Younger physicians are attracted to the field because it offers predictable schedules, without the demands of being on call, and offers a freedom from the administrative hassles and liability costs of private practice.

Greeno added that a successful hospitalist program can demonstrate that a hospital is serious about its relationship with doctors and can work constructively with a physician group.

“There’s good evidence now that a good hospitalist program can improve outcomes. It’s much more cost efficient,” he said. “It gets patients out of the hospital
faster, which is good for patients because hospitals aren’t safe places for
people to be.”



June 2008

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