Realignment: Why Physicians Are Knocking at the Hospital Door on Nashville Medical News

Realignment: Why Physicians Are Knocking at the Hospital Door

By: CINDY SANDERS

In the best of situations, hospitals and physicians achieve a symbiotic relationship that is mutually beneficial and mutually lucrative. For the past few decades, the power pendulum has swung in the physician’s favor since hospitals cannot operate without doctors. Physicians, on the other hand, have enjoyed a variety of practice scenarios ranging from hospital competitor to hospital employee … independent contractor to office-based practitioner with little interest in what’s happening at the nearest acute care facility.

The pendulum, however, has begun to swing in a new direction. While hospitals still need physicians, there are a number of key factors that have physicians casting longing glances at hospital employment contracts, according to John Deane, CEO and founder of Nashville-based SOUTHWIND, a division of The Advisory Board Company. “At the heart of the current challenge for physicians in America is that Medicare reimbursement is not keeping pace with inflation,” he said. “An offshoot of that,” Deane continued, “is the commercial insurance carriers peg reimbursement based on Medicare.” The result is a losing proposition for many practices. “In my mind, that’s the underlying, driving force for physicians coming to the hospital knocking on the door.”

A second driver is a new generation of physicians with different priorities. “Young physicians coming out of training want to be employed. They want a job … capital ‘J,’ capital ‘O,’ capital ‘B,’” he said. “They are not interested in private practice. They are not as entrepreneurial.” About half of medical students are now women; but regardless of gender, today’s physicians are more focused on family and want a work/life balance, Deane continued. They are seeking employment in much larger numbers, and Deane said it would take more of them to do the work of yesteryear’s doctors because they aren’t willing to put in 80-hour weeks.

A compounding factor is the looming physician shortage exacerbated by an aging population and the onslaught of more than 30 million Americans who will soon be added to healthcare rolls. “These are the three reasons there is increasing pressure for health systems to employee physicians and/or offer alternative models of alignment to affiliated physicians.”

Deane noted the federal government has provided more flexibility in allowing hospitals to invest in and support physician employees since hospitals are permitted to pay a competitive wage. “In this model the physician still sees patients in the practice, but the hospital now owns the practice,” he explained. In the traditional, voluntary staff model, hospital efforts to financially invest in a physician are more likely to run up against anti-kickback or STARK laws. Employment is becoming increasingly attractive. “It’s a solution for doctors whose revenues are not keeping pace with inflation,” Deane noted, adding this group continues to grow.

He pointed out three years ago most every cardiologist in the country was in private practice … in many markets today, most every cardiologist is a hospital or health system employee. “What happened? The federal government slashed revenue on in-office testing services,” he said. With a 30 percent cut in reimbursements in an area that represents half a practice’s net income, it’s easy to see why the private practice model ceased to be sustainable. “But hospitals have a big interest in retaining their cardiologists,” continued Deane, “It’s a physician capacity problem. If they didn’t employ the physicians then they’d go to another hospital.”

Alternative Models

While employment is increasingly popular, it isn’t feasible for hospitals to hire every physician aligned with their acute care facility. There are a handful of alternate ways hospitals can meaningfully align with their private doctors.

Recruitment Incentives: Hospitals can help private practice physicians recruit, attract and retain qualified physicians through the use of signing bonuses, student loan repayment and other incentives if there is demonstrable community need.
Health Information Technology: Hospitals can assist practices with both electronic health record solutions and practice management systems. The hospital can offer these technology services to physicians for a fee, but the government will allow hospitals to underwrite the majority of costs so practices pay a fraction of what they would in the open market.
Management Services: Hospitals with strong practice management can assist independent physicians to run their practice more efficiently.
Accountable Care Movement: Probably the biggest trend in alignment strategies is the creation of an Accountable Care Organization (ACO). As part of the healthcare reform legislation, CMS will publish new regulations in the summer of 2011 that transforms the way reimbursements are made — payment for value rather than a fee-for-service model.

Accountable Care Organizations

ACOs bring together hospitals and providers to create an entity that enjoys a split of shared savings through value-based purchasing and bundled reimbursement. “Right now the incentive for physicians is to ‘do more’ to patients … fee-for-service. So we need to create new incentives that will reward physicians for providing cost effective quality care within the established guidelines,” explained Deane.

Although the regulations won’t be available for more than a year, there are steps that should be taken now. “You need to create a vehicle that allows a single signature contractual relationship between the providers — hospitals, doctors — and Medicare and other third party payers,” Deane noted.

“Today it is legally permissible for the hospitals, the employed physicians, and the private practice physician to organize into a single contracting unit to negotiate with payers collectively if the organization’s primary purpose is identifying, measuring and monitoring adherence to best practice guidelines and delivering cost effective care … and that is called Clinical Integration. Absent that, it is a violation of the anti-trust law to collectively negotiate,” he explained. For providers who opt to move forward with creating an Accountable Care Clinical Integration enterprise now, Deane said they would be well positioned to move quickly once the regulations are posted in 18 months.

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Accountable Care Organizations, ACO, John Deane, Physician Contracts, Physician Hospital Alignment, Southwind

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