Saturday, March 05, 2011

The Rise of the Corporate Physician - the End of the (Health Care) World As We Know It?

In discussing how concentration and abuse of power threatens health care professionals' values and professionalism, we have discussed how ostensibly academic institutions value faculty more for their earning power than their academic abilities.  We have discussed how financial relationships between physicians and drug, biotechnology, device and other companies risk abuse of entrusted power.  But up to now, I have been comforted by the hope that physicians in small independent practices who do not have such conflicts of interest are trying to uphold their professional values, even as they were buffeted by the perverse incentives imposed by managed care organizations/ health insurance companies and government insurance (e.g., US Medicare whose payments are controlled by the RUC).

However, a recent article in SmartMoney suggests that the end of the independent physician is nigh:

Remember the solo family doctor? In places like Springfield, it has become increasingly likely that she's collecting a paycheck from a large regional hospital—and practicing medicine according to the hospital's strict playbook. The experience in Springfield is just a needle prick compared with what's going on nationwide. At least one in six doctors—more than 150,000 nationwide—now works as an employee of a hospital system. And with about half of recent medical school graduates deciding to work for hospitals and many established doctors looking to unload their practices amid the tough economic climate, what was a trickle of change has turned into a torrent. Jim Pizzo, a Chicago-area hospital consultant, says the blistering pace of these mergers is leading some colleagues to joke that there are two types of physicians today: 'Those employed by hospitals and those about to be.'

So we are seeing physicians who practiced solo or in physician-lead, physician-run group practices becoming employees of large health care organizations. And here on Health Care Renewal, we know how most large health care organizations are run.

This appears to be an unintended consequence of our recent US health care "reform" law:

But hospital executives also believe that buying doctors' practices could yield a big payday, thanks to a different provision in the health care law. The law will encourage doctors and hospitals to share some payments when treating each patient; as collaborative teams, they could earn bonuses for holding down costs and meeting quality markers. 'The real question for everyone is how that pie—that money—is going to get split up,' Goertz says; hospitals think they'll have the upper hand if they employ the doctors that they're sharing their banana crème with. And that's touched off a flurry of mergers everywhere—from Seattle to Roanoke, Va.

The name of these supposedly collaborative organizations, which are turning out to simply be hospital systems which have purchased physicians' practices and now employ physicians, is "accountable care organizations," which now appears ironic at least.

The article detailed some of the adverse effects to be expected when accountable care organizations become hospital systems with employed physicians providing patient care.

Increased Costs with Decreased Care

Ruth Taylor, a 44-year-old woman in Bozeman, Mont., started seeing Robert Hathaway as her doctor during college, and she stuck with him through everything from routine blood tests to a kidney transplant. Taylor, a professional nurse with warm blue eyes, describes Hathaway as a 'classic small-town doctor' who knew all his patients by name and socialized with them at local basketball games; he was accessible and thorough—even catching a health problem of hers that other doctors had missed. But after Hathaway sold his practice to the local hospital, Taylor says, things began to sour. She was more likely to be assigned to see the physician assistant rather than Hathaway himself. And when she went in for a comprehensive physical (also run by the assistant) in late 2008, she was charged $360, more than double what she'd paid for a workup in previous years.

Imposition of Dysfunctional Health Care Information Technology

On this blog, Dr Scot Silverstein frequently posts about how poorly designed and implemented commercial health care information technology may have harms that outweigh any benefits, and how these systems are rarely objectively evaluated. Employed physicians are likely to be required by their new executive overlords to use commercial health care IT that benefits the managers and their strategies, but may not benefit patient care:

Last spring Hospital Sisters tried to shift all of its Springfield medical offices to electronic medical records simultaneously. But there wasn't enough tech support to deal with all the problems physicians ran into on day one, and wait times spiked at the system's walk-in locations. Nenaber, a soft-spoken 64-year-old with wire-rim glasses, sounds acquiescent about the situation. 'We're getting the hang of these things,' he says slowly, sitting at his desk overlooking a gas station and a strip-mall parking lot. But his practice is still waiting for its electronic payoff

Increasing Prices by Providing Care in the Hospital

Now that the acquisition spree is in full swing, some experts worry that price increases could become the dominant narrative for patients. When hospitals run medical practices, federal law allows them to add substantial 'facility fees' to patients' bills to cover overhead expenses. The new bosses also often rip equipment like X-ray machines and MRIs out of the physician's office, preferring to have patients get those tests from radiologists at the hospital. That, too, can cost patients. A consumer with a high-deductible Aetna plan, for instance, would pay up to $1,400 for an MRI of her back at the University Medical Center at Princeton, N.J., according to data that the insurer makes available to its members. The same scan would cost about a third as much at nearby Radiology Affiliates of New Jersey, a nonhospital facility. Based on a review of insurance databases and state regulatory records, that's a fairly typical price gap

Increasing Prices by Market Domination

Price increases also have the potential to bleed outward—affecting not only the patients of the absorbed doctor, but also the cost of health care citywide. That's because when hospitals sit down at the bargaining table with insurers, they're almost always able to negotiate higher payment rates for their big groups of doctors than a lone physician with little bargaining power

Despite the usual spin provided by the would-be monopolists:
Fast-growing hospital systems, including Hospital Sisters and Bozeman Deaconess, say that their growth will eventually make care more efficient and bring costs back down, since they'll be able to cut back on unnecessary care and duplicate tests

I am sure that the 19th century robber barons made the same pitch about increasing efficiency. Of course, the efficiency mainly benefits the insider managers.

By the way, of course, the hospital systems own public relations machines and lobbyists are now busy attacking any restrictions on such concentrations of power, while the hospital managers figure out how to game the system to increase their market domination before the regulators notice:

As more patients face such disruptions, regulators are taking notice. In October, the Federal Trade Commission and the Department of Health and Human Services met with doctors, insurers and other health officials to discuss the referral and pricing problems that could arise from 'accountable-care organizations'— those new groups of hospitals and doctors that will share financial incentives. The Federal Trade Commission will offer guidelines on what's permissible by midyear. But hospitals are already lobbying for accountable-care groups to be exempt from antitrust and antifraud rules, even as they scoop up more and more medical practices. Under current regulations, officials in Washington must green-light all mergers involving companies valued at more than $63 million. But by buying up tiny medical practices one at a time, critics say, hospitals stay below the threshold and avoid getting much attention. And by the time regulators settle on more-formal legal guidelines, those mergers may be hard to undo, says Cory Capps, a Washington economist specializing in health care antitrust issues.

Excess and Unnecessary Utilization via "Leakage Control"

With big hospital systems now owning physician practices, and practicing physicians directly answering to executives, the push will be on to maximize use of the most lucrative services. Once the hospital systems have made employees out of the physicians, it is easy to pressure their own employed physicians to refer patients to the hospital units that can bill most lucratively:
By their own admission, most hospitals are eager to keep patient referrals under the same corporate umbrella, to save on costs and share medical records but also to boost revenue. The hospitals say they wouldn't force an internist, for example, to refer a patient with heart problems to their own cardiologists, but critics say there's certainly financial pressure. Under a little-noticed regulation that took effect in 2007, hospitals are allowed to pay doctors less if they don't do enough internal referrals.

Doctors in Bozeman and Springfield who granted interviews said they didn't feel pressure to be 'team players' with referrals. But some of those who've left large health systems tell a different story, including Mark Callenberger, an orthopedist in Merritt Island, Fla. Callenberger says that the hospital group where he used to work urged him to direct more patients to the MRI machine owned by the hospital. The doctor preferred a more advanced machine at a private practice that he says offered clearer pictures. But after he ignored the recommendations, Callenberger says, the hospital told his office manager to schedule patients at the hospital's MRI anyway, leaving him to perform surgery using 'crummy images.' (The hospital declined to comment on Callenberger's case but says its doctors can use whatever facilities they choose.) Patients may never know about these power struggles, because doctors aren't required to disclose how they choose specialists. And while patients who ask can always see a specialist outside the network, in practice few are likely to challenge their doctors' judgment, says Bruce A. Johnson, a Denver health care lawyer. 'Face it, when we're really sick,' says Johnson, 'if the doctor tells us to jump off a roof, we'll probably consider doing it.'

Note that we discussed (here and here) the example of a for-profit hospital system with a large number of physician employees pushed to choke off "leakage" of patient referrals outside the system.


The overarching problem is that employed physicians now must answer to managers and executives who may put financial goals, and their own enrichment, ahead of physicians' values, and specifically will choose increased revenue over providing the best possible care to individual patients:

. Executives here are also hoping to push the needle further—standardizing everything from how long patients wait on hold to the ease of parking at the doctor's office (valets, luxury-restaurant style, are one solution under consideration).

Still, Mikell acknowledges, 'doctors don't want follow-the-directions, cookbook medicine.' And for many physicians, the idea of following new rules triggers a much larger unease at giving up their independence—a feeling of loss, both for the businesses they built and for their patients. Back in Bozeman, Blair Erb, the sole cardiologist in town, is a picture of resignation as he prepares to sign a contract with Deaconess. 'I feel defeated,' Erb says, looking around at the office furniture he and his wife, Liz, chose from a catalog years ago. The weathered ranchers and bundled-up women that come through his door mostly express disbelief when they hear that this frank-talking Tennessee native will sell his practice. His staffers say they're not looking forward to the questions the hospital's medical records system will soon prompt them to ask patients. (Do you wear a bike helmet regularly? Do you have a smoke detector?) 'We'll try to retain as much professional independence as possible,' Erb says, gazing at the hospital building, whose bulk he can see through his window. 'But the fact of the matter is, we'll have a new master.'

So I for one do not welcome our new executive overlords.

We have posted about numerous examples of health care organizational leaders who put their own enrichment ahead of the mission. Now even ostensibly non-profit hospital systems are increasingly competing against for-profit systems. We have seen, as noted above, an example of a for-profit system that seems to betting everything on a business strategy to reduce "leakage" of patient referrals.  We can expect that non-profit hospital systems will have to act more like for-profit systems, and the perverse financial incentives given the managers of all hospital systems will lead to pressure on physicians to forgo their responsibilities to provide the best care to individual patients in favor of actions that will bring in the most money in the shortest time.

We seem to be witnessing the rise of the corporate physician, the rise of a physician who must first answer to managers who never committed to putting patient care first, who may have no sympathy for physicians' core values, who may receive huge incentives to maximize short-term revenue no matter what. Such a rise of corporate physicians would be unprecedented in the US, and I believe in any developed country.

The rise of the corporate physician would require patients to put their trust in corporations, rather than individual doctors, in the era of the global financial collapse, in the new gilded age.

We may be seeing the end of health care world as we know it. The upcoming brave new world of health care may be worse that we can imagine.

What is to be done? - I rarely have ventured into specific policy suggestions, but I think that the consequences of the well-intended "accountable care organization" blunder may be so severe that I must so venture now. We must derail the movement towards "accountable care organizations." Any movement to make organizations more accountable cannot do so by making most professionals into employees answering to the sorts of ill-informed, incompetent, self-interested, conflicted or even corrupt leaders that we have been writing about for more than six years on Health Care Renewal.  We need to make it impossible for for-profit companies to employ physicians to take care of patients.  Maybe we need to think about making it impossible for for-profit companies to provide patient care at all, and for for-profit companies to sell health insurance.  Meanwhile, we need to ensure the accountability, integrity, transparency, and honesty of leaders of health care organizations.

If we do not reverse the current trends, anyone who wants good health care may have to look for it somewhere other than in the US.


InformaticsMD said...

But there wasn't enough tech support to deal with all the problems physicians ran into on day one

I wonder if patients suffered injuries as a result of this "imposition."

Also see my latest post on a forensic EHR analysis from Down Under:

On an EMR Forensic Evaluation by Dr. Jon Patrick from Down Under: More Thoughts.

An entire country's EDs are at risk.

-- SS

Afraid said...

I believe this was an intended consequence, indeed an aim, of the Obama healthcare reform. If you've read healthbeatblog, you can see that the benefits of salaried physicians working for mega corporate healthcare systems is how costs are intended to be lowered. I think the costs will be higher and the care lowered though as a consequence through a law of opposites.

Big healthcare had their stamp all over Obamacare. They got what they paid for.

Anonymous said...

But I am seeing this trend at my not for there a difference?

Roy M. Poses MD said...

Probably not much, and decreasing. The non-profits have to compete with the for-profits, and may have executives and board members steeped in the culture that brought us the global financial collapse

Afriad said...

Roy - Absolutely. Many many non-profits operate the same (or worse) than the for-profits. At a minimum, they are totally hypocritical hiding under a chartitable banner while being some of the worst offenders.

maggie mahar said...


You and I are almost always on the same page. But here, I have to disagree.

The Affordable Care ACt calls for
"accountable care organizations" where payments to docs and hospitals will be bundled.

I think of Geisinger, Kaiser, the VA . . . .All offering better care than many people receive from
solo practioners.

Unfortunately, solo practioners are often not accountable to anyone. And when they admit patients to a hospital wher ethey have "privleges,", they feel no need to follow the safety rules. (I'm told this is why some
Manhattan hospitals have such high rates of errors and infections.

The fact that docs have to practice "according to the hospital's playbook" when they are employed by the hospital is generally a good thing. It means that they have to follow safety rules,

Yes, there are hospitals out there run by MBAs who put people ahead of profits.

And this includes academic medical centers run by large egos (whatever degrees they have)
But they are not likely to do very well under reform. Some academic medical centers will be very embarassed when their infection rates are published. (New york State publishes them: check them out.)

Medicare won't be paying for preventable readmissions. CMS will be fighting unncessary treatment. The Sec of HHS wil have the power to "lower payments for overvalued services and raise payments sfor undervalued services."
Hospitals will be paid more for good outcomes and efficient care--not for volume.

In NYC, I hear that Maimonides is slated to become an accountable care organization. It's a hospital known for excellent outcomes, and safe, patient-centered medicine.

The CEO is a woman --with a degree in health administraton (not an MBA)

She felt it was essential to appoint a physician to over see intallation and implementation of Health IT becuase "nobody knows a doctor's business like a doctor."

This is the type of hospital that will thrive under health reform.

So many young doctors are choosing to work for hospitals or large organizatoins because they recognize that in many places (most cities, for instance) the solo practioner or small practice model just is not practical. The cost of overhead (real estate, labor) is too high.

Just as some hospitals overcharge, many solo-practioners and small practices overcharge.

Most importantly,in a solo practice or small practice no one is looking over the doctor's shoulder.
He may be practicing medicine the way he did 30 years ago. He may be cranking up volume. He may be sloppy. As long as he is pleasant, his patients will have no idea.

When doctors work for a hospital,or in a large organizations like Kaiser, other docs are looking over their shoulder. Collaboration between primary care and specialists is much better.

I do think that, under reform, some heads will roll, and some hospital CEOs will be replaced (as their hospitals fail to receive the bonuses for outcomes and efficiency, and are exposed in terms of failing to meet patient safety standards.)

Keep in mind, Don Berwick is running Medicare. He's a pediatrician, not an MBA.

Anonymous said...

In my community we have watched the vertical integration of a non-profit hospital owning a for profit insurance company. Leakage is contained by simply making the only available doctors part of the hospital staff, so nobody can go out of network for services.

My additional concern is certain aspects of the health care act are ripe for fraud. We have seen in my community major advertising campaigns for all sorts of procedures. Bariatric surgery and other government funded weight loss programs. Whatever the media is pushing there will soon follow an ad.

One provision of the act is a “free” yearly physical. I can just see post cards going out to the community offering this service. People then arrange appointments at the hospital where they will release all of their personal information. This will be put in one of those wonderful computers that will instantly be able to determine what test and procedures this person qualifies for at government, or other insurance company’s, expense.

Crazy? The March 6, Akron Beacon Journal article, Welfare program under fire, highlights how a group of unemployed people are being held hostage in a room made of tarps so the county can collect funds for job training. These folks want to work, want to work on job skills, want to complete their GED’s. Instead they sit.

Sadly we are watching the financial drivers of various programs overcome the need or desires of those who the programs were designed to help.

It was discovered a long time ago in private industry that more money could be made with clicks than bricks. The opportunity for the medical corporate entity to click away has grown, and the exploding costs will financial bankrupt the country.

Steve Lucas

Keith said...

I would fully agree with Afraid that the aim of the current health care legislation is to create the type of model as exists at Mayo. Statistics consistently mention Mayo as a low cost pprovider, with the key being that physicians are not incentivised to do more (at least from what we know, but it is possible some docs are paid productivity bonuses).

Maggie consistently sees the solo physician as some renegade unbeholden to anybody. But these physicians still need to react to the needs of their patients and are probably more likely to do so than the physician who is just another member of the team. Hospitals have the ability to remove physicians who do not conform to good standards of practice as well. Physicians will all eventually be held to quality standards, so it behooves the doctor to follow those proven guidelines of clear benefit. Finally, the oposite of her argument is that the lone physician has more latitude to act in his patients interest rather than that of the ACO who will be signing his/her check in the very near future. Will the ACO be acting in the interest of patients or there own bottom line? History suggests the latter will be the driving motivation and physician independence risks being co-opted in this new evolving system.

james gaulte said...

I agree with "afraid"'s comments. We are not dealing with an unintended consequence. Texas has had a statute outlawing the"corporate practice of Medicine" which has worked fairly well but now is under attack again and already not-for-profits hospitals' attorneys have devised a major way around that law. I disagree with Maggie Mahar's panglossian view of what ACOs will be.Has she forgotten the HMO experience? I find her comment about Dr. Berwick less than reassuring.

Roy M. Poses MD said...

Maggie Mahar,

A little disagreement and dissent is healthy. We may disagree, but I think we share common goals. However, maybe we should have a moment of silence for all the health professionals who cannot disagree with the leaders of the organizations for which they work, unless they no longer want to work there.

Having said that, consider first that to my knowledge, while Mayo and Geisinger are large organizations, they are mainly run in a collegial way by physicians, not by hired executives. At least some segments of Kaiser also are still physician run.

I would agree that there are some hospitals and hospital systems lead by people who really care about the patient care mission. But there seem to be fewer and fewer of those.

Furthermore, I think you are way too hard on solo (or presumably small group physicians). Like all physicians, they have sworn at some time to put the care of the individual patient first. Solo physicians may uphold that pledge imperfectly. But they are likely to uphold it better than MBAs who may have only pledged to themselves to make as much money as possible.

Solo physicians are indeed subject to quality oversight, from that provided by medical licensing boards to that implicitly required by the malpractice litigation system. These methods may be imperfect.

But so are the currently fashionable guidelines and P4P schemes that the big organizations use. These are often based on biased selections of evidence that fail to include suppressed research, and do not compensate for manipulated research. They are often written by people with major financial involvement with companies seeking to sell products and services that the guidelines end up promoting. They are often based on studies of patients with single diseases but applied to patients with complex problem lists. Think of the guidelines promoting aggressive use of SSRI anti-depressants by primary care doctors that were not informed by the numerous suppressed studies, inclusion of which would suggest these drugs do not work as well as what their promoters say about them.


The MBAs who run too many hospitals may be quick to adapt such guidelines and P4P schemes since they seem straightforward, which they are if one ignores all the complexity of the context in which they may be used.

Meanwhile, such MBAs are likely to be pressuring physicians to increase revenue both by seeing more patients, and by referring more patients to the hospitals' most remunerative services. Even if guidelines and P4P schemes do increase quality, which is not well proven, their effects are likely to be drowned out by the perverse incentives imposed by MBAs looking to increase their own bonuses rather than to improve patient care.

InformaticsMD said...

I think you are way too hard on solo (or presumably small group physicians). Like all physicians, they have sworn at some time to put the care of the individual patient first. Solo physicians may uphold that pledge imperfectly. But they are likely to uphold it better than MBAs who may have only pledged to themselves to make as much money as possible.

My personal physician, who underwent residency training in the same program as I, and his two partners who did likewise, uphold their pledge most faithfully.

Their largest fear as recently expressed to me is being forced to become employees to be able to afford the health IT they're essentially being coerced to use, sooner or later, by the government.

-- SS