As consolidation begins to sweep through healthcare, hospitalists expect to see the trend accelerate in their sector
Consolidation is happening everywhere in healthcare, so it's not surprising that it's happening among hospitalists. Experts, however, say it's not as widespread as people may think—but they also expect the trend to continue and probably accelerate.
Patients may not notice a difference, but doctors will—with many enjoying what a large operation has to offer and others seeing a situation with fewer options and an environment where “misalignment” between local and national goals and opinions is a constant concern.
Hospitalist consolidation deals that caught the healthcare industry's attention last year included Dallas-based Eagle Hospital Physicians acquiring PrimeDoc Management Services of Asheville, N.C., in July and then buying Inpatient Management of St. Louis a month later. Brentwood, Tenn.-based Cogent Healthcare ended its 2010 by acquiring Endion Hospitalist Systems in December and then it merged with Hospitalists Management Group last May. The newly named Cogent HMG then kept on consolidating with the August acquisition of the Intensivist Group of Lake Zurich, Ill.
Since the deals involved private companies, the financial terms of these transactions have been kept under wraps. But the largest hospitalist group, North Hollywood, Calif.-based IPC The Hospitalist Co., went public in January 2008 with a public stock offering that netted $45.8 million, which the company has used to grow by acquisition.
According to its 10-K annual report filed with the U.S. Securities and Exchange Commission for the fiscal year ended Dec. 31, 2011, IPC has acquired and integrated into its organization 36 practice groups since 2009. This includes 13 that were acquired last year for a total estimated purchase price of more than $24.8 million, according to the report.
For those keeping score, IPC has 1,200 hospitalists in its ranks, Cogent HMG has more than 1,000 and Eagle has more than 350 plus about 200 locum tenens doctors filling temporary positions. (According to the IPC annual report, its figure includes physicians, nurse practitioners and physician assistants, but no breakdown is offered and none was given when requested by Modern Healthcare.)
Another major physician-staffing company, EmCare, says it has 574 hospitalists.
According to its report, IPC hospitalists work in 220 local practice groups in 29 markets where they operate in 365 hospitals as well 550 other inpatient and post-acute-care facilities in 25 states. Despite this widespread presence, more than 60% of the company's revenue is generated from operations in Arizona, Florida, Michigan, Missouri and Texas.
“You read press releases about acquisitions, but it's still very fragmented,” says Robert Allday, executive vice president of corporate and business development for Eagle Hospital Physicians. He adds that about 80% of his company's business is in the Southeast and along the Atlantic Coast.
Most hospitalists still practice in small groups, according to State of Hospital Medicine: 2011 Report Based on 2010 Data, a survey of 4,633 hospitalists in 412 groups published by the Society of Hospital Medicine and MGMA-ACMPE. According to survey respondents, almost 16% of hospitalist practices have four or fewer full-time physicians and almost 24% have only five to 10. Less than 8% of the groups had between 101 and 150 physicians, while just below 13% had 151 or more.
According to Modern Healthcare's annual Physician Compensation Survey (July 18, 2011, p. 22), hospitalist compensation typically ranged between $190,333 and $236,500 and averaged $217,858. This represented almost a 4.3% increase from the previous year's average of $208,925.
Dr. Joseph Li, an associate professor at Harvard Medical School and the director of the hospital medicine program at Beth Israel Deaconess Medical Center in Boston, notes that there are 34,000 hospitalists practicing in the U.S. So, even if you added all the hospitalists together at IPC, Cogent HMG, EmCare and Eagle, they would account only for a small fraction of the total hospitalist workforce.
“In general, I'm an optimistic person,” says Lee, a past president of the 11,000-member, Philadelphia-based Society for Hospital Medicine, who notes that there are both up and down sides to the consolidation trend.
The chief opportunity that Li sees in consolidation is to greatly reduce variation in care. Wherever you go, you can walk into a McDonald's or Starbucks with clear expectations about the cost and quality of the products and services. But he says hospitals have wide variation in cost and quality—even in the same community. Going further, Li says, cost and quality can vary greatly in an individual hospital depending on whether you come in during the day or night or during the week or weekend.
“One could argue that the (hospitalist) management companies are ahead of the ballgame on this,” Li says about the standardization and quality improvement initiatives of the larger organizations.
In looking at the downside of consolidation, Li compared it to local retailers trying to compete against Wal-Mart for customers and employees. At his own institution, Li explains how offering opportunities to teach or do research is one way it can lure hospitalists from the larger, national organizations.
In addition to consolidation, there is also a trend from self-employment to hospital employment, says Dr. Robert Wachter, a professor of medicine at the University of California at San Francisco and chief of the UCSF Medical Center division of hospital medicine.
The upside to this, Wachter says, is that everyone is following the same guidelines and using the same information technology systems, but there is at least one major disadvantage.
“Hospitals aren't very good at managing doctors, so the potential for misalignment is there,” Wachter says. “When it works well, it works very well. But it can be problematic.”
Dr. Lori Heim, who is one of five hospitalists at 152-bed Scotland Memorial Hospital in Laurinburg, N.C., said she is employed by her hospital but the program is managed by a larger system to take advantage of economies of scale with purchasing. Heim, a past president of the American Academy of Family Physicians, says “misaligned incentives” between hospitalists at a local institution and their national corporate office could result in problems with staffing and resources.
She said small groups can set their own policies based on need and experience, while—with large groups—those policies may “come down from on high” with little local input. Noting how she works in one of the poorest communities in her state, Heim observes how her priorities—such as improving transitions of care—are different than in Raleigh or other parts of the state.
Dr. Tamara Doehner is one of 16 hospitalists with 460-bed Nebraska Methodist Hospital in Omaha, though she notes she is employed by the affiliated Methodist Physicians Clinic. Doehner says her group will be adding two more hospitalists by the summer and adds that she does not see consolidation with a larger organization coming anytime soon.
“They don't have anything to offer that we don't already have,” Doehner says. “There's not a lot of reason to change from where I sit.”
Wachter, who runs a 50-hospitalist department, says the nature of the field—providing coverage 24 hours a day while performing few if any procedures—makes for reimbursement challenges.
Sometimes there are “lulls in the action” or a hospitalist may have to spend an hour with a patient's family for an end-of-life care meeting, which is a service that—unlike performing a procedure—is “relatively poorly funded by our payment system.” But, generally, a hospitalist may supervise the care of 12 to 16 patients a shift, Wachter says, and “in most markets, that will not pay a hospitalist's salary and benefits.”
So, even if not directly employed by a hospital, Wachter says most hospitalists receive a subsidy from the institution they work at on top of their share of a patient's bill. He sees this “dependence on the kindness of strangers” as a major force behind hospitalists' quality and efficiency improvement efforts.
“We have to be indispensible,” Wachter says. “If we are not indispensible, we will be dispensed with.”
Wachter, who is credited with coining the term “hospitalist” in a 1996 New England Journal of Medicine article, is proud of how last month the Society for Hospital Medicine became the first physician association to be recognized with a John H. Eisenberg Award for innovation in patient safety and quality at the national level.
The award, co-created by the Joint Commission and National Quality Forum, recognized the SHM for its efforts to improve care transition, glycemic control and venous thrombo-embolism prevention, as well as its efforts to mentor new leaders, share best practices and measure quality.
“We have to show value,” Wachter says.
Allday, with Eagle Hospital Physicians, agrees.
“We believe in analytics—you have to compare results,” he says, noting how the infrastructure of his organization provides the expertise and market knowledge necessary to measurably reduce hospital lengths of stay and readmissions.
John Donahue became the new CEO of Cogent HMG in January and has embarked on a mission to visit each of the 120 or so hospitals where his company's doctors work. He's been to about 20 so far, going on rounds with Cogent HMG hospitalists and sitting in on care-coordination meetings.
His impression is that there will be a “dramatic ramp up of hospitalist consolidation” in coming years in a large part because of new quality requirements hospitals are being expected to meet and the ability large hospitalist companies have to measure their positive impact on getting an institution to eliminate hospital-acquired conditions and reduce lengths of stay.
“All of these metrics are impacted by what a hospitalist can do,” Donahue says. “The hospitalist value proposition has been dramatically enhanced and spotlighted by these requirements.”
Dr. T. Clifford Deveny is the senior vice president of physician practice management for Catholic Health Initiatives, which had almost 402,000 hospital admissions in fiscal 2011. The care for about half of those patients was handled by hospitalists.
“We've got Cogent people,” he says. “And, every company out there, we probably have a contract with them.”
Deveny says more mergers and acquisitions are expected because of the existing fragmentation, which creates confusion when attempting to establish standards even to the point where there is not a common standard about who exactly qualifies to be a hospitalist.
He adds that CHI is in the middle of a process in which it's trying to standardize the way it pays hospitalists since now there are different methodologies at work including paying per shift or per hour with incentives linked to productivity or patient satisfaction scores and increased pay for caring for patients with more difficult needs. He notes hospitalist responsibilities vary per setting as those in small critical-access hospitals often work in the emergency department.
“Physicians want to see their participation make a difference,” Deveny says. “They don't want to be a commodity; they want to have a sense of purpose.”
To that end, Donahue notes how his company has created the Cogent HMG Leadership Academy, where physicians role-play and put themselves in the patients' place and learn ways to explain complex medical concepts and how to just get patients to relax.
Dr. Adam Singer, IPC chairman, CEO and chief medical officer, says the company he founded in 1995 has a similar program—run by Wachter—where each year 40 of the organization's hospitalists learn management and team-building techniques, medical economics and “how to drive the delivery system.” He says there is even an exercise in which physicians learn how their own personality types “affect XYZ personality types” and what they need to do to win people over and affect change.
“It's raising the bar for everyone,” Singer says, adding that, typically, “doctors aren't trained to do all that stuff.”
Singer, named Physician Entrepreneur of the Year by Modern Physician in 2008, says IPC's size enhances its ability to carry out these training activities as well allows it to have the infrastructure in place to measure and support constant improvement.
Smaller groups “don't have the ability or expertise to do these things,” Singer says.
What IPC also offers, according to Singer, is an opportunity “to work like real people and like the other doctors in the hospital do,” noting how a current trend toward having hospitalists work seven days on (often in a 12-hour shift), followed by seven days off could be “the undoing of the hospitalist movement.”
“Doctors should work Monday through Friday and share (weekend) call,” he says, noting that many hospitalists also work during their seven days off filling temporary locum tenens spots.
Noting the “transitory career path” some younger hospitalists have, Heim says of the seven-on-seven-off trend, “I couldn't stand it. I couldn't work and manage my personal life.” She adds that there is nothing intrinsically wrong with working during those seven days off for someone else. “When I was much younger, I used to moonlight, too. It all depends on where you are in your career.”
Turnover can be a problem. The SHM and MGMA-ACMPE survey found that practices had an average turnover rate of almost 14% and a median rate of 7.7%. According to its annual report, IPC had a 16% turnover rate in 2011.
At Nebraska Methodist, Doehner says, hospitalists work five to seven days in a row with doctors in the University of Nebraska Medical Center fellowship program filling in any gaps. She says the goals are to provide continuity while avoiding burnout, adding that the focus is on achieving a work-life balance that helps lead to a hospitalist's longevity on the staff as well as in his or her career.