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Physicians: Tenet Healthcare wants you


By Andrew L. Wang, Crain's Chicago Business
Posted: February 6, 2014 - 12:15 pm ET
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About seven months after it was acquired by Tenet Healthcare Corp., the Chicago-area physicians group that provided care at four former Vanguard Health Systems hospitals is pushing to double its size in the coming year.

Chicago Health System, which has 1,000 physicians in its fold, including about 100 employed doctors, was among the properties swept up by Tenet in October when the Dallas hospital giant purchased Nashville-based Vanguard and its 28 hospitals in a deal valued at $4.3 billion. Vanguard's local hospitals—Weiss Memorial in Chicago, Westlake in Melrose Park, Ill., West Suburban Medical Center in Oak Park, Ill., and MacNeal in Berwyn, Ill.—were also part of the transaction, which brought Tenet's total to 77.

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Now, Chicago Health wants to increase its headcount, between affiliated and employed doctors, to 2,000, and bring its number of employed physicians to 170, CEO Patrick Sorrentino said.

In its pitch to doctors, the network says it will let independent practices maintain their autonomy, while providing back-office support and IT infrastructure that most small practices wouldn't be able to afford on their own. Further, affiliation would potentially offer them access to more patients and higher reimbursement rates through Tenet's national insurance contracts, which would include quality-based incentives like those found in accountable care organizations, or ACOs.

“The aggregation of a large group of providers is stronger than individual units,” Mr. Sorrentino said. “We want to be able to put a group together to withstand the changes that health reform is bringing.”

The recruitment push comes at a moment when the economics of medical practices are under pressure, leaving independent doctors looking to sell out to bigger groups or to hospitals. The fixed costs of a practice—rent, malpractice insurance, technology investments—gobble up a sizable chunk of revenue before a single patient walks in the door, and small-fry practices have little clout with insurance carriers to negotiate higher payments.

Plus, with government and private payers shifting to ACO-type payment contracts that reward doctors for good health outcomes rather than high volume, independents risk missing the boat on those quality-based payments, one expert said.

“It's not just being able to bill at a higher rate—it's things like clinical integration that a lot of payers are willing to pay for, that you can't do alone,” said Dr. Joel Shalowitz, director of the health industry management program at Northwestern University's Kellogg School of Management.

HOSPITALS GAIN, TOO

Of course, Tenet and other hospital operators benefit from affiliating with or acquiring doctor practices. Demand for inpatient care is sinking, and hospitals want to steer patients in need of outpatient and ancillary services such as diagnostics and imaging to places where they can capture the revenue, Dr. Shalowitz said. Hospitals also can gain more control over quality and outcomes.

Indeed, Mr. Sorrentino said, Chicago Health is seeking to build a “deep, broad” network of physicians for its ACO programs, while still offering more traditional fee-for-service payment. New doctors would be stepping into a system with experience in coordinating care for patients and payment for outcomes, he added.

Chicago Health was among the first groups in the area, in 2012, to start a Medicare ACO, devised under President Barack Obama's Patient Protection and Affordable Care Act to reward—or penalize—providers and hospitals based on how they perform on 33 quality metrics. Chicago Health System ACO has about 10,000 patients.

Chicago Health also is operating a commercial ACO for about 6,000 patients that includes Tenet's local employee population. The program is similar to the Medicare variety except that Tenet, as a self-insured employer, is the payer. Mr. Sorrentino said the group is negotiating contracts with insurance carriers.

The group hopes to grow enrollment in both ACOs by 50% in the coming year, he said.

Tenet's interest in acquiring Vanguard was tied in part to the smaller system's deeper inroads into accountable care. At the time of the acquisition, Tenet had established two commercial ACOs in California and Florida, while Vanguard was operating five Medicare ACOs.

“Vanguard has done much more, in terms of being early into" new payment models like ACOs, Tenet CEO Trevor Fetter said in a June 24 conference call discussing the acquisition. "We look at that as a complementary feature of this transaction."

Tenet posted revenue of $9.12 billion in 2012. It posted $7.22 billion in the first three quarters of 2013.

"Physicians: Tenet Healthcare wants you" originally appeared in Crain's Chicago Business.


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