Cincinnati's largest HMO, ChoiceCare, put local physicians on notice: If you sell your practice to a hospital, you won't do much business with us.
Last December, the HMO issued an eight-page memo to 3,000 local physicians saying it won't contract with hospitals or "hospital-
controlled" practices for physician services (See box).
It said hospital-owned practices are "potentially dangerous to the quality and efficiency of healthcare" because they are used to induce inpatient referrals and don't encourage good physician performance.
Under the policy, doctors deemed "hospital-controlled" may contract with ChoiceCare. However, they can't see new patients in certain plans, which may include Medicare as well as workers' compensation and disability programs, or participate in risk-sharing incentive programs. They also would be required to give two years' notice to terminate a contract, rather than the standard 60 or 90 days.
Five months later, ChoiceCare has delayed implementing the policy as it struggles to define which practices are hospital-controlled. But its unusual public stance throws into question the growing trend of hospitals buying primary-care practices.
"There are a lot of health systems in name today that are really hospital-centered," said James A. Hester Jr., ChoiceCare's vice president for network development. "We don't view (the policy) as a permanent situation but something to protect us while true health systems develop."
The unusual policy raised eyebrows. To some providers, it came across as a divide-and-conquer strategy.
"I was shocked because I didn't think it was appropriate for ChoiceCare to take that kind of action," said Julie Hanser, president and chief executive officer of Mercy Health System's greater Cincinnati region.
While at least three other Cincinnati HMOs publicly criticized health systems for buying practices, not all agree it's bad.
United Healthcare of Ohio recently contracted with Jewish Health System, which has snapped up 45 primary-care physicians for its Premier Medical Associates.
Louis Santoro, United's executive director in Cincinnati, said the incentive for hospitals to fill beds declines as hospitals move into risk-sharing pools with physicians.
"Our contracts for certain products will involve capitation for hospitals in Cincinnati. If you believe what you read in the press, I think other companies are driving toward that also," Santoro said.
But ChoiceCare argues it will take a few years for hospital-led systems to shed their hospital mind-set. Large, independent medical groups will be more productive, it says.
To that end, ChoiceCare has encouraged physicians to merge and develop their practices by offering educational programs, technical and managerial assistance, and even help obtaining financing.
Still, its policy against hospital-controlled practices is proving difficult to implement.
Currently, ChoiceCare is meeting with health systems, going over their practices' governance and financial incentives, and establishing criteria for acceptable hospital-physician arrangements.
Practices deemed hospital-controlled will be notified by early summer and their doctors will be required to re-contract under the more restrictive terms, Hester said.
The individual contracts will require physicians to use ChoiceCare-
participating hospitals. Also, they will be allowed to see only their existing patients in plans with highly selective panels, such as Special Health, a Medicaid plan.
Hester said ChoiceCare has "serious concerns" about one or two major health systems, which he declined to specify.
Not all system-owned practices are targets. For instance, Mercy owns 28 physician practices in underserved areas. Hanser said her system has been able to show ChoiceCare executives that those physicians control their own practices and referrals.
But other systems use physicians to direct patients. In one blatant example, 550-bed Christ Hospital had a clause in its physician contracts that required salaried doctors to refer a certain percentage of patients to the hospital. The clause was removed in January, amid questions about its legality.
Some hospitals have interpreted ChoiceCare's deliberations as backing down-which ChoiceCare denies.
"My perception is they came out very strong, trying to draw a line in the sand, and now they find that it's shifting," said Richard Pender, vice president of marketing communications at Jewish Health System. "I think they know they would be cutting themselves off from a great number of doctors."
ChoiceCare acknowledges the policy hasn't discouraged many physicians from selling their practices, but it does claim to have won the attention of providers.
"This has been an educational process for all of us," Hester said. "We feel that the policy has really served its purpose."