While the rest of the healthcare world struggles with issues such as access to care, medical errors and drug coverage for the elderly, for many hospital boards and administrators the bigger concern is their deteriorating relationship with physicians.
It's almost a daily occurrence: Physicians who own part of a specialty hospital or clinic are frozen out by the competing community hospital. Both sides are pursuing reasonable economic self-interest, but the potential fallout is becoming more ominous.
Last week, the issue took a slightly different twist at West Allis (Wis.) Memorial Hospital, where the board refused to validate the election of a physician as chief of internal medicine because of her investment in a competing cardiac hospital. The week before, eight-hospital OhioHealth in Columbus revoked the privileges of 17 staff physicians who had invested in a local surgical hospital.
Physicians are eager to litigate these and other cases, and they claim that HHS is investigating such "economic credentialing" of doctors as a potential antikickback violation. But their complaints mask a significant change in the physician-hospital power balance.
In December, President Bush signed the Medicare reform bill, which placed an 18-month moratorium on the Stark II law's exception for referrals to hospitals in which physicians have an economic interest. As part of that bill, studies will be conducted on whether these hospitals have a negative effect on access to community healthcare. If the findings are that they do, expect a strong push for a permanent specialty hospital ban.
Clearly the general acute-care hospital industry has won the upper hand in Congress for now, but any hospital executive who values his or her shirt must realize that physicians still control referrals and through that hospitals' staffing, scheduling and supply purchases. In other words, the doctors are their most valuable resource.
Physicians, whose reimbursement is still flagging and whose malpractice premiums are still rising, may be more amenable to new arrangements with hospitals.
As reporter Michael Romano wrote in our Oct. 13, 2003 issue (p. 32), Integris Baptist Medical Center in Oklahoma City carved out its entire cardiology service line into a new company, Integris Heart Center. The hospital retained ownership, but a prominent local cardiology group received an annual management fee, performance incentives, seats on the new company's board and a major role for doctors in decisionmaking, both financial and clinical.
In January 2003, West Jefferson Medical Center in Marrero, La., formed two for-profit joint ventures, one with local surgeons to provide ambulatory surgery and another with an organization to provide imaging services. The doctors invested in the facility and help run the operation.
As with an earlier generation of hospital-physician arrangements, such deals must be crafted in such a way as to not run afoul of federal laws governing fraud, physician self-referrals and tax-exempt status. Most involve annual management fees to physician practices to run the high-margin service lines.
This isn't a new phenomenon. Hospital systems have been cutting outsourcing deals with anesthesiologists, emergency room doctors and radiologists for years. Physician-hospital organizations are still operating across the country, under which doctors help negotiate managed-care contracts and other administrative tasks.
Until December, however, many doctors had been looking beyond such deals to the prospect of being hospital owners. As we have said before on this page, such competition is healthy, but clearly the game has some new rules. As a result, there is a choice. Either a new era of cooperation between community hospitals and their physicians is at hand or a new era of litigation.
Either way, this relationship will make for interesting times.