While for-profit hospitals aren't alone in pursuing these strategies, their actions implementing them have been particularly conspicuous.
Nashville-based HCA has been active in its physician-integration strategies. Richard Bracken, HCA's chairman and CEO, told stock analysts last month that, “The nature of our business is changing. Hospitals all over America, including HCA, are employing physicians in their network. It is a cost that wasn't there before, and it is growing.” Last fall, HCA acquired a 13-physician cardiology practice in the Kansas City market and lured a well-known, physician-run burn center to its lone hospital in Southern California.
The Grossman Burn Center was eager to move to HCA's 123-bed West Hills Hospital and Medical Center in Canoga Park, Calif., from 112-bed Sherman Oaks (Calif.) Hospital, says Peter Grossman, a co-director of the center and the son of its founder. Both the local and corporate managers showed great enthusiasm for making the burn center a flagship program at West Hills, Grossman says. The company also is willing to put more than $10 million into converting space in the hospital for the burn center's programs, he says.
Other investor-owned companies also are aggressively pursuing physician-integration strategies including buying practices and physician-owned ambulatory centers, boosting employment of physicians and cutting whole-hospital syndication deals.
Community Health Systems, Franklin, Tenn., has long had a strategic focus on physician recruitment, to the tune of recruiting more than 7,000 physicians between 2000 and 2009, according to the company. Last year, Community completed two large practice acquisitions in Alabama and Washington state. In the latter deal, the company paid about $50 million to acquire Rockwood Clinic in Spokane, Wash., and meld its 32 locations with the two Spokane hospitals that it acquired in 2008.
“When we do group acquisition, we're thinking more about an integrated health network and how we build that around our facilities over time,” says Wayne Smith, chairman, president and CEO of Community. The acquisition of Rockwood's sites and its 130 physicians will enable Community to build a comprehensive offering of services in both primary and secondary markets throughout eastern Washington and parts of Idaho and Montana to win market share, Smith says. “We've just started the strategic process there,” he adds.
Like Austin Heart, Rockwood Clinic pursued a hospital partner to meet broad goals of scope and quality, says Craig Whiting, president of the clinic's board. “We knew that the cost of capital is going to continue to go up and up, and it's good to be aligned with an organization that has good access to capital,” he says. “We actually were in very good shape financially, but we have a vision of being a regional entity.”
Community's employment of physicians has grown significantly, as it now employs about 10% of the 13,000 physicians on its medical staffs, Smith says. Many are primary-care physicians who have become hospitalists, he adds. Smith foresees a shortage caused by this shift, even though hospitalist programs somewhat offset this by enabling primary-care physicians to see more patients by eliminating hospital rounds.
Community's study of projected needs and the current and future physicians available to fill them also suggests shortages of urologists and gastroenterologists, Smith says.
Tenet Healthcare Corp., Dallas, last year formed a joint venture to provide services to physicians who practice at its hospitals, says Stephen Newman, M.D., Tenet's chief operating officer. The partner on the venture is Med3000, a Pittsburgh-based provider of healthcare management and technology services. Over time, the joint venture will take over the management of Tenet's 460 employed physicians and provide information technology and other services to improve communication and coordination of care with physicians having privileges at Tenet hospitals, Newman says.