An effort to curb surgical infections at the largest hospital in Tucson, Ariz., recently raised an awkward proposition: requiring nasal swabs for doctors at the Tucson Orthopaedic Institute.
Co-management emerges as alternative to joint ventures, employment by hospitals
Swabs detect bacteria that can cause harmful complications, pneumonia or bloodstream infections, which can be treated with an antibiotic. Screening doctors made sense to clinic and hospital managers as they considered ways to reduce avoidable infections, but presented the somewhat uncomfortable question of enforcement.
“Can you imagine?” says Greg Waters, CEO of the Tucson Orthopaedic Institute, of the unease among those left to police the policy among highly independent surgeons.
But as it turns out, surgeons themselves would handle the job under a management contract with 555-bed Tucson Medical Center. The orthopedic group receives hourly fees for management, plus additional payouts tied to quality and efficiency goals, giving its 38 doctors an incentive to prod one another to comply, he says.
Indeed, Waters notes it was a doctor who proposed the swabs and discussions are under way to adopt the quality-improvement strategy, which would put surgeons on the spot to remind one another “You're part of the team,” Waters says. “This is what we have to do. Give us your nose.”
Such contracts, known as co-management agreements, have emerged in recent years as an alternative to joint ventures or employment for hospitals and doctors eager to reach deals to bolster efficiency and quality of care, healthcare lawyers and executives say.
Editor's Note: To listen to an editorial webcast on co-management arrangements, click here.
The arrangements—under which hospitals contract with management companies jointly owned with doctors or wholly owned by doctors—may grow more popular since regulators further tightened the Stark anti-kickback law last October and health reform increases pressure to bolster efficiency, attorneys and executives say.
But an expert on hospital and physician relationships warns there is scant research to show such deals are successful at curbing waste and improving quality, and lawyers say deals still risk running afoul of bans on physician self-referral.
Proponents say the arrangements allow doctors who don't seek to become hospital employees to work more closely with the hospitals to improve quality and efficiency by giving physicians the authority to make changes in their work and operations.
The structure of the deals may vary, but all fall short of joint ownership of buildings, equipment or service lines that characterize a joint venture.
Sally Nelson, CEO of Huntsville (Texas) Memorial Hospital, says heightened scrutiny of joint ventures prompted the 88-bed hospital to opt for co-management of its outpatient surgery and imaging services. Nelson says she hopes to expand management to Huntsville Memorial's inpatient services as well as seek increasingly ambitious quality and efficiency goals. “The first year you have to take baby steps,” she says of the year-old contract's quality and efficiency incentives. “They will grow more sophisticated and will have to stretch more to get the goals.”
Thirty-five doctors own the co-management company, HMH Clinical Management, and two primary-care and two specialty-care physicians sit on its governing board.
The Tucson Orthopaedic Institute owns 45% of the co-management company created in July 2008 with the Tucson Medical Center, which owns a 32.5% stake and the Center for Neurosciences, which owns 22.5%. The governing board includes four members from the orthopedic group, three members from the hospital and the final two seats are held by the Center for Neurosciences.
Stuart Katz, the co-management administrator at TMC Orthopedic and Neuroscience Management on behalf of the Tucson Orthopedic Institute, says the contract, which includes roughly a dozen quality and efficiency measures, gave the group's doctors authority to make changes that have improved efficiency, such as a single unit with trained nurses for joint-replacement patients and a spine unit launched on March 1. Katz says such gains outweigh the deal's financial incentives. “This would have gone nowhere” were it just about money, he says.
ProMedica Health System, Toledo, Ohio, which owns seven hospitals in Michigan and Ohio, launched its second co-management agreement for three of its hospitals in October with 40 cardiology and vascular specialists, including 10 employed physicians, after striking a joint management deal with 17 physicians for its orthopedic services at three hospitals. The co-management agreement will expand to include ProMedica's 36-bed specialty orthopedic hospital, which is under construction and scheduled to open in late 2011.
For cardiologist Gopinath Upamaka, M.D., the deal offered the pay and authority he lacked during his prior stint as chief of staff. “I never got compensated a dime” to take time away from patients for hospital quality committees previously, he says.
Now, hourly pay for his management duties comes close to what he would earn visiting a patient. His partners at Northwest Ohio Cardiology Consultants cleared three hours each week from his schedule for his new role, though Upamaka, who is board chairman of the fledgling management company, has worked (and billed) double that.
Upamaka says the demanding schedule will ease as doctors gain experience, adding that the long days at the start were expected. Doctors must learn how to navigate hospital policies, administration and culture as they work toward quality and efficiency goals. Combined, the co-management company's 40 doctors spend 100 hours a week overseeing operations, he says.
Efforts have produced early results, he says.
Before the co-management agreement, patients with the day's first appointment routinely entered the cardiac catheter laboratory at 616-bed Toledo Hospital late. Less than 1 out of 5 of each day's first appointments started on time, a disruptive trend that became a target for an efficiency bonus in the co-management agreement. Seven months later, the laboratory starts 2 out of 3 days on schedule.
Doctors own 60% of the management company—ProMedica holds the remaining stake—and have a financial interest in meeting quality and efficiency targets. “You're invested,” Upamaka says. But they also face pressure from one another to make changes. “Now they're all looking at each other,” says Ken Armstrong, executive director of ProMedica Heart and Vascular Institutes.
The management company's governing board is divided equally between doctors and ProMedica, many of whom met for months before the deal to draft an agreement and set quality and efficiency goals.
Hospitals and doctors may have signed on to jointly manage services, but with scant research to tie co-management to quality and efficiency gains, Lawton Robert Burns, director of the Wharton Center for Health Management and Economics, Philadelphia, says he remains unconvinced.
Burns, who has studied hospital and physician relationships for roughly 25 years, says co-management ranks among the more-integrated arrangements, but is one of many lacking rigorous research to support claims of better quality and more-efficient care.
“It's been weighed in the balance and found wanting,” he says. “That doesn't mean that it doesn't work,” he says. “We can't prove that these strategies work.”
Research to date has found promise in bundled payments and little else among the popular economic strategies to cut waste, unnecessary complications and avoidable deaths, Burns wrote in an extensive 2008 article he co-authored.
Bundled payments for heart bypass patients to four hospitals and four specialties cut spending for Medicare and enrollees by $50 million over five years and there were fewer complications and deaths, according to results of an early Medicare bundled payment pilot project.
Other economic arrangements between doctors and hospitals—including leases, joint ventures, co-management agreements, physician employment, pay-for-performance and deals that share savings from efforts to reduce waste—have been poorly studied or research has yielded minimal or mixed results, he reports.
Such findings could be the result of limited study or research conducted during early efforts to develop ties between doctors and hospitals that improve care and quality, he notes. But strategies may also simply fall short of improving care and instead merely seek to boost market share and income.
Burns questions whether co-management agreements are merely marketing. To hospital executives who contend the deals improve quality, reduce costs and bolster physician collaboration to achieve greater efficiency, he says: “Prove it.”
Co-management deals also have something to prove to those who enforce the Stark law, which seeks to prohibit doctors from making referrals from which they stand to gain financially.
That means hospitals that enter into co-management with doctors must ensure compensation and incentives for quality and efficiency pay strictly for those services—and nothing else, say lawyers, executives and doctors. Wages paid to doctors for management must be at a fair market value for their time. Executives and physicians at ProMedica and elsewhere say independent consultants determined appropriate compensation.
Lawrence Boyle, M.D., co-management medical director of HMH Clinical Management, the physician-owned company created to manage outpatient surgery for Huntsville Memorial, says the partners also asked consultants to vet its incentive payments to ensure bonuses stand up to scrutiny.
Boyle says the company's hourly management fee pays the same rate for all doctors, regardless of whether they're primary-care doctors or specialists, who typically earn more in practice.
Bruce Johnson, a healthcare fraud-and-abuse attorney at Faegre & Benson, says physician employment may offer a “cleaner and easier” alternative to the legal risks of co-management agreements.
He notes cardiologists may also prefer a hospital salary to management fees as changes to regulations and reimbursement squeeze revenue. Under changes last October to the Stark law, hospitals can no longer contract for physician-owned services in deals described as “under arrangement.”
Doctors may earn more as employed physicians, Johnson says, while hospitals and doctors typically turn to co-management as an alternative to employment.
Steven Banghart, a healthcare lawyer with Ungaretti & Harris, says the more stringent Stark law may drive more co-management agreements among doctors who balk at employment but can no longer generate revenue from “under arrangement” deals.
David Brooks, CEO of Providence Regional Medical Center Everett (Wash.), says physician employment removes a barrier to hospitals and doctors working more closely to improve quality and curb spending, but hiring doctors alone won't necessarily produce such results. “An employed physician is a tax-status only,” he says. “Just because a physician gets a paycheck doesn't mean they are any more aligned,” he says.
That is not to say the hospital, owned by Providence Health & Services, Renton, Wash., which owns 24 hospitals in five states, sees no value in employment. It has increased the number of hired physicians to 85 from roughly 55 five years ago, he says. But to promote integration—among employed and independent physicians—the hospital relies on strategies such as co-management, as is the case with oncologists, or a 2006 overhaul of medical staff leadership.
The hospital launched its oncology co-management agreement with the Everett (Wash.) Clinic and two other independent groups in 2005.
Mark Mantei, chief operating officer at the Everett Clinic, says the 350-doctor group practice entered into the co-management deal after considering its own expansion of cancer care to halt the flow of patients to nearby Seattle.
“We were capable of going on our own,” he says. But such a move required significant capital that would likely have resulted in wasteful competition with Providence Regional Medical Center over high-priced technology, he says.
Mantei says that last fall's Stark law revision forced the partners to change terms of a related lease agreement, but the co-management deal has proved to be as financially beneficial as an independent venture. Meanwhile, the partners have expanded services, so fewer patients travel to Seattle for care, he says.
One measure of cancer patients seeking care in Everett shows steady growth in the past three years, Providence Regional officials say. In 2007, the Providence Regional cancer partnership reported data for 1,491 patients to cancer registries, says Lawrence Schecter, the hospital's chief medical officer. That figure is projected to total 1,700 for 2009, about a 14% increase, once final figures have been tallied.
The Everett Clinic agreed to a two-year co-management contract with three consecutive one-year renewals, Mantei says. “We felt we were treated fairly economically,” he says, “and we feel we're doing well for the patients.”
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