At the other extreme, Billings (Mont.) Clinic merged with a community hospital in that city back in 1993 and has purred along as a physician-led, group-practice-centric organization with a single patient record and billing system and well-aligned financial and clinical incentives for quality and efficiency.
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But a new word was spliced into the clinic's vision statement for 2010: value—for patients and payers. “We realized that if you are not an organization that creates value, you're not going to be poised for the future,” says Douglas Carr, the clinic's medical director for education and system initiatives.
The Patient Protection and Affordable Care Act, along with other economic forces and regulatory wrinkles, are driving physicians and hospital administrations into each other's arms, often for strategic reasons but also for survival in the face of declining reimbursements. These forces will alter the ways hospitals and their physicians work with one another.
To help measure that change, Modern Healthcare in partnership with Press Ganey Associates, a healthcare performance improvement firm based in South Bend, Ind., conducted an industrywide survey on the state of hospital-physician relations and how they may change given a host of potential obstacles. Of the 193 responding organizations, 94% employed at least some physicians.
“The results of this study indicate that the relationship between hospital administration and employed physicians is generally pretty good in the United States,” says Dennis Kaldenberg, Press Ganey's chief scientist. The poll indicates “that the percentage of physicians who work in an employment arrangement is going to increase in the future, and the hospitals view that as adding value to their organizations but not to the extent that it diminishes the value of physicians who practice in more traditional kinds of arrangements.”
Such optimism may be premature, however, says Thomas Ferkovic, managing director of SS&G Healthcare Services, who advises hospitals and physicians on how to structure their businesses. A lot of hospital-physician togetherness is motivated by a sense that financial formulas are going to be rewritten around bundled payments for episodes of care, sharing gains from cost avoidance and executing other ideas for rewarding quality of care rather than more care, he says.
“Theoretically, it really is very good and we all agree with it,” Ferkovic says of concepts like accountable care organizations and patient-centered medical homes. “But there's a big difference between theory and actual implementation, and whether or not there's enough money in the (new) system.”
”Nobody knows where we're going, but they're all getting on the plane,” he says.
Agreement is nearly unanimous that the momentum behind employment is strong: 39% agreed and 53% strongly agreed that the percentage of physicians employed by a hospital is bound to increase. And most thought that was a good place to be: 45% considered relations between hospitals and employed physicians to be currently very good or outstanding, while roughly the same percentage rated relations good or fair. More than half predicted things would be better a year from now, while about 1 in 4 saw no change.
Asked about physicians not employed by the hospitals, there was less to be positive about today. Slightly more than 1 in 4 rated relations very good or outstanding, and 16% called relations poor, very poor or unacceptable. Slightly more than a third rated relations with independent doctors as good, and 1 in 5 rated them fair.
In some parts of the country, employment is not an option to forge closer hospital-physician relations. “California is a corporate-practice-of-medicine state, and as a consequence, hospitals may not employ physicians,” says Morris Flaum, CEO of Sutter Pacific Medical Foundation. The organization comprising three medical groups with 230 physicians anchors one of five regions in Northern California into which Sacramento-based Sutter Health recently reorganized to better govern and coordinate care.
Despite the prohibition on employment arrangements, “At least in our region I would think that the relationships between hospital administration and physicians in the foundation, or physicians outside the foundation, are quite good,” Flaum says. “Physicians are integrally involved in managing the quality of the care that's being provided,” including the adoption of a single electronic patient record and other care and disease-management systems springing from participation in the Sutter Medical Network.
In other areas of the country, employment has become the logical response to a regulatory climate “increasingly hostile” to for-profit physician groups working with not-for-profit hospitals, says Bruce Wellman, CEO of Carle Physician Group and formerly CEO of Carle Clinic Association, a 340-physician practice that had for decades maintained a separate but highly collaborative relationship with 279-bed Carle Foundation Hospital, both in Urbana, Ill.
The clinic association, which performed 99% of the physician-generated services at the hospital and also managed a health plan in which Carle physicians are accountable for about two-thirds of the 320,000 covered lives, had talked about being “virtually integrated” with the hospital, Wellman says. But in 2008, a new round of changes in the so-called Stark regulations further limited physician referrals to organizations where they hold a financial interest, making it impossible to provide integrated care economically, he says.
Needed services for the hospital “required all sorts of contractual gymnastics and significant effort to maintain in a changing regulatory environment,” he says.
The hospital foundation and physician practice entered into talks that culminated in the hospital acquiring the physician practice and health plan in a $250 million transaction. The deal closed April 1.
The leadership of both organizations already had reasoned that physicians must be integrated into common governance and management. “When Stark came along, it just pushed us into the transaction,” says Wellman, a physician, who became the executive in charge of both inpatient and outpatient physician activities.