Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
August 29, 2017 01:00 AM

Guest commentary: Tilting back toward independent medical practice and what it might mean for hospitals

Jeff Goldsmith
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Jeff Goldsmith

    The U.S. hospital industry was a major beneficiary of the Obama years. In exchange for significant Medicare rate concessions, hospitals received more than 20 million paying patients from the Affordable Care Act. They also received a significant political gift from Congress: The Medicare Access and CHIP Reauthorization Act applied new pressure on independent physicians to enter salaried employment by hospitals to escape federal recordkeeping requirements.

    While the country remained fixated on the fate of Obamacare, HHS, headed by arch-conservative orthopedic surgeon Dr. Tom Price, has been quietly looking for ways to help independent practicing physicians. Recently, the department exempted most practicing physicians from the Merit-based Incentive Payment System reporting requirements of MACRA for 2018. It also markedly reduced the amount of hospitals' 340B subsidies for drug purchases, which had quietly fueled a boom in hospital purchases of medical oncology practices. Finally, the CMS recently ended two mandatory hospital-centric bundling programs that, among other things, conveyed control over physician incomes to hospitals.

    It is possible that this is just the beginning of a campaign to re-advantage independent practitioners at the expense of hospitals. Other policy options include:

    • Lifting restrictions on establishing new or expanding existing physician-owned hospitals (part of the ACA) and loosening Stark law restrictions on physician-owned imaging and surgical facilities

    • Ending Medicare's policy of paying more for "hospital-based" physician services than for the same services offered by private practitioners in the same community

    • More aggressive enforcement of Office of Inspector General fraud and abuse restrictions on hospitals' physician compensation policies

    • Offering independent practice association and other physician-sponsored enterprises financial help in sponsoring Medicare Advantage plans.

    • Using reference pricing of surgical packages for regular Medicare patients, where physician-sponsored packages would define the reference price, as well as rebates for Medicare Advantage subscribers for using lower-priced services.

    While some of these require statutory changes (requiring congressional assent), some changes adverse to hospital interests might sneak into law in late-night reconciliation negotiations.

    What might these changes mean for hospitals?

    Large independent specialty physician groups could undertake private equity-financed development of new short-stay surgical facilities, taking advantage of the rapid migration of joint replacement and spine surgery out of the hospital. There will be attractive long-term lease opportunities in vacant shopping malls recently abandoned by K-Mart, Macy's and Sears.

    These new surgical facilities could feature Four Seasons-quality amenities and offer hip, knee and shoulder replacement and spine surgery packages, including home-based rehabilitation and wound care for under $10,000. Physician-sponsored imaging centers could offer $150 CT scans and $400 MR scans. Hospital imaging departments would quickly empty of their elective scans, a major source of operating profits.

    Local oncology groups could offer patients fixed-price chemotherapy bundles including generic chemotherapy drugs, paired with aggressive nutritional assistance and alternative medicine therapy for pain control for men with prostate cancer and women with breast cancer. Patients could be incentivized by Medicare Advantage plans with cash rebates for groups that agreed to adhere to NCCI treatment protocols.

    Hospitals would have to "right size" their employed physician cadres, reducing employment to mission-critical strategic areas. They would also have to double down on efforts to improve clinical productivity, terminating employment for less-productive salaried clinicians and reining in excessive compensation.

    However, threats to outpatient and surgical volume could severely damage hospital operating margins. Hospitals would be challenged to push down the delivered cost of complex ambulatory care to create positive cash flow at the reference price. This would require not only leveraging vendors (e.g., standardizing implantables and restrictive formularies for specialty drugs), but also process redesign and blueprinting care models.

    Additionally, outpatient margin compression would force hospitals to address the unprofitability of their inpatient services. It would no longer be tolerable to lose 10 cents on the dollar for each Medicare inpatient treated. Addressing with rigor both avoidable costs and cost variation among practitioners will be vital, with assistance from their key "process manager" physician-hospitalists, intensivists and emergency physicians.

    Alternatively, though this may open a potential Pandora's box of conflicts, hospitals may conclude that joint ventures with independent specialty groups (notably medical oncologists and orthopedic surgeons) on the use of the hospital's ambulatory services is the only way to avoid duplicative investment in imaging, surgical and infusion therapy capacity in the community. This strategy has worked in some communities, but has had a sad and checkered history in others. To do it successfully requires deft political and financial decisionmaking and the ability to set limits.

    At this stage in a new administration, it is not clear how aggressively Secretary Price and colleagues will tilt toward independent physician practice. However, it is worth thinking about how hospitals and systems position themselves for a fresh wave of competitive challenges from their physician communities.

    Jeff Goldsmith is national adviser at Navigant Healthcare and an associate professor of public health sciences at the University of Virginia.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    merger-arrows-money_i.png
    Option Care Health CEO stands by $3.6B Amedisys deal
    Why home is becoming the future for hospitals
    Why home is becoming the future for hospitals
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing