Competition, consolidations, and concierge medicine

January 15, 2019

There is a way that physicians-including employed physicians-can manage the effects of healthcare consolidations. 

A recent study from the Nicholas C. Petris Center at the University of California, Berkeley states that, because of increased market share, the average price of a hospital stay has increased between 11 and 54 percent in areas that have experienced hospital system mergers. Market share is further increased when hospital systems buy private physician groups.  

This is good for hospital systems that have been struggling and need to improve revenue. It may seem like a plus for physician groups who have sold their practices as well, as they are now able to take advantage of the increased negotiating power and earn higher reimbursements.   

But who is hurt by these consolidations?  And is there anything we can do to level the playing field?

An increase of more than 50 percent for a hospital stay is not going to be paid by insurers. These costs are passed on to patients in the form of higher premiums. Consumer watchdogs are taking note and demanding a return to a more competitive healthcare landscape, with even the current administration announcing their goal to limit excessive consolidation by executive order (which has not changed the landscape of consolidation).

But it’s not just patients who feel the pain when hospital systems take over private physician practices en masse. Some doctors recognize, oftentimes too late, that becoming an employee instead of a small business owner can come with its own set of problems. 

For example, many physicians believe that by selling their practice, they eliminate practice management headaches. That’s not always the case. Employed physicians often have to manage staff, but now they may be beholden to staffing decisions they wouldn’t have made themselves and often miss the flexibility of making choices without interference or approvals. Decisions made within a corporate structure are centralized and usually driven by cost, not quality. For example, physicians may not be able to reward individual contributions (such as by giving a bonus for a job well done) or may be forced to work with a staff member who doesn’t fit into the practice’s culture.

In addition, once the physicians sell, they lose the bargaining power they once had. They may find their income improves initially after selling, which is certainly attractive. But over time, and as contracts are renegotiated, this can and often does change. Doctors find that what was meant to be an empowering decision can become a debilitating one-as decision-making is limited and the economics no longer bear out. 

There is a way that physicians-including employed physicians-can manage the effects of healthcare consolidations. And surprisingly, the solution may be the same for all concerned parties.

Doctors can increase revenue through a privately funded program that taps into the value in their patient relationships. An average hybrid membership program can earn significant revenue and can be just what the practice needs to plug the holes and remain private, strong and stable.

And for those who are employed by large health systems, a hybrid membership program can be empowering, putting some control back into the hands of the physician. Being free from the pressure of productivity measures even for just a few hours allows doctors to take their time with patients and enjoy the practice of medicine again.  

Hospital systems are recognizing the value of a blended membership model, too. Allowing physicians to maintain or even launch their own partial membership program can be the perfect incentive or motivation, and they work hard to recruit top practices and top physicians. The programs blend seamlessly into their vertically integrated systems and allow physicians to see all patients-not just members-while earning significantly higher per-hour revenue. Management and providers all benefit.

The most important takeaway is that physicians in every stage in their career should look carefully at new, customizable practice options. Competition is important to our healthcare system, and patients want choices too. The days of membership medicine being all or nothing are over-there are flexible approaches that can keep competition and morale up for every practice style. 

Wayne Lipton is managing partner for Concierge Choice Physicians, LLC, and one of the most experienced and successful executives in concierge medicine. Lipton graduated from Harvard College in 1973 with a degree in Biochemistry. He attended the University of Chicago Business School and the Boston Architectural Center. He was formerly a chief operating officer for PhyMatrix, a public healthcare company; chief operating officer for Physicians Choice, a Connecticut IPA and practice management company; and president and principal of Richmond Way Stores, a local chain of drug stores that he operated for 20 years.