Trendspotter: Why You Don’t Have To Go To Work for a Hospital

August 4, 2010

As more doctors go to work for hospitals, more of their colleagues are thinking about giving up private practice. But is this the only way to go-and will it help fix the healthcare mess or make it worse?

By encouraging and piloting new Medicare reimbursement methods, the healthcare reform legislation is accelerating hospitals’ employment of physicians. And, as more doctors go to work for hospitals, more of their colleagues are thinking about giving up private practice. But is this the only way to go-and will it help fix the healthcare mess or make it worse?

Even before the passage of the Patient Protection and Affordable Care Act (PPACA), hospitals were hiring an increasing number of physicians out of residency and private practice. Among the most important reasons for this strategy were these: Hospitals wanted to protect their referral base; they wanted to be indispensable to health plans; and they wanted to “align” more closely with physicians to prepare for the new reimbursement approaches that they believed were coming.

Among the approaches to delivery system reform that the government is currently testing or promoting are payment bundling and accountable care organizations (ACOs). The payment bundling methods include combined payments for inpatient and post-acute care, as well as bundling of doctor and hospital payments. In addition, some private payers are experimenting with episode-based bundling of both procedures and chronic care for individual patients [].

ACOs are groups of physicians and hospitals that take a degree of responsibility for the cost and quality of care. Under the PPACA, the Centers for Medicare and Medicaid Services will launch a shared-savings program for ACOs in 2012 []. Participating ACOs that meet quality standards will have the opportunity to receive a portion of savings - mostly from averted hospitalization and ER visits - that exceed a certain level. As I noted in an earlier Trendspotter blog entry, CMS used a similar approach in its Physician Group Practice demonstration, a five-year pilot of gain-sharing that ended last March. Some private payers are offering similar ACO programs or capitation contracts with a quality component.

To qualify as an ACO, an organization must include primary-care physicians and serve at least 5,000 Medicare beneficiaries. It may be an integrated delivery system that includes hospitals and employed doctors; a large multispecialty practice; or a clinically integrated IPA or physician-hospital organization. Any physician organization that attempts to do this must collaborate with a hospital, but the hospital does not have to organize or lead the ACO.

Whether or not they form ACOs, hospitals do not necessarily have to employ physicians to align with them. For example, some hospitals are subsidizing and/or hosting electronic health records for community physicians. Many hospitals have formed joint ventures with surgeons, medical specialists, or radiologists.

From the viewpoint of the new payment methods, the downside of physicians going to work for hospitals or joining ACOs led by institutions is that the healthcare systems will determine how large a piece of the pie the physicians get. On the other hand, if they don’t treat their doctors right, they won’t incentivize them to produce the savings required for everyone to prosper under gain-sharing or capitation.

Some physicians, of course, bridle at the notion of their incomes being limited and want to hold onto fee for service as long as possible. However, that way of life is coming to an end. What you must decide now is whether you want a hospital to determine how you’ll practice and how you’ll be reimbursed, or whether you’d rather join with your colleagues in a clinically integrated group, IPA or PHO.

While many physicians belong to IPAs or PHOs, few of these organizations are clinically integrated. So to have a fighting chance of surviving in private practice, doctors must join together to build an infrastructure that will enable them to coordinate care and manage population health. To start with, physician organizations should choose a common EHR so that it’s easy to exchange information; another important step would be to hire care coordinators.

If physicians integrate clinically and become leaders, rather than cogs in a healthcare system, they may be able to determine their own fate. But for reform to succeed, doctors, hospitals, and other providers will have to realize that the point of this exercise is not to develop more bargaining clout or fill more beds, but to improve quality and cut costs. If ACOs and payment bundling merely result in hospitals increasing their power in the marketplace, we will be back at square one.