The Center for Health System Change released an Issue Brief recently dealing with the increasing number of physicians aligned with hospitals; specifically employment models.[1] The authors conclude their research of several regularly reviewed communities in the U.S. by stating:
While the potential of hospital-employed physicians to improve quality and efficiency has received attention, the potential for higher costs has received less attention. The existing fee-for-service payment system encourages strategies to use employed physicians to increase referrals and admissions, coupled with the market power of hospitals to gain higher payment rates, risks overshadowing potential quality gains.
In essence, physician employment is attractive to both hospitals and physicians under volume-driven fee-for-service, and the growing employment trend does not guarantee improved clinical integration will occur. The recent acceleration in hospital employment of physicians runs the risk of raising costs and not improving quality of care unless broader payment reform reduces incentives to increase volume and creates delivery to achieve real efficiencies and higher quality.
The pivotal element in the research and policy implications is congruent with a broader, more exasperating strategy issue facing the healthcare industry today – the sustainability of the fee-for-service model and its co-existence with a patient-centric care delivery model in which strategic profit is derived from quality and outcomes.
There is a degree of irony in the release of this document and the release of the Centers for Medicare and Medicaid (CMS) announcement of a plan for providers – physicians, hospitals, and other providers, to be reimbursed through bundled Medicare payments. The initiative is an expansion, of sorts, of earlier announced bundled payments under the Affordable Care Act. The Bundled Payments for Care Improvement Initiative previously released can include physician groups, hospitals, physician-hospital organizations, nursing homes, etc. This week’s announcement calls for providers to apply for participation in one of four models. Similar to other new initiatives, the release was under the rubric of a pilot and totally voluntary. The clairvoyant among us will take this as a sign of things to come in the near future.
Bottom line – the barrage of new initiatives, strategies and regulatory change are targeting fee-for-service models and precursors to their death.
Health System Change’s research clearly shares that there is an inherent potential for employed physicians to improve quality and efficiency; they also note that the driving force for most hospitals to align through employment is to gain market share. The metrics for the increased market share have not changed since alignment and integration strategies of the 1990’s – increased inpatient admissions, retention of diagnostic imaging within the system, growth of outpatient services, and improved negotiating power with health plan contracts. Near the conclusion of the research findings, the authors identify an additional driving force being preparation for “expected Medicare payment reforms, including bundled payments, accountable care organizations, and penalties for preventable hospital readmissions.”
Senior leaders in healthcare are living within a schizophrenic world – creating increased profits within a FFS model that rewards for greater admissions, greater testing, and increasing numbers of procedures; and the new paradigm in which profitability comes from lower admissions, less readmission, tighter control of the patient moving through a system of care, and improving quality and outcomes.
The combined results of the last five years of industry change has included physicians seeking out employment opportunities based on financial security, desire for improved quality of life, and innate desire to practice medicine versus operate a business in response to ever changing regulatory and financial strategies. What to do with the physician who is employed remains a conundrum for most health system leaders. In only a few cases nation-wide, has the role, job description, and internal processes for an employed physician been addressed and resulting in the desired impact. The most glaring exception is those situations where the physician group practice has expanded to include a hospital or health system (i.e. Cleveland Clinic, Mayo Clinic). Historically owned and governed physician health systems have not had to face the administrator managing the physician in the same way that community hospitals and non-academic hospital have.
The Center for Health System Change reviewed the current market and shared its findings. There are few instances where physician alignment and integration have resulted in lowering costs and improving quality and outcomes. Those situations that have been successful carefully entered into the situation, consistently attempted to identify the right correlation between clinical practice and clinical management, and were purposeful in the employment contract. There is no difference in any employment agreement – physician, administrator, cleaning crew. If leadership clearly defines the role, expectations, and working relationships, and is straight-forward in terms of evaluation, compensation, reward and punishment, the ability of all parties to work toward a singular objective is enhanced.
[1]Source: “Rising Hospital Employment of Physicians: Better Quality, Higher Costs?: O’Malley, Ann S., Bond, Amelia M., and Berenson, Robert A., Center for Health System Change, No. 136, August 2011. http://www.hschange.org/CONTENT/1230/1230.pdf.
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