What Impact Will Hospital-Employed Physicians Have on Healthcare?

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HPE-thumb1As healthcare reform kicks further into gear, more and more physicians are surrendering their autonomy and accepting hospital employment. The long-term implications of these arrangements have yet to be determined, but if one prominent United States city is any indication, the healthcare market will favor the larger system in the future.

According to Alan Bavley of The Kansas City Star, “In the Kansas City area, fully 55 percent of physicians are now employed by hospitals, Blue Cross and Blue Shield of Kansas City estimates. That includes virtually all cardiologists and most cancer specialists.”

This, of course, tracks alongside the rest of the nation, in which “the number of doctors on hospital payrolls…has risen by one-third” since 2000, Bavley writes.

However, there are many questions about this paradigm shift that are waiting on answers: Can physicians, who generally prefer autonomy, conform to the corporate structure? Will hospitals view physicians as necessary to raising the bar on quality and patient satisfaction, or will they take the cold, detached corporate view and see them as a way to increase the bottom line?

One of the areas in which hospitals have benefited from employing physicians is referrals. “Data analyzed by The Star for the Kansas City area suggest that while independent physicians spread their referrals among many hospitals and physicians, employed doctors overwhelmingly favor the hospitals that pay their salaries,” Bavley reports.

Since physicians in Kansas City have started to focus referrals on their employers, other independent practices in the area, such as a neurology practice represented by marketing director Aaron Seacat, have seen their referrals bottom up: “One of those doctors sells out to a hospital, and suddenly the person who has been sending us two or three patients a week is sending us zero. We go from being their best friend to ‘we can’t help you.’”

Area hospital groups, such as HCE Midwest and St. Luke’s Health System, were quick to tell the newspaper that they don’t demand their physicians send all referrals to their organization, but physicians seem to feel obligated to do so at the very least.

Bavley also notes the benefits for physicians are obvious: “Hospitals with strong exclusive networks of doctors have far greater leverage than independent doctors to negotiate higher payments from insurance companies. Costs can soar where hospitals command large shares of the market.”

Vice president of America’s Health Insurance Plans Robert Zirkelbach noted: “When a hospital buys a practice, its rates will increase in the following year’s contract. Increases of 20, 30 or 40 percent are not uncommon. It’s not 3 or 4 percent, that is for sure.”

How do the patients feel about this integrated care? If Jill Stower of Overland Park can be taken as an anecdotal representative of the whole, then they’re skeptical. As Bavley relates, Stower’s primary-care doctor, employed by St. Luke’s, referred her to a lung specialist within St. Luke’s after she expressed concern about a persistent cough. The lung specialist then referred her to a cancer specialist, also within St. Luke’s, who determined that she had lung cancer and wanted her to begin treatments immediately. Stower, who was not a smoker, told the specialist she wanted a second opinion and would go to the University of Kansas Cancer Center.

The specialist then told her she was running out of time and would be wasting what little of it she had left by seeing “young doctors still in training” at KU. She and her husband said they felt like bags of money that couldn’t be allowed to slip through St. Luke’s fingers. Such patients are commonly known as leakage among healthcare executives, Bavley writes.

Although she decided to go to KU anyway and opted to receive treatment there, the entire experience left her feeling disturbed about this new breed of hospital-employed physicians.

In spite of the trend within Kansas City toward hospital-employed physicians, Bavley writes, “[t]he Kansas City area still has a diverse healthcare market with large hospital groups like HCA Midwest and the St. Luke’s Health System, academic centers like the University of Kansas Hospital, and community hospitals like Shawnee Mission Medical Center all vying for patients.”

However, it should be noted that St. Luke’s acquisitions have led it to dominate 57 percent of the marketplace.

Kansas City is but one battleground where this tension between hospital-employed physicians and independent physicians is playing out. As healthcare executives, what is your perspective on the physician-employment trend? What is your read on the long-term impact this will have on communities? Will the healthcare market favor the larger system even more?

If Jill Stower had come to your organization and had a similar experience, how would you respond to her claim that she felt like a bag of money?

-by Pete Fernbaugh

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