Strains in Hospital-Physician Relationships

Doctors are losing influence. Hospital systems are growing more powerful as they bulk up by buying physician practices, nursing homes, urgent-care centers, and other hospitals. Insurers and the federal health care overhaul are squeezing hospital and doctor payments and shifting doctor payments and reimbursement from how much health care is given to how effective it is.

Jonathan Rockoff, “New Medicine: As Doctors Lose Clout, Drug Firms Redirect Pitch," WSJ, September 25, 2014

As hospitals grow bigger, drug companies are concentrating their marketing on hospitals rather than doctors.

There is no mystery as to why this is so. You get more bang for your buck in dealing with employers rather than employees. Drug companies, insurers and government would rather deal with a few large organizations rather than a myriad of doctors.

The percentage of doctors employed by hospitals has risen from 31% to 42% over the last three years, and the percentage of doctor practices owned by hospitals has gone up from roughly 20% to about 60% over that same period. (Sources: Hospital Strategy Group and Cegedin Relationship Management).

These rises have coincided with the passage of ObamaCare, which in various ways, is pushing the concepts of Accountable Care Organizations to coordinate and consolidate care, shift payment from fee-for-service to bundled care, and shift emphasis from individual treatment to population health management.

These developments have created tensions between hospitals and physicians. These tensions are inevitable. As a hospital administrator once said of physicians, “ You can’t live without them and you can live with them.”

Hospitals and doctors often compete. This competition has intensified as technology advances has made it possible to treat 80% of surgical procedures safely on an ambulatory basis outside of hospitals. The problem for hospitals is that inpatient surgeries have often been a profit-center that covers the cost of services such as mental health, emergency rooms, and non-collectible payments for the uninsured and Medicaid.

Hospitals have responded by decentralizing and setting up their own ambulatory care centers and by hiring and owning physicians practices, both primary care physicians and the surgical specialists to whom they refer; and by raising prices, sometimes by 50% or more, for seeing physicians in hospital-owned physician practices.

Physicians have reacted by creating concierge practices and direct pay ambulatory care centers and by encouraging self-funded business to directly contract with physicians at lower costs. Physicians claim these practices are more direct, more convenient, more efficient, less costly, and avoid administrative expenses of hospitals and other third parties, and the problems of hospital-borne infections.

The reality is, of course, that both hospital and outpatient care are needed at one time or another. Most patient care occurs at the edge between doctors’ offices and hospitals, and coordination is needed. Many complex operative procedures can only be performed in hospitals, some require lengthy hospital stays, some demand equipment available only in hospitals, some require hospital teams and a concentration of medical-surgical specialists.