Tuesday, November 25, 2008

Hospitals and Physicians in the Real World

The good news is that bad news may be good news.

When you read or hear of physician-hospital relations, the talk is usually couched in lofty terms – “integrated systems,” “health partnerships, ““hospital physician alignment,” or, even “competition-coopetition.”

In the real world, however, the situation is much more complicated. It is full of tensions, paradoxes, conflicts, and political hardball. It is, well, messy.


This messiness may be why I found a recent e-mail from John McDaniel so intriguing. John is a former hospital CEO. In recent years, has served as president and CEO of Peak Performance Physicians, LLC, a practice management firm based in New Orleans. John, an old friend, often serves in a go-between in the real world of hospitals and doctors. John can attest to the truth of the statement once made by a hospital CEO of doctors,”You can’t live with them, and you can’t live without them.”

Hospital Problems

A host of problems beset hospitals – shrinking margins, Medicare refusing to pay for treating common complications, rampant MRSA and C. Difficile infections, declining reimbursements, dropping admissions, pressures to pay specialists for ER coverage, skyrocketing debts from the uninsured and underinsured, costs of building primary care networks , and rebellious specialists who persist in building competing facilities.

Physician Despair

Meanwhile physicians are wrestling with their own set of problems - declining reimbursements, rising practice costs, longer hours, mounting paperwork, concerns over malpractice premiums, swamped offices, pressures to install electronic medical record systems, inability to recruit new physicians, looming physician shortages, a profound loss of morale, and future uncertainties. A recent survey of 270,000 primary care physicians and 50,000 specialists, conducted by The Physicians’ Foundation, which represents members of state and local medical societies, indicated 78% of physicians perceived there to be a primary care shortage, 90% said paperwork has increased, causing them to spend less time with patients, 76% felt overworked, 49% said they would quit medicine if they could, and 60% would not recommend medicine as a career for young people.

Hospital Strategies

In his e-mail, John outlined the strategies leading hospitals are pursuing to grow and develop their hospital affiliated services.

1. Provide financial support for recruitment of individual practices, 83%

2. Have a written medical staff development plan, 72%

3. Provide training to physician office staff to improve coding, billing, and collections, 56%

4. Provide information system support for independent practices, 53%

5. Have a formal physician relations program responsible for spending time with referring physicians who are not members of the active medical staff in an effort to grow referrals to our physicians and hospital, 50%

6. Provide other types of management support for independent practices, 46%

7. Actively advertise independent physicians, 37%

Source: “Strategies for Strengthening Physician-Hospital Alignment: A National Study” The Society for Health Care Strategy and Market Development of the American Hospital Association.

John concluded his e-mail, “While most hospital leaders who participated in this study seemed to understand they have grow their volume and revenue through the recruitment of additional physicians in order to increase market share, and while hospitals seem to get a better return on investment when recruiting specialists, most hospitals are taking a more balanced approach, resulting in the expansion of their primary care networks in order to strengthen the referral network for current specialists.”

A Conversation with McDaniel

I called John McDaniel about matters relating to his e-mail and had the following conversation.

“We’re seeing more doctors say, 'To hell with it, I’m going to work for the hospital.' And we see more hospitals wanting to employ doctors. We went through this in the early and mid-90s, but that was craziness related to the entry of the public companies into the physician management arena. Now hospitals legitimately want to hire doctors.”

“And the young doctors coming out of training really want employment. It’s a trend I think will continue because of the uncertainties of reimbursement. For sure, reimbursement is not going to increase. I don’t think this country can afford national health insurance, but the Democrats are going to try. That prospect adds to the uncertainty. There would still be a private market, just as in England, but it would be much smaller. “

“There’s just a lot of fear. Fear is driving everything. Even the specialists are fearful. We see urologists, general surgeons, and pulmonologists seeking hospital employment. Doctors wanting to work for hospitals cross all lines. “
“Docs 45 to 55 are especially eager. They know they can’t retire anytime soon, and they’re just so uncertain. It’s a little bit like being in the Mafia. They have had a taste of the good life, but there’s no easy way out. Those over 55 are saying, I can probably ride this out. And the young ones simply want a better life style.”


“Then there are the pressures of installing EMRs. The feds are saying they will pay 2% more for e-prescribing but that’s a drop in the bucket when you consider the cost of EMRs. The feds are also saying hospitals can pay up to 85% of the cost of installing EMRs in doctors’ offices. But hospitals are reluctant. There are 100 EMRs out there, and the cost of writing interfaces for multiple systems would be exorbitant. Most hospitals are saying they would pay X percent of a single system, or endorse 3-5 systems for which they will write interfaces. Only about 20% of doctors have EMRs. I know Obama says he will spend $50 billion to install EMRs in doctors’ office to create a national operative system in two to three years. It just ain’t going to happen.”

A Meeting with a Doctor Group

“I had a meeting with a group yesterday afternoon. I told them, ‘Until the hammer fails, let’s decide how much each of you wants to make each year, how much you want to set aside for retirement each year, and how many more years do you have to do that. Let’s just work our ass off until the hammer fails.’
“In all of our practices, we’re developing fail-safe plans – operational disaster plans. What happens if Medicare/Medicaid has significant changes, and/or we have national health insurance? What happens if your state requires you to see Medicaid patients? Are you going to participate? Basically we’re developing operational disaster plans. The main plan is to do business as usual as hard and fast and long as you can.”

Not a Pretty Picture

“You are going to have fewer and fewer doctors participating in fewer and fewer plans and seeing fewer and fewer Medicare and Medicaid patients. Then you have a real access problem, and you have more and more patients complaining to more and more government representatives about waiting six months or more to see fewer and fewer primary care patients. The very thing the government doesn’t want to address – less and less coverage for more and more people – is going to happen. What happens if 1/3 of doctors stop taking Medicare and Medicaid? “

Physician Extenders

“More and more physician extenders – nurse practitioners, nurse doctors, and physician assistants – will begin to fill the primary care gap. But it will take legislation at the state level to turn them into medical practitioners. And many citizens will prefer to see doctors. I see a political blood bath coming – with extenders seeking more power and physician resisting. Collectively, 900,000 doctors have a lot of potential political power – if only they could get on the same page. If you think driving GM to the table to cut union contracts is a problem, imaging dealing with America’s doctors.”

Catastrophic Insurance for All

How is this country going to able to afford a universal system? One way of doing it is to provide everyone with catastrophic coverage – stop-loss insurance for everything costing over X dollars. Maybe we can develop a strategy for covering the uninsured and under-insured but I can see covering everybody for comprehensive care. The problem is: how do we control expenses? The only people you can control are hospitals and physicians. You can’t control the entitled masses that have come to believe they have a right to the best of care, as long as someone else pays the bill.”

“How in the hell did we get into this mess? We just woke up a couple of weeks ago and found out, ’We got a problem!’ If I had all the answers, Warren Buffett would be in second place. It’s a tough, complicated problem beyond any single person’s comprehension.

The good news is that the bad news may bring hospitals and physicians closer together.

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