Size Matters: Hospital Consolidation
and Physicians
I think no virtue goes with size.
Ralph Waldo Emerson (1803-1882), The Titmouse
May 27, 2012 - As health reform evolves,
I’ve been watching multihospital systems grow in size and power and
speculating what their gigantic size means.
Here, as of
2008, were the 10 largest systems in revenue size
1. Veterans Administration
Hospitals, $40.7 billion
2. Hospital Corporation of America, $28.4 billion
3. Ascension Health, $12.7 billion
4. Community Health, $10.8 billion
5. New York Presbyterian, $8.4 billion
6. Tenet Health, $8.3 billion
7. Catholic Health Initiatives, $7.8 billon
8. Catholic Health West, $7.6 billion
9. Sutter Health, $6.9 billion
10. Mayo, $6.1 billion
What strikes
me about this list are that such giant systems like Kaiser, the Cleveland Clinic, Johns Hopkins, Duke, and Health Partners in Boston don’t
even appear, and the large number of Catholic multisystem chains. The revenues of multihospital systems has undoubtedly
grown since 2008. In 2011, hospital mergers and acquisitions hit an alltime
high. More than half of all hospital
admissions , 60% to be precise, occur in the 200 largest hospital systems, hospitals now own more than half of physician practices, and large hospital systems are gobbling up rural and smaller hospitals at an accelerating rate.
Reasons
behind the growth are self-evident:
·
market
and monopoly power to become dominant preferred providers in geographic regions
·
administrative
flexibility in coping with reduced
federal reimbursements, triming duplications, and creating hospital-physician
bundled billing organizations
·
Need
to expand into outpatient markets by acquiring physician practices
·
More
ability to negotiate higher payer prices, particularly from private insurers
·
More
capacity to invest in health reform
demands for quality, safety and electronic systems
·
Enhanced abilities to direct referrals and to
build high tech centers for imaging, cancer, heart and orthopedic centers
·
Anticipation
of influx of 32 million more paying Medicaid recipients in 2014 and 78 million new baby boomer Medicare eligibles over the next 18 years.
Critics' Worries
Critics worry that consolidation:
·
will
create monopolies that will drive up prices and costs for government and
consumers;
·
will
make hospital owners of physician practices the real economic masters of the
health system, rather than government or
physicians and their organizations.
As Humpty
Dumpty said in Through a Looking Glass,
“ The question is: which is to be the master, that’s all.” The new question is: In the physician world, will hospital systems, now the dominant physician
employer, dictate and direct what
physicians can do, rather than physician organizations?
For insight
into what a reform-minded government thinks about this and other matters, I will like to quote the words of
Ekekial Emanuel, MD, who was one of President Obama’s principal physician advisors from his perch at the National Institutes of Health before
his present position as the professor of medicine at the University of Pennsylvania, as cited by David Nash, MD, head of population
health at Jefferson Medical College in MedPage today.
“Initiatives launched under the
Patient Protection and Affordable Care Act (ACA) of 2010 are key to the
solution:
- Patient-Centered Medical Homes: The Group Health
Cooperative of Puget Sound model (1,800 patients per primary care
physician with nurses and pharmacists doing chronic disease management and
outreach) has already achieved both clinical success and cost
effectiveness (a 1.5: 1 return on investment).
- Accountable Care Organizations (ACOs) focus on value-based
care delivery and payment systems: Bundled payments – a veritable
"prix fixe" – forces collaboration among all providers.
Sacramento (CalPERS) ACO's Acute Care Episode demonstration project (i.e.,
payment bundles for coronary artery bypass grafts, pacemakers, and 8
orthopedic procedures) may be the prototype for a national program.
A former Washington insider, Emanuel
believes that unless the Supreme Court does something completely
"wacko," the U.S. will have universal coverage (with the exception of
undocumented persons and refusals).
Costs will decrease and -- with
advances in interoperable electronic medical records (EMRs), comparative
effectiveness research, reporting, and medical error reduction -- quality will
improve.
Changes in the delivery system will
serve as catalysts
Within the next 10 years, Emanuel
predicts that:
1.Checklists will be
used routinely for intravenous therapies and surgery
2. Electronic medical
records, health-related smart phone apps will become the norm
3. Remote monitoring of
metrics such as weight, blood pressure, glucose levels will facilitate the
management of chronic illness.
4. Health insurance as
we know it will disappear”
Not My Opinion
That is Emanuel’s opinion. I believe the Surpreme Court may indeed do something "wacko," like strike down Obamacare.
Emaneul may be right on counts 2 and 3, but not on 1 and 4.
I do not believe you can replace clinical
judgments and patient desires with
checklists. . I do not believe Accountable Care Organizations, which are
essentially government-directed consolidation of hospitals and physicians into
organizations offering bundled bills, will reduce costs, nor do I believe they
will replace health insurances companies. .
That is “top-down” centralized
command and control government thinking, and not “bottom-up” behavior in the real world.
Tweet: Hospitals are reacting to reform by consolidating
into bigger systems, employing more doctors, and negotiating higher costs.