Untangling  Tangled Hospital-Physician Relationships: Mission Impossible?

Oh, what a tangled web we weave

When we first we practice to deceive!

Sir Walter Scott (1791-1832, Lochivar

If I were to rewrite Sir Walter Scott’s famous dictum and to apply it to hospital-physician relationships,  I would have two versions:

One,  Oh, what a tangled web, government does weav

When it seeks hospital-physician  costs to relieve.

Two,  Oh, what a tangled web,  government does weav

 When it assumes hospital and physicians are naïve.

I speak as someone who has been writing about health reform for 40 years,  who has been a PHO chairman,  and who has consulted on physician-hospital relationships.

The single best article on the subject of hospital-physician relationships  I have read appeared in the May 11 edition of The Health Care Blog “The Tangled Hospital-Physician Relationship.”   It is by Jeff Goldsmith,  national advisor for Navigant and an associate professor of public health sciences at the University of Virginia;  Nathan Kaufman, an independent health care strategy and physician-hospital consultant, and  Lawton R. Burns a professor at Wharton.

The article is 2750 words long and is full of cogent observations.   

It is a historical record of how the government has tried and failed to reduce costs by imposing regulations on hospitals and physicians and seeking both to disentangle and to consolidate the relationship.

It  notes that hospitals generate $1 trillion  while physicians contribute $600 billion  in annual costs towards the nation’s 3 trillion health care spending.

It says the number of hospital-employed physician rose 40% from 70,000 in 1998 to 122,000 rfin 2014.  

It observes the number of hospitalists have risen from virtually zero to 44,000 today. 

It  asserts specialists have stiff-armed Accountable Care Organizations, which have stressed primary care leadership at the expense of specialists. 

It comments on the effects of the Stark Laws of the 1990s, which forbade physicians having ownership to entities to which they referred. 

It tells of the effects of the Deficit Reduction Act of 2005, which drastically reduced what Medicare and Medicaid would pay for free-standing imaging services while raising hospital fees the same services.  

It notes reducing Medicare pay for cardiologists and orthopedists and other high-tech specialties drive specialists into the waiting arms of hospitals and caused hospital doctors to maximize hospital referrals and increase imaging and lab costs.  

It  notes physician incomes have been squeezed by government regulations,  unaffordability of high deductibles created by ObamaCare induced health exchange plans with insurer losses, and  the hassles of prior authorization.

It  dwells on the costs of replacing retiring baby boomer physician  with millennial physicians who prefer to work shorter worker hours with more time off, and who care less about what the hospital charges.

It talks of the political conflicts between hospitals and physicians  in these words,  “Conflict with physicians over contracts, practice prerogatives, and scope of professional practice poses one of the single most significant career threats to hospital administrators. Hospital executive colleagues have commented to us that half or more of their job is “political” — managing the diverse economic interests of their medical staffs. One confessed that there is nothing more dispiriting in his job than fighting with physicians over money.”

And it comments throughout its article on the plight of primary care physicians and ends with this dispiriting paragraph.

“Hospitals have a vital interest in the renewal of the primary care physician base in their communities, a particularly vital one if the community is struggling economically. Yet all over the US, hospitals have become midwives to an expensive intergenerational transition in medicine, perhaps permanently raising their expense base. Due to competitive pressures, hospitals are supplying an increasing percentage of physician income at a time their top line revenues are growing in the low single digits, if at all. This rise in physician expense challenges hospital managers and clinical leaders to improve clinician productivity as well as the quality of their work product.”

It is only natural for hospitals to want to raise revenues to stay in business, and for physicians to seek economic security at the expense of hospitals.  Where this all ends and how hospitals and physicians  can or will dismount from the escalating cost Merry-Go-Round,  no one knows, but it is likely to result in dispersal of health services outside of  hospitals  with partial replacement of hospital services by market-based services outside of government  and 3^rd party regulations  and controls.