Idaho Flaneuse raised a good point in yesterday’s post regarding models of medical care and the economics of referral.
I wonder how this will work with the consolidation of doctor’s practices. Here in Boise most of the primary care practices have been bought by the hospitals here. I don’t have personal experience, but I think that some of the specialist practices have also been purchased by the hospitals. Seems likely to me that the doctor will send you to the hospital that owns them rather than the one that is rated the best. Will this leave the patient fighting to go to the better rated hospital or bearing a larger burden of cost if they don’t?
This is one of the big problems with system and delivery reform. The business model requires a lot more regional coordination without ownership barriers.
Hospitals buy up provider practices for a few reasons. Before last year’s budget bill, one of the big reasons was to transform outpatient centers into off-campus hospital facilities that could charge a much higher Medicare rate. That revenue hack is gone for new acquisitions. The other two reasons are prestige of the hospital now being able to offer a high profile program and referral patterns.
A physician who is either on their own or working for a non-hospital owned group with no strategic relationships with a hospital will often have admitting privileges to multiple hospital groups if they live in the core or mid-ring of suburbs in a metro area. Multiple privileges allows the provider to treat patients with a variety of insurances. St. Thomas might not take Mayhew but North General does. North General does not take Aetna but St. Thomas’s does and has a regional destination program for Aetna covered lives. St. Thomas and North General both accept Blue Cross. That is common in a network driven world. So if the provider has privileges at both St. Thomas and North General, she can treat patients who are covered by Mayhew Insurance, Aetna and Blue Cross. Her Mayhew patients go to North General when they need surgery, her Aetna patients go to St. Thomas, and her Blue Cross patients go where the doc thinks they’ll get the best care for that particular problem or the first operating room slot opens up.
Now if North General buys the practice where that physician works, she’ll still have privileges at St. Thomas but her salary is determined partially by the success of North General. There will either be hard incentives and guidelines that all possible patients are to be kept within the vertically integrated medical center or bonus structures that strongly encourage that. The hospital group is buying the provider’s referral pattern. In this scenario, if the physician responds to their incentives, she’ll pick up a lot of new Mayhew covered people, lose a lot of Aetna covered patients and see noise in her Blue Cross covered panel.
If a patient gets into a vertically integrated silo, it is tough to get out even without considering insurance. The medical records are in one spot, the doctor who is treating a condition is in one spot with a relationship already established, the supporting services are lined up, and if there is a need for follow-up service the appointment is set up for a visit to the vertically integrated physical therapy center or blood lab or MRI center. It is a very smooth workflow where (if done well) there are very few obvious off-ramps to take the patient’s medical dollars outside of the vertically integrated business model. The money stays in the bucket and the vertically integrated provider system has dozens of analysts figuring out ways to keep even more money in the bucket.
If the system is large enough, the patient can benefit from facility level specialization as North General might be the hip place for the Greater Shelbyville Medical Group while South Memorial Hospital is the cardiology hospital for the group. But there is no guarantee that a vertically integrated business unit is either big enough or good enough to generate quality returns due to specialization.
This is problematic. And the incentives can get even more problematic when we throw an integrated insurance company into the mix. They might only offer coverage at owned facilities (the Kaiser model) or they might have a tiered network where care provided at owned facilities has a better deductible/out of pocket maximum than care at other in-network facilities (most other payer-provider systems’ lower priced plans). The goal of the design is to keep as much money in the combined entity’s bucket. Hopefully the vertical integration of the healthcare provision and finance entity leads to internally coherent incentives to reduce wasteful care and to think longer term for better quality. Hopefully, it leads to better care coordination, hopefully it leads to better outcomes at better prices. Hopefully it does lots of wonderful things. And in some systems, it does. But the incentive is to keep the patient in-house and thus the money in-house as often as possible even if there is a better locally viable alternative.
It confusing here because most doctors have a relationship with the public and the catholic hospital. I try my best to get sent to the public hospital but, for somethings, they send me to the bead people.
@raven: I made those names up — it could be any two hospitals
@Richard Mayhew: I’m sorry, I meant here in Athens.
Sounds like an anti-trust lawsuit waiting to happen – if anyone still wanted to file anti-trust litigation.
On a side note: I’m always amused by the Republican mantra that we don’t want an “uncaring” government bureaucrat getting between patients and their doctors. Republicans instead want to have insurance company and hospital conglomerate bureaucrats stand between doctors and their patients – bureaucrats who are paid to try everything they can to deny expensive care to patients, regardless of need.
Most of the doctors who are becoming employees of hospitals are NOT the kind of surgical specialists that are providing tertiary care (well, in some states a lot of those doctors are employees of academic medical centers, but that’s for different reasons). In any event, your primary care physician rarely recommends surgery — rather, he or she refers you to a surgical specialist. It’s true that if such a specialist is on the staff of a particular hospital, that’s where you will end up going, but that is irrespective of whether the specialist is employed by the hospital, and in most cases, is not. Sorry I can’t contribute more than this today, but the employment issue is really not a driving factor in limiting the likelihood that we are going to move to this kind of specialized hospital network model (which has been used by certain insurers for transplants and some other high risk or complex procedures for a while now).
The great social action conundrum.
@Barbara: Agreed, most hospital employed physicians are either PEARS or hospitalists. But there are increasing cases where local hospital groups buy up orthopedic or cardiology or nephrology or neurology practices to get the referral patterns. That is the case I am discussing here.
@RepubAnon: right now the FTC is big on hospital to hospital mergers, I have not seen a lot yet on vertical integration actions.
Dumpster of vertical integration.
2 local hospitals are owned by one outfit and serve 3 communities of olds to very olds. Physician medical offices on same properties as hospitals and fully linked data systems. Visit any Doc within the system and they have full access to all patient records as does hospital. Sounds great…Doc”s work 7 to 4pm and never walk into the hospital.
It’s a meat grinder. Once you get in the system the GP will toss anything they can to a specialist. You want it, they’ll do it. 92 or 93 year old neighbor had a shoulder replacement. They lead him to believe he would be home in three days. He was out of the hospital in 3, but into a rehab / nursing care for a couple months. Dirt nap within 2 years.
Age group tells me it’s mostly Medicare patients. Doc turnover is very high. They recently lost the whole optical group of 4 Doc’s who just all picked up and moved to another side of town. Treat cancer very aggressively. Surgery + chemo / radiation. Know a guy using his golf cart to get to his mail box which is 10 feet from house. He finally got off the merry-go-round and got into hospice.
People just following the doc’s advice… Old age isn’t a battle, it’s a massacre.!
A massacre indeed! I pity all olds who aren’t aware of the system enough to look out for themselves. And then there’s the $500000 cap; if what it takes to fix you is over that limit, oh well, sucks to be you. A blessing and a nightmare is Medicare, depending on your particular illness at any given time. All about the insurance bean counting – 100%.
@Richard Mayhew: In Pittsburgh, the biggest hospital bought a lot of other hospitals and then formed a health insurance company. The enormous hospital then wouldn’t take other insurance companies’ patients, who had few local alternatives.
I don’t know what’s happening now in Pittsburgh because I don’t live close enough to get its local news. However, the feds and the state attorney general sued to block the merger of the two biggest hospitals in the Harrisburg area, and when the federal judge ruled for the hospitals, they took the case to the appeals court, where it is pending. I hope something has been done or will be done about the Pittsburgh situation.