Hospital-Physician Mergers: All Is Not Well

The Disease Management Care Blog, believing that the ultimate end game will be an historic insurer-physician alignment, checked out an “Issue Brief” on the Rising Employment of Physicians, courtesy of the Center for Studying Health Center Change (hat-tip to the folks at KHN).  The authors interviewed hospital, health plan and other provider executives from 12 representative locations around the country and came away with some telling impressions on what’s happening in the hospital market place.

The authors didn’t find much in the way of insurer-physician alliances, but they sure found evidence of increasing employment of physicians by hospitals.  Why?  For the docs, it’s a perfect storm of declining reimbursement, growing overhead, increasing insurer hassles, the cost of implementing an EHR and the high premium for liability (malpractice) insurance.  In addition, younger physicians are attracted to the prospect of a better work-life balance that comes with steady employment.  For the hospitals, it’s the opportunity consolidate market-power, maintain a referral base and do away with the revenue-stealing physicians’ in-office and surgi-center procedures.

Yet, while economics are driving docs into the arms of the hospitals, the authors cautioned that all is not well when it comes to 1) coordination of care/quality, 2) costs and 3) access to care.

To wit:

1.  Employing doctors is not the same as “integrating” care services.  There is little evidence that that alone leads to coordination of care – outside of some limited service-line issues, like reducing readmissions among patients with chronic heart failure.

2.  The continued reliance on fee-for-service as the predominant mode of payment is leading hospitals to increase revenue by encouraging their newly employed physicians to increase the volume of services.  In addition, hospitals can charge insurers a “facility fee” for many of the services that were previously independently performed by physicians.  Wanting to control the market for some services also leads to “bidding wars” for certain types of physicians, and if the bidding is successful, hospitals can command higher prices from payers. These four factors spells increased costs.

3. There isn’t anything about hospital-physician employment that automatically does anything to increase access to care.

“Precisely!” says the DMCB.

The threat of losing leverage with ascendant hospitals in their networks is one reason why large insurers have every reason to start courting the physicians in their networks.  They also understand that it’s the physicians that can increase quality, reduce costs and increase access.  All they have to do is develop the information systems, joint programs and incentives to make it happen.  As the bloom comes off the rose of hospital-physician mergers, the DMCB predicts that tide will turn in the other direction.

Jaan Sidorov, MD, is a primary care internist and former Medical Director at Geisinger Health Plan with over 20 years experience in primary care, disease management and population-based care coordination. He shares his knowledge and insights at Disease Management Care Blog, where this post first appeared.

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