Career Trends: How to Ride the New Wave of Physician-Hospital Integration

August 1, 2013 at 12:00 am


It’s no secret that hospitals across the U.S. are hiring more physicians and acquiring more small group practices. The report “Physician Practices: Background, Organization, and Market Consolidation,” published by the Congressional Research Service in January 2013, quotes an American Hospital Association 2011 survey “that found the number of doctors on hospital payrolls had increased by 32 percent from 2000 to 2010” and further states that “about 20 percent of practicing physicians now work for hospitals.”

But the trend is hardly new, as a 2011 perspective in the New England Journal of Medicine notes. “In the 1990s, hospitals acquired many physician practices of which they subsequently divested themselves,” authors Robert Kocher, MD, and Nikhil R. Sahni, BS state in “Hospitals’ Race to Employ Physicians—The Logic Behind a Money-Losing Proposition.”

In this column, Clinical Practice Committee Chair Kathrin Nicolacakis, MD, assistant professor of medicine at the Cleveland Clinic; Members in Transition and Training Committee member Humam Farah, MD, director of the sleep, Alpha-1 and clinical research center of the Hannibal Clinic in Hannibal, Mo.; and Clinical Practice Committee member Scott Manaker, MD, PhD, associate professor and vice chair of clinical affairs in the Department of Medicine at the University of Pennsylvania Medical Center, provide insight into the trend and how ATS members might better position themselves.

What would you say accounts for the trend of hospital integration?

Dr. Nicolacakis: Reductions in physician reimbursement as well as the changing economy have accelerated physician interest in hospital integration once again. Previously it was only primary care practices that were integrated, however, now multiple specialists and specialty groups are aligning with hospital systems including our ATS members.

Dr. Farah: The fragmented U.S. health care system has forced some organizations to become sophisticated integrated delivery systems with shared responsibility and accountability for patient care and outcome, regardless of their location within the system. With the introduction of the accountable health care system, integration may become a necessity and a prescription for survival in this economy. A greater emphasis on quality will make it more difficult for smaller hospitals and independent practices to thrive in this environment.

Dr. Manaker: Hospitals are increasing their competition for market share, but there has also been a convergence of payment reform forces. First, bundled payments (including physician fees) to accountable care organizations, physician-hospital organizations, hospitals, or health systems. Second, hospital payments now depend on outcomes of quality measures that require tighter linkage and control of physician activities. Third, falling reimbursement to physicians—both absolute falls such as in sleep studies and pulmonary function tests as well as relative falls due to expenses rising faster than small increases in other reimbursements—encourages physicians and their practices to be acquired. Fourth, the increasing importance of interventional bronchoscopy to downstream hospital revenues and garnering market share is another factor. Fifth, there’s been contracting for in-house or remote (electronic) ICU services and to a lesser degree rapid response services. And finally, we’ve also seen increasing costs of electronic integration of medical practice such as electronic health records (EHR), ICD-10 conversion, and quality reporting.

Which ATS members might be most affected by hospital integration?

Dr. Manaker: Those who practice in groups in highly competitive markets, which contain a small number of hospitals and health systems but a large number of small private practice groups.

Dr. Farah: New physicians graduating out of fellowship and joining the different practice pathways or looking for a change in path or location.

Dr. Nicolacakis: Those who are established in their practices (solo or group) will be greatly affected by hospital integration. The adjustment to becoming an employed physician in a large integrated system can be a tremendous adjustment for these ATS members in mid-career and later. Loss of autonomy of multiple aspects of practice as well as learning a complex EHR, are only a few examples of potential sources of physician frustration and stress.

What are the possible benefits of integration?

Dr. Farah: The concept of integration means getting hospitals, physicians, nurses, and community care givers to collaborate more effectively and flexibly. I do think that integration will help us provide better quality care for our patients at lower cost as long as the financial goal is kept within limits.

Dr. Nicolacakis: I agree that an integrated delivery system optimally executed has the opportunity to deliver high quality and efficient medical care. Other potential benefits include coordination of care across all levels (inpatient and outpatient) with smooth transitions throughout the system. This has the potential to not only improve quality, but also reduce costs. It is also easier to implement high standards of care as well as evidence-based medicine in an integrated system. Integrated systems will also be better poised to participate and implement all the regulatory and reporting requirements that are part of the Affordable Care Act.

Dr. Manaker: From a societal perspective, lower medical spending for improved outcomes equals greater value. From a hospital/health system perspective, integration means greater control over patient flows and demand for health services and greater ability to influence quality measures and outcomes. From a physician perspective, the benefit can be economic survival.

What are the possible risks from or problems with integration?

Dr. Nicolacakis: There are multiple challenges for physicians facing hospital integration. There is risk of reduced compensation as well as loss of autonomy. Physicians traditionally have not been trained in a “team-based” approach to medical practice. True clinical integration requires cooperation and collaboration from providers, nurses, etc. and the hospital. Physician groups and practices need to be involved in the development of multiple hospital systems. This would include optimization of the EHR, development of evidence-based clinical pathways as well as optimal documentation, and coding and billing practices. Without such involvement, there is also a risk of having unengaged physicians with potential high turnover and loss of job satisfaction.

Dr. Manaker: A physician may feel a loss of independence and potentially experience a loss of income, though again, the benefit would be survival rather than having to close a practice and relocate in response to prevailing market conditions.

Dr. Farah: This will create instability in decision making that will be amplified by the declining reimbursement and the hospital cost-containing efforts. Risk-sharing models (ie. third-party payers) may not be in the best interest of the physician or the individual practices. The system and administration may be very inviting and proactive at the time of the initial interview only to add many restrictions and expectations after signing the contract and relocation.

What is the best advice you would provide to physicians going through integration?

Dr. Manaker: Be sure you fully understand your contract, including your performance measures, incentive compensation, non-compete clauses, and reporting relationships.

Dr. Nicolacakis: Consider all the possible options of integration that are available in your geographic area even non-employment integration models. Align with hospitals that have physician leadership as part of the administration, if possible.

Dr. Farah: Make sure your values and practice goals align with the hospital system, and explore the language in the contract carefully. Ask for clarification on terminology like “pay per performance” or “meeting quality metrics and meaningful use.” Evaluate the providers-to-patients ratio and the number of procedures performed. Some hospital systems tend to over hire to make sure they have enough staff to cover the service, which may result in financial cuts to the provider once his contract guarantee is over. High turnover is a red flag. And be sure to confirm that the physician leadership members have clinical responsibilities in addition to their administrative duties.


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