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Simone's OncOpinion: The New Relationships of Community Hospitals and Doctors

Simone, Joseph V. MD

doi: 10.1097/01.COT.0000423800.10992.92


The world of medicine has changed dramatically in the past five years. Health care reform in all its variations is now widely accepted as a fait accompli, and because of the unsustainable cost of care, changes will proceed irrespective of the Obama plan that is now the law of the land.

Today the landscape for community-based physicians has shifted due to declining reimbursement, uncertainty about the future, and the graduation of more young doctors willing to be employed at a lower income in exchange for more favorable working hours and not needing to run a business.

A study by Kocher and Sahni published in the NEJM (12 May 2011) reported the following: From 2002 to 2008, the percentage of physician-owned practices declined from about 70 to 50 percent (the decline has continued in the past four years); the percentage of hospital-owned practices increased from about 20 to 50 percent. In the same period, the percentage of primary care doctors employed by hospitals increased from about 18 to 31 percent and specialist physicians from six to 15 percent. The authors predicted that by the end of 2012, the percentage employed will be 40 percent of primary care doctors and nearly 25 percent of specialists. Also, they predict that by 2013 only 33 percent of physicians will be “truly independent” practitioners.

I have had the opportunity to observe this accelerating shift of employment status up close and personal in the course of consulting for and observing several large health systems. This shift raises many obstacles to its successful consummation and completion as a productive, collegial, and efficient transformation. The gulf between what was promised (or understood to be promised) in the deal is often at odds.

Thus, major “misunderstandings” seem to occur with some regularity. They cause feelings of betrayal and distrust and a poisonous brew that impairs doing what is best for the patient in an efficient manner. I hasten to point out that sometimes, because of inexperience or excessive optimism, either side may be misled unintentionally, but the damage is done nonetheless.

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3 Key Misunderstandings

Here are some key statements that can lead to misunderstandings.

1. “You can continue to practice as before.” To the uninvolved observer, this promise is absurd on its surface. But I was surprised to find how often this was the physicians' understanding and belief. But they are no longer free agents since they are employed by the hospital system and thereby must abide by all the rules of the institution, the regulatory and review agencies, and the law governing physician-hospital relationships. And as hospital employees they are expected to attend meetings of hospital committees and other hospital business that require physician participation.

Many of the now-employed physicians expect to be paid for these non-practice activities and since they earn money only by seeing patients, their income may suffer. Hospitals may compensate physicians who serve in a variety of “medical director” positions, but these are few in number and the pay is meager compared with what they can make seeing patients.

In some cases the hospital system has purchased not only the practices, but also all of their tangible assets, such as offices and equipment or taken responsibility for leases and such. So “technical” income from office laboratories, imaging, or chemotherapy administration now belongs to the hospital.

To be sure, the legal agreements usually include additional, “make whole” compensation for employed practitioner. But the latter's income will in time boil down to contemporary productivity by RVUs or some other method, not historical issues.

Development of multidisciplinary clinics threatens many employed medical oncologists because they are almost all generalists by necessity and choice. So if a new hot-shot lung cancer expert is hired to start a multi-d clinic, and if multi-d clinics expand to include the major cancers, where does that leave the generalist oncologist who cannot spend the time needed to participate because of his crowded office hours and travel to clinics that often take place in distant hospital-owned sites?

Physicians considering employment by a hospital must understand their loss of degrees of freedom. If they can bend a bit, they will probably be better off in the long run because of health care reform. But it will be a major change.

2. “Doctors will participate in management.” One must understand the management structure of large, successful, multi-hospital health systems when considering employment with one. Large hospital systems have developed structures and formulas dealing largely with a voluntary staff of physicians. This is the traditional model for community hospitals. Most have little or no experience with employed physicians except, in some cases, hospital-based physicians such as radiologists and pathologists. But an influx of several hundred oncologists, surgeons, cardiovascular physicians, and primary care physicians is a new experience.

Such institutions are accustomed to appointing a medical director or chief medical officer for each hospital. These physicians deal with training programs, regulatory affairs, problem physicians, relationships with nursing staff, etc., and they attend many, many committee meetings. However, they often have little power. The reason for this is that lay administrators make up an almost military system of management. They may be experienced and talented, but few if any are physicians.

In my early years when I used to moonlight in a community hospital while in med school, the administrators viewed physicians as persons they must tolerate out of necessity. Doctors were often viewed as prima donnas and a genuine pain in the butt. And furthermore, they couldn't manage their way out of a paper bag when it came to hospital issues. So they never were allowed to make any hospital-wide decisions (this attitude was justified in many cases).

This attitude of tolerance by necessity continues to this day in a slightly more benign form. Hospital administrators work their way up the ladder by managing the laundry, then the parking facility, and then the labs, and so on. They are expected to know what goes on and anticipate problems. Doctors traditionally have been concerned only with their own practices and had no interest in the details of management of hospital affairs. Few doctors have taken the time to become knowledgeable and proficient in such affairs.

Now that Accountable Care requires the physicians to be integrated into the hospital system of costs and responsibilities, few are prepared to participate. And if they do, they want to be paid for the time beyond their normal practice income. You can see where the problem lies. A successful hospital system will need time to develop physicians who are competent to manage significant aspects of hospital affairs and to have earned the trust of professional hospital administrators. Expecting it on day one is unreasonable.

3. “We all want what is best for the patient, so this relationship will work.” The problem here is the clash of cultures. One of the most difficult things to change or even modify is the culture of an organization, any organization—whether a large health system or a two-person medical oncology practice.

The culture consists of many things that are almost invisible and taken for granted; it is a basic way of doing things. It often leads to an attitude of, “We have always done it this way, so why change?” Or one may hear, “If we make that change, we will offend the guy who has been doing this job for years.” A final example is, “That change will cost me clinic time and my income will go down.”

The second-tier hospital administrators are also trying to build their careers. When they joined, the path was clear and they worked their way up with the assumption that the ladder would be the same as it had been. Hiring many doctors and developing more advanced programs, like multi-d clinics, can step on their toes because such efforts often require people from different silos with different bosses.

This is exemplified by some hospital systems creating a medical practice group as a home for all the employed physicians. That is reasonable, but what if the CEO and the number two administrator of that organization are not physicians? With the ACA on the horizon, what if it is decided to develop a coordinated cardiovascular or oncology program with clinical trials and multi-d clinics? Who will recruit the people with some academic experience and/or the ability to develop those activities?

The administrators who head these medical groups are quite good at recruiting practicing physicians, but have no experience in finding or evaluating physicians who can lead and build programs. This can result in lost opportunity, frustration, and tapping the brakes too frequently, preventing timely progress.

Back in the '90s, hospitals bought practices in an attempt to control patient referrals. That failed when hospitals overestimated the increase in referrals and they were left with a batch of underemployed and underproductive physicians. They have learned from that experience and now the incentive is different—to compete for global payments by disease episode, physicians must be weaved into the fabric of the organization to ensure efficiency, high quality, and profit.

The obstacles noted above make it clear that this transition will not be a walk in the park. And by the way, some of these same obstacles arise in academic medical centers; misunderstanding leading to distrust and bitterness are not infrequent there as well.

© 2012 Lippincott Williams & Wilkins, Inc.
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