Partnerships between Physicians and Hospitals

Orlando—President Barack Obama enacted the Patient Protection and Affordable Care Act (ACA) to improve the value of healthcare, with an emphasis on increasing the access of care, decreasing the cost escalation, and implementing quality measures.

To help achieve those goals, physicians and hospitals must work together, according to Robert Lancey, MD, MBA, chief of cardiac surgery and codirector of the Heart Institute at the Bassett Heart Care Institute in Cooperstown, New York. Drawing upon his role as a provider and business executive, Dr. Lancey suggested that the collaboration could benefit both physicians and hospitals as well as patients during a session at the NAMCP meeting titled Physician–Hospital Partnerships: The Rules of Engagement. Dr. Lancey admitted that “patient care can be very frustrating” and that “things are very complex in medicine.” He said it is important for providers to understand healthcare is a business and not simply a social service. Dr. Lancey cited findings from a 2006 study from the Organization for Economic Co-operation and Development that the United States spent more money on healthcare per capita than other developed nations. The costs included outpatient care, technological advances, salaries, and prescriptions. The research found that wealthier nations spend more money on healthcare, but spending in the United States far exceeds the expected level.

Physicians play a major role in the healthcare system, controlling 85% of the costs associated with personal health spending, according to Dr. Lancey. Their salaries, on-call pay, equipment used, tests ordered, procedures performed, and value-based reimbursement all are costly to hospitals. “Docs control the costs in healthcare, plain and simple,” Dr. Lancey said. “Docs control the quality, and docs control the costs.” As part of the ACA, there will be several initiatives designed at limiting the costs such as global capitation, bundled payments, integrated care models such as accountable care organizations, value-based purchasing, and comparative effectiveness research. Dr. Lancey said providers will receive incentives based on meeting quality benchmarks as well as collaborating with each other. A similar engagement occurred in the 1990s, when physician practices consolidated, and managed care was popular. However, the initiative “to some extent fell flat on its face,” according to Dr. Lancey, for several reasons: the practices were overvalued (leading to losses of >$100,000 per physician); the reimbursement structures did not compensate based on productivity; there was too much of an emphasis on economic factors instead of providing better care; hospitals did not have much experience managing physicians; and doctors were not consulted to offer any strategic advice.

The recent collaboration between physicians and hospitals can be effective, according to Dr. Lancey, because physicians can benefit from the hospitals’ facilities and reputations while hospitals can gain an advantage by controlling the costs of physicians and utilizing on-call coverage. Dr. Lancey discussed a New England Journal of Medicine article that appeared online on March 30, 2011, which noted 50% of physicians were employed by hospitals or integrated delivery systems. In addition, although hospitals lose $150,000 to $200,000 per year in the first 3 years of employing a physician, 74% of hospitals said they planned on increasing physician expenses in the next 24 to 36 months. Dr. Lancey said physicians focus on 3 goals: delivering care to improve patient outcomes, wasting minimal time, and generating stable incomes. Recent trends, though, suggest physicians are facing challenges. It costs more to run their practices because of increases such as legislative and regulatory scrutiny, more expensive medical supplies, and higher malpractice premiums. From 1991 to 2005, overhead expenses in physicians’ offices increased from 55% to 60%, according to Dr. Lancey. In addition, physicians’ incomes fell 7% from 1995 to 2003, and increases in expenses outpaced increases in reimbursement by a 2 to 1 ratio.

Rather than having physicians deal with administrative duties and other tasks, Dr. Lancey said hospital executives should allow them to spend most of their time on caring for patients. He cited a Press Ganey Associates’ 2008 Hospital Check-Up Report that indicated physicians’ satisfaction correlated with high scores on the Hospital Care Quality Information from the Consumer Perspective survey. “Satisfied docs deliver better care,” Dr. Lancey said. The findings showed that physicians were most concerned with the responsiveness of hospital administrators to their ideas and needs. Next, they were interested in how well the facility allows them to care for patients, followed by how the hospital adapts to the changing healthcare environment, how much physicians can trust and have confidence in the administrators to carry out their duties, and how well the administrators communicate with physicians. In the coming years, Dr. Lancey expects a cultural shift in the physician population. He said >75% of physicians are males, but 40% of physicians born after 1965 are females. According to Dr. Lancey, approximately 75% of young physicians say having family and personal time is important, whereas 33% of doctors <50 years of age do not want to work longer hours for more money. To measure physicians’ performance, Dr. Lancey said hospitals should implement report cards that incorporate meaningful, relevant, reliable, and timely data. The reports would provide financial and quality incentives and compare physicians’ performances within their departments and versus national benchmarks. Dr. Lancey emphasized hospital administrators should communicate with physicians, so they can agree on appropriate measures and understand how they will be evaluated.