Do Employed Physicians Deliver Better Care?
You undoubtedly know that health care is expensive, but unless you are directly involved, you may not have noticed significant changes in the business are taking place below the surface. In the past, physicians ran their own, typically small practices and admitted and care for patients at the local hospital. This “cottage-industry” model of practice has largely disappeared as physicians aggregate into larger groups, often choosing direct employment by the hospital. You may well ask why would physicians, who are typically well-paid, give up their freedom to become cogs in a larger organization? The answer is the steady, exponential increase in government regulation in the name of improving quality of care.
Not only are small practices subject to the regulations any small business must face, they are also being required to adopt expensive, cumbersome medical record-keeping systems and face financial penalties if they do not report various statistical data to the government on an annual basis. All of these costs flow directly to the bottom line in a small practice, thereby directly reducing the physician’s income. At first, doctors responded by increasing their volume of business, but most now have reached their personal limits and find themselves in the untenable position of working harder, enjoying it less, and getting paid less. In response to this dilemma, more and more are choosing to seek employment from the hospital.
Hospitals, too, have been under regulatory pressure. It has been nearly thirty years since the government started “prospective payment” to hospitals, which really means they have fixed the amount they will pay for Medicare beneficiaries. Medicaid programs have followed suit. Since the government pays for about two-thirds of all inpatient care, this has had a drastic effect on hospitals. Now, though, private insurance plans, worried about being able to sell their products, have been using similar methods to reduce the amount they pay, even though most are still on some sort of “fee for service” arrangement. Hospitals have responded to these economic pressures by trying to keep the volume of care delivered high—keeping the beds full. As a result, they have been interested in employing physicians to ensure they will keep admitting patients to the hospital.
CMS, realizing this drive to volume raises the amount of taxpayer dollars they must spend, has decided to move more than half the payments over the next couple of years to what they call “value-based purchasing.” They have also been publishing hospital-level quality data, particularly risk-adjusted mortality, 30 day readmission rates, length of stay and patient satisfaction scores. There is a long story behind each of these measures and space does not permit getting into them. Suffice it to say, all of these represent responses to what CMS believes are opportunities for providers to game the system to increase revenue without providing more, or better care to the beneficiary patient.
Policy makers have noted the increasing trend to direct employment of physicians, but there are few studies about whether this is good or bad for patients. On September 20th, Scott and associates published online a study trying to get at this question. [Scott KW, et. al., Changes in Hospital-Physician Affiliation in U. S. Hospitals and Their Effect on Quality of Care. Ann Intern Med 20 Sep 2016. doi.10.7326/IM16-0125.] In 2003, 29% of hospitals reported directly employing physicians, which had increased to 42% in 2012. Hospitals engaging in direct employment tended to be larger and not for profit. Looking at the four measures of care quality noted previously, there was no difference. But is that surprising?
Direct employment is often said to be part of an effort to create an integrated system and overcome the barriers and competing interests that characterize the previous arrangement. The benefits of improved quality of care are often featured as part of this arrangement, which also helps qualify deals for protection from anti-trust actions. (Integrated care is the new buzzword for the holy grail of a system that reliably provides the right care for the right patient at the right time at the right place and at the right price.) So far, physician employment has not had any impact on quality of care.
This study may be good news. Hospitals have found direct employment to be an enormous financial drain, so there is enormous pressure to improve efficiency. There is pressure to improve patient satisfaction, to avoid penalties, but saving current dollars always takes precedence over reducing future losses. The study results show that for the moment direct employment has not had a negative impact, either.
I think it is possible to develop an integrated model of care that is good for everybody—providers, patients, and payers, but it is very hard work and requires an enormous change in attitudes, direction, and structure. Worse, it requires investing huge sums of money with no guarantee of a return on the investment. Given this reality, I think most of the move toward direct employment has been a defensive reaction by both physicians and hospitals in response to adverse long-term financial trends, not a desire to change the way care is delivered. If we are serious about wanting to develop such systems, we need to find a way to encourage and enable change in the desired direction. Presently, most people are changing only to avoid the fate of the last duckling to get back on the ship.
Lucius F. Wright, M. D.
You undoubtedly know that health care is expensive, but unless you are directly involved, you may not have noticed significant changes in the business are taking place below the surface. In the past, physicians ran their own, typically small practices and admitted and care for patients at the local hospital. This “cottage-industry” model of practice has largely disappeared as physicians aggregate into larger groups, often choosing direct employment by the hospital. You may well ask why would physicians, who are typically well-paid, give up their freedom to become cogs in a larger organization? The answer is the steady, exponential increase in government regulation in the name of improving quality of care.
Not only are small practices subject to the regulations any small business must face, they are also being required to adopt expensive, cumbersome medical record-keeping systems and face financial penalties if they do not report various statistical data to the government on an annual basis. All of these costs flow directly to the bottom line in a small practice, thereby directly reducing the physician’s income. At first, doctors responded by increasing their volume of business, but most now have reached their personal limits and find themselves in the untenable position of working harder, enjoying it less, and getting paid less. In response to this dilemma, more and more are choosing to seek employment from the hospital.
Hospitals, too, have been under regulatory pressure. It has been nearly thirty years since the government started “prospective payment” to hospitals, which really means they have fixed the amount they will pay for Medicare beneficiaries. Medicaid programs have followed suit. Since the government pays for about two-thirds of all inpatient care, this has had a drastic effect on hospitals. Now, though, private insurance plans, worried about being able to sell their products, have been using similar methods to reduce the amount they pay, even though most are still on some sort of “fee for service” arrangement. Hospitals have responded to these economic pressures by trying to keep the volume of care delivered high—keeping the beds full. As a result, they have been interested in employing physicians to ensure they will keep admitting patients to the hospital.
CMS, realizing this drive to volume raises the amount of taxpayer dollars they must spend, has decided to move more than half the payments over the next couple of years to what they call “value-based purchasing.” They have also been publishing hospital-level quality data, particularly risk-adjusted mortality, 30 day readmission rates, length of stay and patient satisfaction scores. There is a long story behind each of these measures and space does not permit getting into them. Suffice it to say, all of these represent responses to what CMS believes are opportunities for providers to game the system to increase revenue without providing more, or better care to the beneficiary patient.
Policy makers have noted the increasing trend to direct employment of physicians, but there are few studies about whether this is good or bad for patients. On September 20th, Scott and associates published online a study trying to get at this question. [Scott KW, et. al., Changes in Hospital-Physician Affiliation in U. S. Hospitals and Their Effect on Quality of Care. Ann Intern Med 20 Sep 2016. doi.10.7326/IM16-0125.] In 2003, 29% of hospitals reported directly employing physicians, which had increased to 42% in 2012. Hospitals engaging in direct employment tended to be larger and not for profit. Looking at the four measures of care quality noted previously, there was no difference. But is that surprising?
Direct employment is often said to be part of an effort to create an integrated system and overcome the barriers and competing interests that characterize the previous arrangement. The benefits of improved quality of care are often featured as part of this arrangement, which also helps qualify deals for protection from anti-trust actions. (Integrated care is the new buzzword for the holy grail of a system that reliably provides the right care for the right patient at the right time at the right place and at the right price.) So far, physician employment has not had any impact on quality of care.
This study may be good news. Hospitals have found direct employment to be an enormous financial drain, so there is enormous pressure to improve efficiency. There is pressure to improve patient satisfaction, to avoid penalties, but saving current dollars always takes precedence over reducing future losses. The study results show that for the moment direct employment has not had a negative impact, either.
I think it is possible to develop an integrated model of care that is good for everybody—providers, patients, and payers, but it is very hard work and requires an enormous change in attitudes, direction, and structure. Worse, it requires investing huge sums of money with no guarantee of a return on the investment. Given this reality, I think most of the move toward direct employment has been a defensive reaction by both physicians and hospitals in response to adverse long-term financial trends, not a desire to change the way care is delivered. If we are serious about wanting to develop such systems, we need to find a way to encourage and enable change in the desired direction. Presently, most people are changing only to avoid the fate of the last duckling to get back on the ship.
Lucius F. Wright, M. D.