Money and Medicine, Part 2
Money has fueled growth of the “medical-industrial complex” causing changes in the practice of medicine for physicians, but also affecting hospitals. One common strategy hospitals have used to increase the odds of financial survival has been direct employment of physicians. Currently, more than 25% of US physicians are in groups directly employed by hospitals and 7% are hired directly as individuals. But according to the Medical Group Management Association, hospital-owned multispecialty groups are losing about $196,000 per employed physician annually. Physicians seek these arrangements to preserve income by shifting overhead burdens to the hospital, but why do hospitals persist when the results have been dismal?
In rural areas retirement of independent physicians has forced hospitals to hire in order to keep medical staff in their economically challenged facilities. But other hospitals have had a variety of reasons.
“Many health systems have gotten into trouble because their strategic rational for hiring physicians became a moving target. A hospital system we follow morphed from a “grab market share” strategy, to a “respond to competitive acquisitions” strategy to a “bailout” strategy for loyal independent physicians to a “increase bargaining power with payers” strategy to a “position for value based care” strategy over a period of eight years. By the time it was done, it was the proud owner of a 700-plus physician group and losses of more than $100 million per year.”
The authors state the losses are partly an accounting artifact, but also reflect lack of expertise in managing the practices, which is different from managing a hospital. Not surprisingly, they are part of a consulting firm which helps organizations with such issues. However, they conclude with the following.
“Finally, hospitals and systems must understand the value they are creating not only for their employed clinical workforce, but also for the two-thirds of their physicians who are not full time employees—those who are contracted, independent physicians in CIN’s or in part-time administrative roles. What would motivate all these physicians to want to work with the organization over the long term…Beyond that, they must engage their physicians in planning and organizing care. Physicians are complex, highly trained professionals. They cannot be mere employees; they must be owners of the organization’s goals and strategies.”
So, hospitals have not found employment to be a panacea, and navigating the political minefields has proven difficult. Physicians have been unhappy because of unresponsive bureaucracy and inept handling. It should come as no surprise that these sorts of problems makes clinicians on both sides of the line unhappy, and they are quitting in droves.
In an article published today (10 June 2018) in The New York Times Robert Frank asks “Would a single-payer system require painful sacrifices from doctors? He notes one alternative to the current mess is moving to a national health system. He points out this would constrain physician income growth but points out it need not cause major reductions in current levels, so the changes would be gradual and not as painful. This is his version of the answer to the old question “How do you boil a frog?” The answer is to put it in a pot of cold water and turn the heat up gradually. The frog won’t try to hop out of the pot, which it will do if you try to put it in boiling water. However, his larger point is that improvements in practice satisfaction can offset money. He notes, for instance, that physicians willingly join groups like the Mayo Clinic for less income than the would from other groups, because they prefer the style of practice.
Which leads us back to the original article, pointing out ways hospitals need to deal with their physicians, be they employed or just affiliated, to improve their practice lives. If money were spent to reduce the documentation burden by use of scribes or better designed systems, for instance, physicians might be happier with less cash income. After all, there are only two variables—time and money—and the curves rarely intersect at a perfect spot.
As an interesting anecdote to illustrate the issues more concretely, my hospital recently tried to renegotiate its contract with a group of three specialists they employed. Negotiations did not go well with the net result that two of them opted to leave town after giving required notice. One of the departing physicians told me that he would have been more willing to accept the new contract with the pay cut it contained, if the hospital had been willing to commit to “changed working conditions.” He was not specific about what this might entail and I did not press the point either, so perhaps, in the end the result would have been the same. The hospital is hoping it can replace the departing physicians, but the number of this particular specialists is low, and it may be more difficult than they imagine. It will also take a while for the medical staff to develop confidence in the skill set of the new doctors. In the meantime, they will probably refer patients outside the system to specialists located in Memphis or Nashville. So, everyone loses—patients, doctors, and hospital.
This is not meant to be a tale about good doctors and bad administrators. I was not privy to the conversation and I am sure there are truths on both sides. Frankly, I don’t even care about right or wrong—it is how do we keep good doctors in town doing their professional best? If Mr. Frank is correct, it might have been possible to structure a deal where this overarching strategic goal was achieved. Instead it became a contest over dollars with the worst of all possible outcomes.
Money has always been part of medicine and has fueled spectacular growth in all aspects of the profession. But we are at a crisis—fighting over division of the spoils if you are cynical—with losses for all concerned. Unfortunately, I am not optimistic we can get everyone to get back to the real question—how do we do the best we can for our patients with the resources, both human and financial, at our disposal?
10 June 2018
 Goldsmith J, Hunter A, Strauss A. Do Most Hospitals Benefit from Directly Employing Physicians? HBR, 29 May 2018. Accessed same date at https://hbr.org/2018/05/do-most-hospitals-benefit-from-directly-employing-physicians.html
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