Changes in Hospital–Physician Affiliations in U.S. Hospitals and Their Effect on Quality of Care

I am an internist in a small private group, founded in our community over 30 years ago. Our practice is soon to become employed by the local hospital. The reason for such a paradigm shift is due largely to financial concerns, including rising overhead, diminishing insurance payments, radically expanding documentation requirements and associated costs of EMRs, etc. It is my firm belief that private practices are a dying breed, unless a complete overhaul of physician compensation is undertaken on a national level. Whether or not a change is possible or even implementable remains to be seen. Furthermore, it seems that the implication(s), whether intended or otherwise, of national guarantor policies may inculcate a health care workforce which is either supported by a single payer, or resigned to fight a losing battle in the open marketplace.

I read the article “Changes in Hospital-Physician Affiliations in the U.S. Hospitals and Their Effect on Quality of Care” by Scott, et. al., in the 3 January 2017 Annals with interest. Their findings are not particularly surprising. Employment by hospital systems alone does not necessarily effect the quality-of-care provided. This is in part based on a false assumption stated in their first paragraph. Namely that hospital-employed physicians are “…less likely to focus on generating revenue to maintain an independent practice and more likely to focus on patient care.” This would seem to assume that these employment arrangements are salary-based rather than productivity-based. In general, physician employment agreements with hospitals remain largely productivity based (encounters, work RVUs, etc.). Based on our group’s participation in a large national survey of large affiliated groups, about 90% of physician compensation remains productivity-based while 10% is value-based (patient satisfaction, citizenship, quality metrics).

To date, the primary driver for hospital systems to employ physicians is to ensure they have a more stable revenue stream. The clear majority of those physicians coming out of training are not looking for positions in private practice with all its intendent business hassles. This means that those who have embraced private practice cannot easily recruit and retain physicians. At the same time, many physicians in private practice are finding the business and regulatory burdens of private practice no longer tenable and are looking for hospital system-affiliated employment opportunities. So, it seems for hospital systems, physician employment is primarily a matter of financial survival. While the pursuit of quality is noble, it is not the primary driver of the affiliation changes described in the article.

In my experience, the pursuit of improved quality-of-care is not magic. It does not arise spontaneously out of an employment agreement. What is required is time and attention, usually from a team of individuals, who can understand processes and work flows and preform gap analyses, and who can use a variety of tools inherent to process improvement. In general, if you want to have physicians participate in this process, you need to offset reduction in income based on lower productivity with a stipend that covers their lost opportunity. As noted by the authors in the discussion, “For example, by employing physicians, hospitals can more closely direct their activities and drive changes in care.” With largely productivity-based employment agreements, for that to happen hospital systems must be willing to separately reimburse physicians for those activities.

From October, 2008 until August, 2016 I functioned in a position akin to Chief Medical Information Officer at a mid-sized rural hospital. We were rapidly acquiring practices during that time period, in large part due to the increasing administrative burden of private practice and the economics of rural practice in Central Maine. I had significant responsibility for integrating practices into our electronic medical record (EMR), and for enhancing function of our electronic medical record. We used our EMR as a means of driving and standardizing care for our employed physicians. Thus, I was in a position to observe the evolution of behavior as our private practice physicians became employed.
Generally, it took a minimum of 4 to 6 months for a practice and its physicians to become acclimated to our EMR. We usually did implementation in stages (retrieval of data, orders/prescriptions, and documentation) to minimize impact on productivity and to reduce the trauma of the transition. At that point, we would start holding practices and individuals accountable for adhering to the standards and expectations set previously and enforced for our employed doctors. This too was introduced gradually, and it was really only after a year of employment that a newly employed physician could be considered to be fully integrated into our system. This timeline applied to other aspects of performance and integration, not just function within the EMR.
The process of ending one’s private practice is painful; I went through it before moving to the world of medical IT. There is a sense of failure in needing to give up something that you have built. There is a natural resistance to being told what to do after setting your own rules for the last 20 odd years. There is a chafing under what might seem to be mindless bureaucracy (sometimes it is, but often it’s the difference between running a small office and a big medical center). There is the shock and disruption of simply needing to do things differently after doing it your own way. Physicians changing status from private to employed are NOT the same as “new hires.” They are older, set in their ways, and the transition is not always comfortable. These are folks NOT working at their peak efficiency or job satisfaction.
Finally, implementation of a protocol or standardization of a process is sometimes time consuming, disruptive, and initially met with resistance.
Thus, I would argue that two years is too short a time period to judge success or failure. My gut tells me that the benefits of the employment for quality of care outweigh the negatives. There is more accountability, more expert knowledge available in a large organization, and more resources with which to make things happen. The authors are to be commended for trying to assess impact in an objective fashion. However, two years may be a rush to judgement.

We appreciate the insightful responses to our study [1]. We agree with Dr. Bedsole that indeed, as others have found, financial motivations often underlie the real reasons for hospitals acquiring physician practices [2]. We agree that there are substantial and growing challenges to the private practice of medicine, and it is uncertain whether this form of practice will be sustainable in the long run.

Dr. Ertle’s reflection points out the important nuance that an employment model does not mean that physicians are not compensated based on financial productivity. Our point in the introduction was that hospitals can use these arrangements to drive quality but the evidence suggests that they are not, on average, doing so. It is also a reminder of the great variability in what “employment” may mean across different hospitals and settings.

Finally, we are grateful for Dr. Ringel’s comments about the difficulty of making this transition work and the timeline examined in the study. His personal account of guiding the transition of previously private physicians to a hospital-employment model provides valuable insight into the dramatic changes that are underway to promote such acquisitions and that such changes do indeed take time. While we agree that it may take many years, our findings suggest that at least two full years after the transition, there have been no meaningful gains in quality. Whether a longer post-transition period will yield better results is unclear but it does suggest that policymakers should not look to hospital acquisition of physician practices as a quick fix that will lead to better care within a few years.

REFERENCES

[1] Scott KW, Orav EJ, Cutler DM, Jha AK. Changes in Hospital–Physician Affiliations in U.S. Hospitals and Their Effect on Quality of Care. Ann Intern Med. 2017;166:1-8. doi: 10.7326/M16-0125
[2] Baker LC, Bundorf MK, Kessler DP. Vertical Integration: Hospital Ownership of Physician Practices is Associated with Higher Prices and Spending. Health Aff May 2014 33:5756-763; doi:10.1377/hlthaff.2013.1279