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Articles / 2010

Common ground for doctors and hospitals: Tricky medical partnership

Ventura County Star
Monday 10/03/2010
By Tom Kisken

Like teens at a dance, private hospitals and doctors are trying to figure out new ways of asking each other to link arms.

Elbowed by the rising cost of practicing medicine, pyramids of paperwork involved in dealing with private and public insurance and federal healthcare reform, hospital leaders are experimenting with ways they can form more direct business relationships with doctors. The changes come despite a long-standing law that makes California one of five states that bans nearly all private hospitals from employing doctors in a dividing line a statewide physicians' group compares to church and state.

"When you hold the purse and you dictate how the money flows, you can absolutely exert influence," said California Medical Association CEO Dustin Corcoran, arguing direct partnerships can make it easier for decisions on medical procedures to revolve around how much they cost. "The only people who argue (the law) is obsolete are the ones that want to employ doctors."

Gary Wilde, CEO at Community Memorial Hospital in Ventura, trotted out the dance metaphor. He noted healthcare reform is built, in part, on encouraging doctors, hospitals and others to work together to eliminate redundant treatment, implement records that document all care regardless of where it is delivered and drive down prices while protecting quality of care. Starting in 2012, hospitals and doctors paired together in "accountable care organizations" could receive financial incentives from Medicare.

Exact details of how the accountable care organizations will operate haven't been announced, though efforts to form partnerships are intensifying.

"The music is starting to play and we don't know who to ask to dance," Wilde said.

Community Memorial, like many hospitals, partners with doctors through its network of clinics in an arrangement allowed by California law. But the hospital is also using something called management services organizations to align with individual and small groups of doctors.

The way it works is the doctors pay the hospital a fee—sometimes more than half their total revenue—to take care of many administrative services. In return, Community Memorial provides office space, staff and processes all the billing.It means that instead of spending 20 hours a week or more on payroll or dealing with insurance problems, Dr. Marc Beaghler can focus on urology.

"Time is a big factor," said Beaghler, recounting stories of repeated snafus in payments from Medicare. "I think it hopefully will insulate us against some of the government shenanigans."

Hospitals already routinely contract with physicians groups. Now Simi Valley Hospital is trying to hire an administrator who will focus solely on finding ways to partner with doctors and other providers. St. John's Regional Medical Center in Oxnard is talking to independent doctors and physicians groups about partnering to coordinate care.

Current law allows medical groups to form foundations that can hire doctors as long as the network meets standards that include the participation of at least 40 doctors and 10 different specialties. Networks such as Kaiser rely on the foundations but individual hospitals have trouble meeting the requirements. The Hospital Association of Southern California has helped develop a plan that will allow hospitals to together join a mass foundation.

"Instead of having one hospital have 40 physicians, 10 hospitals have 40 physicians," said Jim Lott, executive vice president of the hospital association.

If healthcare reform is one force behind the trend of collaboration, so is the desire of doctors to wriggle out from under the cost of running a private practice. Younger doctors particularly want jobs where they don't have to deal with billing and insurance providers.

"It's the complexity that's driving them here," said Dr. Steve Jones, medical director of Community Memorial Hospital's clinic network, referring to checks on a patient's eligibility, pre-authorizations and billing complications. "Gone are the days where a patient shows up at a clinic, shows an insurance card and they get treated."

Other doctors are skeptical of many hospital-doctor partnerships. They question the possibility of a hospital favoring one doctor over another or using partnerships to assure referral of patients to their facilities.

"Anytime the hospitals try to control the doctors, the doctors aren't too crazy about it," said Dr. Robert Lum, a radiation oncologist and former president of the Ventura County Medical Association. "When you're your own boss, you don't have to answer to anyone as far as how your patients are taken care of."

Corcoran said the California Medical Association has no problem with partnerships aimed at driving down the cost of medicine and improving care. But he worries some hospitals are primarily focused on protecting their market share.

He said hospitals and doctors need separation to protect a hospital's financial interests such as decisions on when patients are discharged from interfering with care.

Wilde said terms of the partnerships, and the fact that the doctor—not an administrator—is licensed to practice medicine, guarantee final decisions will be made by doctors.

"I don't see it as church and state," said Laurie Eberst, CEO of St. John's Regional Medical Center in Oxnard. "I see it in the future as all about aligning together with the goal of providing the best care for the patients."

Corcoran said widespread partnerships between doctors and patients could translate into less competition between providers. That could bring higher prices, he said.

"If there's absolutely no diversity in the marketplace, you've got to go to the only game in town," he said.

Lott said the trend isn't driven by greed but by reform that not only encourages integrated care but brings pilot programs of bundled payments, meaning hospitals and doctors will be paid a lump sum. He noted that public hospitals are already able to hire doctors in California. So are academic hospitals. And 45 states already allow hospitals more freedom in hiring doctors.

"I've listened to them for 20 years and it makes no sense to me," he said of defenders of California's law. "The way healthcare is evolving in this country, it's only a matter of time before the antiquated restrictions we have in California give way. I give it five to 10 years and it's over with."

Some observers say the current law could complicate the development of accountable care organizations. Many argue the law should be loosened so that more hospitals can fight growing physician shortages. Even Corcoran says he favors allowing rural hospitals the ability to hire at least some doctors.

If the trend for doctors to partner with hospitals and large medical groups builds, it could mean less businesses like Dr. Jim Hornstein's. He's a family doctor in Ventura who has operated his own solo practice for 23 years.

He thinks one-doctor medical offices can help patients develop trusting relationships with their doctors. He thinks changes in treatment can sometimes be implemented quicker than in large groups.

An advocate of reform, Hornstein thinks the new changes will dramatically change practices but says it's too soon to pinpoint the effect on small medical offices. He hopes patients continue to have choices.

"I think all physicians would be wise to say the times are a-changing and let's see where this goes," he said.