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Hospital-Physician Rift Leads To “Medical Arms Race” And Endangers Emergency Care, Berenson Says In Health Affairs Web Exclusive

Fisher Advocates Making Extended Hospital Medical Staffs Accountable, While Wilensky Proposes Increased Hospital-Physician Gain Sharing As Transitional Strategy

Bethesda, MD -- Deteriorating relations between hospitals and physicians are imperiling a wide range of health care objectives, researchers from the Center for Studying Health System Change (HSC) report in a Health Affairs Web Exclusive published today.

One consequence of the unraveling hospital-physician relationship is a “medical arms race,” as services once performed only in hospitals migrate to physician-owned specialty hospitals, free-standing ambulatory surgery centers, and physicians’ offices. But the estrangement between hospitals and physicians is also impeding the adoption of information technology (IT), the implementation of pay-for-performance programs, and care for the uninsured.

As one hospital executive told HSC researchers: “Doctors used to feel that in return for having the hospital as a place to care for their patients and earn income, they should contribute to the hospital, taking ED call, participating on committees, improving quality. Now they say to the hospital, screw you. . . . Many don’t even come to the hospital any more.”

The HSC paper is one of the lead articles in a six-article Health Affairs package on the interaction between physicians and hospitals. Two other lead articles offer different approaches to aligning incentives for physicians and hospitals more closely. Dartmouth Medical School professor Elliott Fisher and coauthors propose making “extended hospital medical staffs” accountable for quality and cost. Gail Wilensky, the John M. Olin Senior Fellow at Project HOPE, and coauthors advocate the use of comprehensive gain-sharing arrangements, where hospitals and physicians share savings generated by more efficient care delivery, as a way to transition to a future of integrated delivery systems.

Robert Berenson, a senior HSC consulting researcher and senior fellow at the Urban Institute, and his coauthors report results from Round Five of HSC’s Community Tracking Study (CTS) site visits, conducted from January through June 2005 and funded by the Robert Wood Johnson Foundation. Every two to three years, HSC examines changes in the financing, organization, and delivery of health care by visiting the same twelve nationally representative communities: Boston; Cleveland; Greenville, SC; Indianapolis; Lansing; Little Rock; Miami; northern New Jersey; Orange County, CA; Phoenix; Seattle; and Syracuse.

In Round Five, 46 percent of hospital and health system CEOs identified various aspects of relations with physicians as among the top three pressures facing their hospitals. Twenty-one percent cited competition with physicians over services, and 11 percent cited problems assuring on-call physician emergency department (ED) coverage. In contrast, in Round Three, conducted in 2000-01, only 15 percent of hospital CEOs said that physician issues were among the top three pressures they faced; 11 percent specifically cited competition with physicians over services, and no one identified ED coverage as a major pressure.

“Competition between physician-owned specialty hospitals and community hospitals gets most of the national media attention,” said Berenson. “But more widespread competition is actually happening over services, such as many advanced imaging procedures, that once could only be performed in hospitals but now can be safely done either in specialized ambulatory facilities or in physicians’ offices.”

Hospital respondents in nine of the twelve CTS communities reported that difficulty with physician ED coverage was a significant issue. In these communities, most hospitals have reluctantly started paying physicians for taking ED call or have guaranteed payment for services rendered to uninsured patients, or both. The costs involved are still small, but hospitals worry that the precedent of paying physicians for ED coverage could lead to mushrooming costs down the road. For example, hospitals in Miami and Syracuse reported that physicians in specialties or at hospitals where ED coverage is not a problem have become aware that other physicians are being compensated for taking call and are starting to demand on-call payment as well.

The split between hospitals and physicians also threatens efforts to make hospital care safer and more cost-effective through IT, pay-for-performance, and other mechanisms. “To use these tools effectively, hospitals must work with committed physicians who feel like they have a stake in the hospital enterprise. These days, though, physicians who fit that bill are in increasingly short supply,” Berenson said.

The HSC authors point to several policies that they say have contributed to the unraveling of the hospital-physician relationship. One example: restrictions on gain sharing between physicians and hospitals. “For example, hospitals are precluded from offering financial incentives to physicians to work to reduce hospital costs, such as agreement on selecting an agreed-upon set of implants used in orthopedic surgery,” say Berenson and his coauthors, HSC president Paul Ginsburg and Jessica May, a former HSC health research analyst and current Princeton graduate student.

Fisher: Focus Accountability For Costs And Quality
On Extended Hospital Medical Staffs

Elliott Fisher and coauthors advocate combating the hospital-physician rift by focusing accountability for performance and resource allocation on the “extended hospital medical staff.”

“Virtually all physicians are either directly or indirectly affiliated with a local acute care hospital, whether through their own inpatient work or through the care patterns of the patients they serve,” the authors write. And “because most patients receive their care within the context of a local delivery system comprising physicians and the hospital where they work, the hospital and its extended medical staff provide a natural organizational setting within which to improve the overall experience of care.”

Using claims data from 2002-04 and utilization data from 2003, Fisher and his colleagues assigned physicians to hospitals using two different methods. For the approximately 60 percent of physicians billing Medicare who do inpatient work, they assigned each physician to the hospital where he or she treated the most patients. Physicians who did no inpatient work in the 2002-04 period were assigned to the hospital where a plurality of the patients they treated were admitted.

This method produced stable groupings. “For physicians who do any inpatient work, 90 percent or more of their inpatient work is at their primary hospital. Among the 38 percent of physicians who don’t do any inpatient work, more than half of their patients’ admissions occur at the hospital to which the physicians were assigned,” the authors report. “Most importantly,” they note, “Medicare beneficiaries’ care is highly concentrated within these empirically defined delivery systems. On average, 72.7 percent of beneficiaries’ physician visits for evaluation and management (E&M) services (inpatient and outpatient) are to physicians within their assigned extended hospital medical staff, and an average of 63.5 percent of all admissions are provided by the primary hospital.”

The authors cite several advantages to using the extended hospital medical staff as locus of accountability for both quality and cost. They note, for example, that the Institute of Medicine has called for “the development of measures that focus on the longitudinal experience of Medicare beneficiaries (including measures of total costs and health outcomes), as well as measures that directly address the current fragmentation of care. Aggregating performance measurement to the level of large physician groups is the only approach, we believe, to achieving this dual objective. Large multispecialty physician groups could play this role, but they remain few and far between; in contrast, all physicians (and all Medicare beneficiaries) can now be assigned to an extended hospital medical staff.”

According to Fisher and his colleagues, the most important reason to focus on extended hospital medical staffs “is to establish accountability for local decisions about capacity. Higher spending across U.S. health systems is largely attributable to greater use of discretionary ‘supply-sensitive’ services,” they note. “Local decisions that influence capacity (capital investments, recruitment, and physicians’ choices about practice location), therefore, are likely to be the first step in the causal chain leading . . . to the overuse of supply-sensitive services. Comprehensive measures of longitudinal quality and costs at the hospital staff level would bring the impact of such decisions to light.”

For the most part, Fisher and coauthors acknowledge, extended hospital medical staffs are still only “virtual” organizations. However, “because it is feasible to define the extended hospital medical staff and the patients they serve using readily available administrative databases, the implementation of performance measurement [and public reporting] at this level could begin nationwide in relatively short order.” In addition, “reform of the payment system to reward improved performance at the level of the hospital and its medical staff is already the focus of current and planned Medicare demonstration programs.”

Finally, “the pressure of year-after-year growth in the volume of physician services has led Congress to ask the Medicare Payment Advisory Commission (MedPAC) to explore the hospital medical staff of one of several alternatives to the current nationwide pool used for the Sustainable Growth Rate formula. Any move to link future fee increases to the growth in volume of services delivered by individual hospital medical staffs would provide a powerful stimulus for the development of more coherent medical staff organizations.”

Dartmouth’s Fisher also teaches at the Center for Evaluative Clinical Services (CECS) and is a senior associate in the Veterans Affairs Outcomes Group, White River Junction VA Hospital. Coauthor Douglas Staiger is a professor of economics at Dartmouth, an adjunct professor at the CECS, and a research associate with the National Bureau for Economic Research. Coauthor Julie Bynum is a professor at Dartmouth Medical School, and coauthor Dan Gottleib is a senior analyst at the CECS.

Wilensky: Align Hospital And Physician Interests
Through Comprehensive Gain-Sharing Initiatives

According to Wilensky and coauthors, gain sharing between physicians and hospitals can provide a transitional strategy between our current fragmented health care system and a future of multispecialty group practices and integrated delivery systems.

“Some believe that hospital and physician networks formed by insurance companies can increase their focus on cost and quality improvement, perhaps through network competition,” Wilensky said. “Others advocate forming accountable provider units consisting of hospitals and the physicians that work in them and refer to them. But however we will ultimately get to truly integrated care, we’re not there yet, and we need a strategy to fill the gap and to move us in the right direction.”

“The concept of gain sharing took root during the time when the payment systems for hospitals and physicians became misaligned,” explain Wilensky and her coauthors. The creation of the Medicare hospital prospective payment system created “strong incentives for facilities to contain costs to be financially successful, within the flat amount received for each discharge. Conversely, Medicare generally pays physicians a separate fee for each service, which does not create any incentive for containing a physician’s outpatient costs or costs within the hospital.” In this environment, hospitals saw gain sharing as a way to realign physician incentives and respond to “physicians’ complaints that they were being asked to produce the savings but not being offered any of the gains,” according to Wilensky, Billings Clinic CEO Nicholas Wolter, and Maj. Michelle Fisher, the administrator of the Department of Surgery/Department of Anesthesia and Operative Services at the Brooke Army Medical Center.

However, the authors warn that, “if gain sharing were to have a true chance to play a role as a transitional strategy, we think that it is unlikely to be the kind of gain sharing that has occurred recently. These efforts have focused primarily on limited and narrow high-cost technology -- not without value, but too limited to address broader systemic organizational redesign, which might produce more-sustainable approaches to cost reduction and improvements in patient safety and quality.”

The authors lay out a much more far-reaching vision of gain sharing: “When we refer to ‘gain sharing,’ we mean the ability to share savings with physicians that result from the more appropriate use of imaging and testing services; or the careful and appropriate prescribing of therapeutics that use the least-costly appropriate therapy available.” Also appropriate to include in gain-sharing initiatives might be efforts to reduce medication errors; to substitute outpatient services for inpatient services; to introduce disease management techniques, and to improve end-of-life care.

Wilensky and her coauthors cite as a model a demonstration project conducted by the Centers for Medicare and Medicaid Services (then HCFA) in the early 1990s. In that demonstration, initiated when Wilensky was HCFA administrator, four selected hospitals agreed to accept a bundled payment covering Medicare Part A and Part B services for each beneficiary undergoing coronary artery bypass graft surgery. Participating hospitals and physicians were free to apportion the bundled payment in whatever fashion they agreed upon. At two hospitals, the parties chose to “align physicians’ incentives with those of the hospital by implementing gain-sharing programs, resulting in sizable reductions in costs in intensive care, laboratory, routine nursing, and pharmacy services costs.”

The authors recognize that there are several legal barriers standing in the way of the comprehensive gain-sharing initiatives they advocate, and they call for legislative action to eliminate these barriers. In the absence of legislative action, the only available avenue for new gain-sharing efforts will be a six-site Medicare demonstration project slated to run from 1 January 1 2007 through 31 December 2009. Hospitals will receive their regular Medicare reimbursements but will be allowed to pay physicians up to 25 percent of documented cost savings resulting from quality improvements.

In addition to the three lead articles, package also includes shorter Perspectives by Mayo Clinic president and CEO Denis Cortese and Mayo chief administrative officer Robert Smoldt; Health Futures Inc. president Jeff Goldsmith; and VHA vice president of research Ken Smithson and VHA executive vice president and chief operating officer Stuart Baker.

All of the lead articles and Perspectives can be found at  http://content.healthaffairs.org/cgi/content/full/hlthaff.26.1.w31/DC2



Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.


©2006 Project HOPE–The People-to-People Health Foundation, Inc.