Do physicians make good employees?

There has been a clamor of legislation this past year in many states, including Texas, that would allow for the employment of physicians.

For some readers of this blog that may seem like an odd statement. Texas is one of the few states that still prohibit "corporate practice." This is where physicians work directly for a business entity rather than either working for another physician or physician group.

For Texas and the states that prohibit this practice, the reasoning has always been that this separation helps maintain the clinical autonomy of the doctor-patient relationship. And I would agree with this wholeheartedly.

Having a physician's judgement clouded in any way by the perceived need to make a bottom line is a recipe for disaster. Fortunately, most physicians understand this risk and are masters at handling the tense relationship they might have with their employers.

But the question here isn't whether physicians should be employed, but will they make good employees?

Most people would define a "good employee" as one that shows up for work on time, provides dedicated service, treats the business like their own and functions well in a team environment.

Most of the physician friends that I know all show up to work on time.

And most physicians I know treat the business like their own -- if they are the owner.

And as for team play? Well, let's just say that coed basket ball games in medical school were tense at times. Team play isn't something that is necessarily a reviewed credential in medical school applications.

As a former hospital based medical director, I've seen physician groups owned by health care systems have a turnover near 25%. And with the cost of recruiting a physician close to $250K including startup costs, first year salary guarantees and signing bonus -- that's absurd.

Physicians that are hired fall into two basic groups. They are right out of school, owe $200K in school loans and are uncomfortable in the current environment with starting a new practice from scratch. They have no experience with this model anyway -- most of their teachers are already working in an employed relationship at a medical school or hospital. Their exposure to business is only through these providers.

Or, the physicians are frustrated with private practice: the alarming increase in overhead, growth in liability risks, the long hours, lack of good call coverage and the continual decline in reimbursement. They are seeking employed relationships primarily so they can continue to do what they are called to do. They want to see patients and continue to practice medicine and let someone else worry about the business.

See the commonality here? Both groups don't want to worry about the business.

Hiring employees that "don't want to worry" about the business seems like a recipe for disaster for me.

For now hospitals and health care systems can pay a premium to hire doctors. They are funded under a payment scheme that allows them to have either profits (for profit hospitals) or margin (non profit hospitals) that can be redirected to hire doctors to refer to their hospital so they can make more profits and more margin.

But, for many systems, this doesn't work long term.

Here's an example: Dr. Welby has practiced for years in a community as a family practice doctor. He is well known, works 80 hours a week, has a nurse, two office staff, and a small office that is paid for and hasn't been updated since the 70's -- including the magazines.

Despite this frugal existence he is financially challenged because of the escalating benefit costs for his employees, higher malpractice premiums, and he can't remember the last time he received a rate increase from any payer. Most of his patients are Medicare; twice in the last year he wasn't paid at all because Congress didn't fund the health care for older Americans.

He's tired and looking for help.

In rolls Sister Daughter Felicia Hospital System -- they are a not-for-profit health care system (not-for-profit means they don't pay taxes and "System" is a word right from Modern Healthcare: makes you seem like a big health care team -- read on). They have a physician run medical group that they own, but don't directly control. Well, let's just say they do control the budget for the doctor group. And it always runs at a loss, so the hospital system is perpetually in a position of having to "bail out" the group and define budgetary goals and direction. So there is some control.

They meet with Dr. Welby, show him their electronic health record, how they achieve quality metrics in virtually every measure of health improvement, how U.S. News and World Report thinks they are a Top 100 hospital, and how they will take care of the front desk operations and provide staff. And, oh by the way, they have a new medical office building that has a gym, day care, and even a Starbuck's.

To make things better for Dr. Welby they'll even buy out his practice by purchasing his accounts receivable (there aren't that many), take all of his records, and give him a guaranteed salary for a year and a signing bonus. All he has to do is sign here and start to work.

Now Dr. Welby will have the agreement looked over by a lawyer -- the same guy who did his home refinance and his divorce. The hospital will say that "it's the same agreement that we all sign" and then will grin -- they have Fulbright and Jaworski on their side.

There is back slapping, and maybe even champagne if its a Catholic hospital system, and everyone enjoys the moment and the win.

All will be good for a few months. The staff will not like the move with all the new processes and procedures and uniformity. The patients will not like it because they have to pay to park, will get bills they may not be familiar with and there will like be some changes in health insurance coverage.

The doctor won't like it all either: certain drugs won't be on formulary, there will be an electronic medical record to learn that will "hurt my work flow," and there won't be the complete control of the practice that he's used too.

But there are benefits. It is likely that he will slow down his daily schedule by 25 to 30 percent, there will be less importance on admitting his patients to the hospital ("I'll let the hospitalist do that"), and when it comes to doing procedures it will just mean more work and more risk of weekend responsibilities.

The hospital system will overlay a whole new set of overhead for the physician ranging from new office space (read: more cost/foot), "indirect costs or overhead" that is difficult to explain (but includes many things the physician never purchased before like legal retainers, marketing, telecommunications infrastructure, bill boards, JCAHO, nurse managers, case managers, coding and compliance staff, float nurses, retreats and meetings, helicopters -- you get the picture), and staff whose benefit and salary structure is the same as that of the hospital and is richer and more expensive.

So fast forward one year later.

The hospital is not happy because the physician's practice is losing money -- actually bleeding money. Patient volume is lower and revenue is stark. They don't understand why the physician isn't working harder. They are now going to roll him into an income distribution formula where part of his compensation will be based on volume and the rest on "performance measures." The result will likely be lower pay.

He's not happy with the lower pay and pushes back. He claims its the hospital system's fault: all that higher overhead, not collecting his payments, not billing his claims right, and he can't read, understand, or have access to the right financials. "And what about that indirect costs -- what's that?!?"

So one of three things will happen. He will either leave, and the hospital will have to recruit a replacement. He will stay and conform somewhat but continue to publicly gripe about the system and be disruptive and not a team player. Or, he will conform to the hospital model and all will be well.

The hospital will be in little position to do anything about the overhead issue. But, most systems will work with the physician for awhile, supporting the practice, because they don't want to be seen as "running someone off."

What's the solution?

Certainly models that allow the physician to maintain some autonomy and responsibility for their own practice will help some. Convincing the physician of the long term benefits of some of the good things the hospital has to offer (such as quality improvement and infrastructure) and getting buy-in will be good for all involved. Convincing the hospital that the physician needs to be included under the tent and as a part of the team will also be part of the solution.

Congress could go a long way by aggressively creating gain sharing models that allow both sides of the health care team to be paid for improvement in health care value. This would promote team work and alignment.

But in the end, in the current model, do physicians really make good employees? And do hospitals really make good employers?

Re-bamacare: Is health care reform now a problem for Republicans?

The public relations nightmare for the Obama administration's health care plan last year now seems to be a problem for the Republicans.

Republican lawmakers have long wanted more intense reforms of insurance laws that purport to stream line the system, lower cost, and cut out redundancy.

Of course the concern for patients is that the only sure fire way to lower health care costs is to restrict access and therefore lower utilization.

Patient advocates have long been skeptical of Republican promoted health care (read: insurance reforms) because below the surface the bills seem to be reminiscent of old war style cronyism: pandering to the insurance companies and corporate medicine.

True or not, that's not the purpose of my discussion today. This is more about the table turning anti-Obamacare public sentiment that is now being carefully redirected toward these Republican proposals.

Particularly in state legislatures where lawmakers are now struggling to balance state budges with escalating deficits, every possible revenue source or cost cutting move is being critically examined.

On the surface many of these ideas seem plausible -- directly employee physicians so that their prescribing and ordering habits can be controlled.

Given that the most expensive piece of medical equipment in America right now is the pen, this would seem to be on target.

Limit tests or procedures, force the use of quality guidelines and metrics, cross share lab to prevent redundancy, and put physicians smack in the middle of a care management team to increase quality and value for patients.

And to make more money for the corporate entities involved.

The problem is not whether something like these rules need to be implemented -- they do -- the problem is that absent proper oversight and restraint the slippery slope of profits and revenue would suggest that patients might get the short end of the stick.

Just imagine if your physician was told to use a certain drug, a certain provider for a procedure or diagnostic test, a particular institution for your surgery -- your choice would be gone as would that of the physician.

Now certainly we are all going to have give up some health care decision freedom as we move to limit the exponential rise in health care expenditures.

But patients and physicians need the opportunity for some autonomy in the doctor-patient relationship.

Whether it is contractural protections against wrongful termination, protections against adverse hospital decisions, prohibitions against forced admissions, or whistleblower protections, physicians need to maintain some degree of separation from the unintended consequences of corporate America.

Patients need this as well.

What's been fascinating to watch is that in multiple states where Republicans are using the budget shortfall as a steam roller to clear a path for any proposal that seems to save money, the health care changes related to employment and insurance reform seem to be hitting a snag.

Dubbed "____-bamacare" depending on the lawmaker in question, use of this phrase immediately conjures up negative sentiment not only among the public but also among fellow Republicans who might not be so forward educated on the benefits at stake.

This is particularly evident in Texas where Lieutenant Governor David Dewhurst is seeing push back on his proposals to expand corporate control of health care.

From visiting with hundreds of patients its clear that monkeying with anything to do with a patient's health care choices, particularly now in this post-Obamacare sensitivity, is a risky move.

It is likely that good proposals will also potentially fall on the sword with our President's plan.

Patients seem to be tired of government intervention in health care. They recognize the need for changes in the cost, but they are still not convinced that government or big business is in the best position to make these decisions.

They are probably right.


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Location:Jacksonville, Florida

The Health Care Cold War: Will ACO's Bring Down The Wall?

Although there are no sounds of B-52's flying at low altitudes above the hospital, there are salvos nonetheless between the partners in health care as the positioning of providers in the ACO marketplace starts to crystallize.

ACO's, or accountable care organizations, are the product of one of the Obamacare beta solutions for controlling health care costs and improving outcomes.

My friend Dan Finch at the Texas Medical Association compared them to unicorns: no one's ever seen one but you'll recognize it when you do.

I'm not sure he's completely correct, there are a few of these organizations forming around the country. One in Chicago offers to produce great data on the utility of the delivery mechanism though the jury is still out on whether it will net positive results for patients.

These new entities can be formed really by anyone -- that is, anyone brave enough to pioneer the business model. The risks are great because of the capital requirements to protect the integrity of the captitated payment system which is really the heart of the organization.

Capitation is an ugly word in health care financing probably because of the almost unanimous negative consequences of the insurance models funded in this manner in the 90's.

Everyone then left with a bad taste in their mouth.

Insurance companies couldn't rein in physicians and hospitals to control costs and patients never bought into the model that prevented them from using a infinite amount of resources in their own health care.

So why would it be different now?

The argument is mostly supported not by the change in patient expectations or the robust IT infrastructure that we have in this century, but rather by the necessity to control costs. That argument unfortunately will drive the business principles that formulate these new organizations.

The definition of a "cold war" must include the word "protectionism." Certainly the world saw the escalation in missile batteries and nuclear warheads until Reagan was successful in "tearing down that wall."

But, pardon the reckless use of the 1988-presidential-debate line: Mr. Obama you are no Reagan.

Why am I so pessimistic these ACO's will find a place in this market space?

First is the lack of a unified national standard concerning our information technology infrastructure. There is currently no data sharing among providers outside of their own controlled groups (you can thank another federal stature for the difficulty here: read HIPPA).

And although a standard can be created and implemented, there is still the fact that many of the ground war health care practitioners (the primary care physicians) are still not active users of this technology. Current estimates put this at somewhere around 30% tops.

And with the cost of implementation of an electronic health record setup in a physician's office near $40K it will be some time before we see widespread adoption of EMR's.

Then there is the issue of exactly what we will measure to insure that quality care is being delivered. These so called "measures" of quality are still undergoing national debate and peer review. They're close to getting the numbers right. The question is whether physicians and patients will buy in.

And finally there is the nasty issue of "gain sharing." This is where you reward the parties for achieving the goals of delivering high quality care in an efficient manner.

Paying physicians is particularly difficult because of a myriad of other federal statues relating to anti-trust and kick back regulations.

Some groups, particularly hospitals, believe that the answer to this issue is direct employment of physicians. But this business model is challenging in that not only must a hospital control the diverse interests of a multi-specialty group of physicians, but it also has to morph the health care of individual patients to fit a cost savings model.

Both of these groups are not historically responsive to direction by a third party.

Then you have the difficult problem that hospitals are funded by actually admitting patients and providing care. In the ACO model the profits only come from keeping patient's healthy and OUT OF THE HOSPITAL.

Now sure, business models can change. But hospitals will have to recognize and be able to adapt to this change in a swift and controlled manner to insure that they remain profitable and can continue their mission.

Oh lest I forget one other very important party to the ACO equation: the people who pay for health care services.

Whether these ACO's are created as a hospital-based entity or along the traditional insurance model, at the end of the day both the government and American business expect to pay less for health care services in the future.

So for the ACO model to be successful it actually has to have a declining net revenue line.

It is this money line that has everyone so concerned and lining up to protect their own interests.

Hospitals are arguing for a hospital-centric model so they can control the dollar at the end of the day. Physicians are either jumping on board with the hospital groups or they are lobbying for measures to protect their private practice.

Patient groups are seeing that there could be limitations on both who they can see for care and where they can go. This loss of autonomy in the doctor-patient relationship will be very hard for most patients to swallow.

Insurance companies and business groups don't trust hospitals, physicians, or patients to work to control costs in the health care economy. So they are lobbying for strong protective measures to insure that ACO's don't get out of the normal reserve requirements to sell an insurance product.

ACO's hold the promise of ending the cold war.

If all of the parties could work together on a fair and balanced model that puts the patient first in the decision making process, it could offer an opportunity for success.

But for now all of the parties are building up their arms to protect their own interests, or they are being overwhelmed by a well funded adversary.

Virtually every hospital is "creating an ACO" and physician's practices are being gobbled up health care systems.

I applaud the idea of collaboration and use of IT to improve the health experience for patients. Today, though, I'm not too confident that the current attempt at tearing down the wall will work.


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Location:Quito, Ecuador