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Arnel Reynon illustration
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Dr. Barklie Zimmerman has chosen to remain an independent practitioner. Six of his practice’s nine doctors became hospital employees in June. Jay Paul photo
Powerful lights illuminate a man in a basement surgery theater at Henrico Doctor's Hospital. A mass of blue hospital sheets obscures his face and body. Only a 6-inch section of his upper groin is exposed — and filleted like a steak.
Dr. Barklie Zimmerman, wearing mad-scientist-style magnifying spectacles, makes the final few stitches that will secure a synthetic artery. This replacement part defuses a time bomb — an aneurysm, now safely removed — from the patient's femoral artery.
"This is a dedicated vascular team," says Zimmerman, finishing his work before resting a hand on the man's thigh and assuming the pose of a mechanic taking a breather on the fender of a rusty but dependable old Buick. He gestures to three nurses. Together, they took less than two hours to save a man's life. "It makes a difference having people who have done this before rather than a group where … nobody gets to do it that often."
Zimmerman is concerned. Not about the prognosis of his patient, but about his own future in medicine. He fears that market and regulatory changes could disrupt the delicate balance between making money and caring for patients.
An independent surgeon with the Richmond Surgical Group, Zimmerman is part of what medical-industry folks call "a vanishing breed." Many of his peers, faced with massive changes in their profession, are fast becoming salaried employees of large hospital groups. Though Zimmerman remains independent, six of his practice's nine members became employees of HCA in June.
"I have two kids in medical school right now, and I fully expect that when they come out, they might not have a choice," he says, between private practice and hospital-group employment.
Across the nation, one in six doctors now works for a hospital, according to the American Medical Association. And half of all new doctors bypassed private practice and were hired by hospitals in 2009, says the Medical Group Management Association.
This shift can be attributed to several factors, including federal health-system reform that will reward efficiency, the recession, administrative costs associated with running a private practice, a proposed 30 percent decrease in Medicare reimbursements and debt often carried by medical graduates.
Whether a doctor is a hospital-corporation employee may seem like nuance to patients, but most doctors, hospital administrators and medical-industry experts agree that this nuance actually represents a fundamental change.
"What that means to patients, which is to me worrisome, is that in some hospitals, in some situations where doctors are employed, they are limited by their employer as to who they can refer [patients] to," Zimmerman says.
With more of his colleagues going on the payroll at big hospitals, Zimmerman says, referring patients to in-house doctors is "a business decision — it's nothing diabolical. But what concerns me, though, is patients don't know it's happening." And doctors, having conceded some of their autonomy to an employer, may not be allowed to inform those patients of their potential conflict of interest: "My personal opinion is there's potential for compromising your integrity by getting yourself into a situation like that," Zimmerman says.
Carilion Clinic in Roanoke is part of a pilot study being conducted by the Brookings Institution on efficiencies gained by hospital systems that build integrated staffs that can meet all the needs of patients and, as a result, limit referrals to physicians not on their payroll. The health-care industry's buzzword for this economy-of-scale model is "accountable-care organizations." The study also includes, among others, the Cleveland Clinic. Both are examples of the likely future of medicine with large hospital groups because their sheer size will make them the dominant medical provider in the regions they serve.
But a $30 million lawsuit brought by Ronald Burchett, a former Carilion patient, claims that Carilion's internal-referral system goes much further than reducing the need for outside referrals. Instead, his suit alleges that Carilion's policies, which he says discourage outside referrals, led to his burst colon in March 2008. Carilion's attorneys have argued that there is no such policy, but the circuit-court judge in the case in May again allowed the plaintiff to continue with his suit.
"I think there are patient safety issues that are being expressed," in the Carilion case, says Deborah Love, director of the Richmond Academy of Medicine, adding that the lawsuit summarizes the biggest fear about a hospital business model that could result in patients being sent not to the best doctors but to those on its payroll. "Does it limit choice? It could, yes."
But there are also advantages to integrated hospital systems that allow patients to find all of their medical providers — from primary-care physicians to obscure specialty surgeons — under one corporate roof.
Dr. Marc Katz, a cardiac surgeon who left private practice and joined Bon Secours, says an integrated system like Bon Secours has not been limiting doctors' authority and has expanded their ability to provide the best care for patients. He cites how cardiac-surgery and cardiology practices now are under a single roof and how a partnership has formed regarding individual care.
Love notes that a system that encourages internal referrals could allow management to "win some efficiencies out of it" both for the patient as well as for the hospital's bottom line. But she says Carilion provides a case in point of why there is debate in the hospital industry right now over whether hospitals should or shouldn't provide doctors with freedom — or even encouragement — to refer outside the system when they feel it's in the best interest of a patient.
A Surge in Consolidation
Hospital groups gobbling up practices is a national trend, says Keith Borglum, a California-based licensed medical-practice sales consultant for more than 25 years, who's been extra busy lately. "This trend does come and go about every decade, I guess. The last surge was in the 1990s, when hospitals were buying up lots of practices."
That previous surge began in 1992, to be precise, says Roice D. Luke, former chairman of the department of health administration at Virginia Commonwealth University. Luke studies local hospital-market structures. In a trend parallel to the current one, many of the same hospitals were buying doctors and practices in reaction to reform legislation pushed by President Bill Clinton 20 years ago.
Then and now, the push is toward amalgamation, in which the hospital has a hand in every aspect of a patient's care. Insurance is something soon to be mandated by federal law, and many patients with insurance must choose a primary-care doctor — and that physician could be on a hospital payroll, giving him influence in referring other doctors and specialists employed by the same hospital group.
There's little before the mid-1990s that's similar to the consolidation and buying of practices that is now occurring.
In Richmond 20 years ago, there were 17 hospitals or small hospital groups reacting to policy-reform efforts that never fully materialized, Luke says. Most made the mistake of believing that running a doctor's office was no different from running a hospital. When the dust cleared, many hospitals either shuttered the medical practices they bought or put them back into private hands. "It was an idea whose time had not fully come," Luke says. "I think we're in a different world now than we were in the '90s."
Now Richmond has just three hospital groups: VCU Health System has its footprint primarily downtown, while the two big players, HCA Virginia Health System and Bon Secours Virginia Health System, jockey in the competitive suburban market.
The biggest difference that makes today distinct from the past, Luke says, is that health-care reform is now the law.
Reform moves the nation away from a model in which doctors and hospitals are reimbursed by insurance companies based on each service rendered, Luke says. The new model, which puts hospitals at the top of the power structure, is meant to emphasize the value patients get for those services. For hospital groups to do that while also maintaining cost effectiveness for their businesses, owning more hospitals and employing more doctors becomes the best prescription, he says.
But how to consolidate and become accountable without creating closed systems where — hypothetically — doctors at one hospital group would be unable to send a patient across town to another hospital group? The answer is far from simple.
The Way of the Future
About the only agreement among experts is that large hospital groups and accountable-care organizations are the way of the future. "You just can't appreciate how significant that is," Luke says.
To gain something of Luke's appreciation requires understanding the massive investments in infrastructure — buildings and equipment — that big hospital groups undertake.
Infrastructure verges on empire in Richmond. HCA's local facilities include Chippenham and Johnston-Willis hospitals on South Side, Henrico Doctors' and Retreat hospitals north ofthe river, and John Randolph Medical Center in Hopewell.
Bon Secours is equally expansive, as indicated by a massive map dominating nearly an entire wood-paneled conference room wall next to the office of Peter J. Bernard, the system's chief executive officer. Tiny blue fleur-de-lis dot the metro area to demark St. Mary's, Richmond Community, Memorial Regional and St. Francis hospitals.
To afford it all, hospitals need to maximize the use of those resources, Luke says. "But the consequence is, you begin to erode competitiveness."
Officials with the nonprofit Bon Secours say that bringing doctors in as employees has increasing advantages for hospitals, physicians and patients. Among them is better management of care through use of electronic medical records — another federally mandated change coming down the pike.
The technology behind electronic records still has a way to go. That said, it benefits hospital corporations that own many medical practices to put them all on the same system, says Michael Spine, senior vice president for development at Bon Secours.
Bon Secours remains staffed predominantly by independent doctors and practices. Of 1,800 doctors who see patients through Bon Secours' Richmond hospitals, slightly more than 12 percent are employees.
Spine says Bon Secours' strategy was to move that figure closer to 23 percent, but he says that actively pursuing that goal hasn't been necessary because "doctors are coming to us saying, ‘Will you employ us?' "
HCA's numbers are similar, says spokesman Mark Faust, with nearly 10 percent of its 1,645 associated physicians on its payroll. He notes a " higher interest" among doctors discussing the possibility of employment recently.
Will Zimmerman is a third-year medical student at VCU. He's not a doctor yet, and unlike his surgeon father, he's not worried at this point about what the business landscape will look like when he graduates. But he is thinking about the business on a micro scale — and he hears stories from graduates.
"I think one of the biggest concerns for medical students is finances," the younger Zimmerman says, expecting his own student loans to teeter perilously close to $200,000 by the time he's through. He's heard that many hospitals are making generous employment offers that include signing bonuses and direct repayment of all or part of student loans.
Bon Secours and HCA acknowledge efforts to attract young talent to the payroll through competitive employment packages.
Is Bigger Better?
Borglum, the California-based practice broker, supports Spine's assertion that the advent of electronic records makes putting doctors on the payroll easier than working with independent ones. Considering the market for medical-practice sales, he believes technology is "not likely" to streamline the nation's health-care system any time soon. He sees efficiencies gained only when doctors sell to the large hospital groups.
Spine acknowledges that "an integrated program where we provide all services to that patient" could lead to an increased likelihood that referrals remain within the system, and he says that while internal referrals aren't pushed, Bon Secours doctors do have "a productivity incentive." Incentives are incorporated into a merit-based pay system that evaluates doctors on a variety of performance measures, Spine said.
He says productivity incentives for doctors — in this case that also encourage doctors to refer patients to doctors within the same hospital group — don't erode quality since referrals to colleagues allow doctors to collaborate more closely on patient care and wellness.
VCU's Luke says there are big benefits to an accountable-care organization model like the one Bon Secours talks about. "This coordinated ... model, one of its great strengths is you can integrate systems so that people will be transferred to the best place to have the work done," Luke says, suggesting that making doctors into employees is how you make the new system work. "I think there are some elements that are buried in the [federal] legislation that will stipulate further consolidation and integration … at the local level, which I think is a good thing."
Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University, disagrees.
"Do you trust the system to construct the default network of providers?" Nichols asks. "And that, my friend, is the question for the 21st-century health-care system."
Spine says Bon Secours doesn't discourage physicians from referring outside its system: "We respect patient choice, and we respect doctor preference."
Ted Johnson, vice president of operations for HCA physician services, says there are no incentives that encourage doctors to refer patients within HCA's system. "Our physicians understand that they have the right and responsibility to refer their patients … depending on what's in the best interest of their patients," he says.
HCA and Bon Secours both acknowledge that they're likely to have more doctors on the payroll in the near future. One local industry expert suggests that as many as 50 percent of doctors who used to be with smaller practices are now employees of the hospitals with which they were once independently affiliated.
"Employment has occurred and is occurring," Johnson says.
Toni Ardabell, Bon Secours' CEO of Bon Secours St. Mary's Hospital, says that regardless of whether a hospital follows a more open system or moves toward an integrated system, it will always remain in the best interest of hospital groups not to undermine their physicians on decisions about patient care.
"The physician's power base is their expertise," Ardabell says. "They still have total control of their clinical practice, and administration does not tell a physician how to practice medicine."
Jack Cooksey contributed to this story.