Blue Promise: Consolidation in Health Care Delivery Part 2

Why do physicians want to join a hospital-based practice and how can we empower them to remain independent? Dr. McCoy talks about the importance of keeping physicians independent with Dr. Vivian Ho, a health economist at Rice University's Baker Institute, Lee Spangler, JD, BCBSTX Vice President of Texas Government Relations, and co-host Ross Blackstone, BCBSTX Director of Strategic Influence. You can listen to the complete discussion in podcast form on Apple Podcasts (https://apple.co/2KyH87U) and SoundCloud (https://bit.ly/2jncyl6).

Additional links in the Consolidation in Health Care Delivery Series:

  • Blue Promise: Emergency Care Part 1: Independent and hospital-based physicians all wear the same white coats. How can the average consumer tell the difference and what are the implications for health care costs?

Blue Promise is an online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas.

Show Transcript

SPEAKER: DAN

A new study shows that health care costs go up when providers consolidate in Texas. So why are doctors entering these relationships and what can we do about it. Thanks for joining us for this addition of Blue Promise, I'm Dr. Dan McCoy and I'm the president of BlueCross BlueShield of Texas. I'm here with my co-host Ross Blackstone.

 

SPEAKER: ROSS

Thank you Dr. McCoy we have Dr. Vivian Ho here she's a healthcare economist with Rice University's Baker Institute. And we have Lee Spangler he's vice president of Texas government relations for BlueCross BlueShield of Texas. So earlier in our previous segment we were talking about how hospital based physicians are typically more expensive than independent physicians so as from a patients perspective I would think I might not want to go to a hospital based physician yet. There are a lot of physicians who do affiliate with hospitals.

So I'm curious to know Dr. Ho why would a doctor want to affiliate with a hospital organization. Is it because they get paid more money or what…what's the motivation.

 

SPEAKER: VIVIAN

Well particularly for younger physicians they may be attracted by all of the different services or are additional things that can be offered by a hospital in terms of you know the guaranteed salary and patients coming to them and and ordering supplies and things like that. Some people thought it was an and this vertical integration is an unintended consequence of the Affordable Care Act. Affordable Care Act introduced accountable care organizations to Medicare which was a way of reimbursing hospitals physician groups and giving them what's called shared savings so if they could lower the cost trend for treating a group of patients then they would share in the cost savings. But there have been some studies looking at the relationship between penetration of ACOs in local markets and the vertical vertical integration between hospitals and physicians and they actually have not found a very tight relationship. So then it comes down to is this is this due to money and should we follow the money trail and it does appear that that physicians who align with the hospital the combination of those two together can bill at higher rates because of the way outpatient reimbursement is done for many services that are provided supposedly under the name of the hospital but could still be delivered by the physician who's owned by a hospital in their own local physician office. So it's a question of of being able to make more money.

 

SPEAKER: ROSS

I want to clarify something you said because if I'm playing devil's advocate I would think maybe an independent independent physician might want to affiliate with a hospital organization because it might they might have access to more resources, equipment that they might not otherwise have access to which would help them deliver services at a lower cost. But what you're saying is that it's not it's not necessarily lower… the costs are not lower.

 

SPEAKER: VIVIAN

Absolutely. Certainly the cost to the patient aren't any lower.

 

SPEAKER: ROSS

Okay

 

SPEAKER: VIVIAN

I mean it's sort of we're talking about about the salaries to the physicians may be end up being higher. But at the end of the day we're trying to to control healthcare cost growth and this is not this this combination of consolidation is not helping patients.

 

SPEAKER: DAN

And also let me I want a level setting here. Let's be clear here. The care that's delivered by hospital based physicians can be extraordinary and in fact I would argue that that many of the physicians that are practicing in employee relationships are phenomenal physicians it's phenomenal care just as there are independent physicians. So what we're really talking about here is a payment model that's not particularly in my opinion a care model. It's a payment model and it's an economic decision for the docs. I mean I will be honest with you I practice medicine for almost 20 years. It's hard to practice medicine today as an independent physician. There's electronic medical records. There's there's us there's the payers that are always kind of throwing you know complicated rules at the practice. Your costs go up get your malpractice insurance benefits for employees wage cost your rent goes up every year. And Medicare had a pretty significant period where there wasn't a substantial increase in payment. And if that's 50 to 60 percent of your revenue there is a little bit of driving physicians into these models because they throw their hands up and say I'm tired. Well I don't I can't do it anymore.

 

SPEAKER: LEE

And previously when I worked for a physician organization I heard that quite a bit. But when you look at whether or not the ACA was the catalyst or not for this consolidation I think physicians began to understand when that payment model started to come out that it was going to be population base and that meant one as a practice, I need a larger population so that it's more predictable the risk that I'm taking is more predictable. And then also because a lot of these alternative payment methodologies deal with quality outcomes I'm going to need some method to measure that quality outcome. And as a small physician practice I can't bear that overhead alone. So there was consolidation among physician practices so that they could actually attempt to prepare themselves or what they saw as the future that was coming which was accountability for a population of patients not just the patient panel that they happen to have. Also on top of that many physicians expressed frustration at mandates that were placed upon them regulations things like that that would come down that they would then have to comply with. Well compliance is a cost. And so as their overhead grew they began to understand that if rather than a solo physician practice if I have two physicians. Now the overhead cost is shared on two sets a shoulder's not just one set. So there were a number of factors that actually pushed physicians into consolidation.

 

SPEAKER: DAN

Let me say when one more thing too is that Dr. Ho kind of outlined that that transition can lead to higher cost. The physicians we just talked about it could lead to less burden and less administrative hassle but it also leads to less autonomy and I think that's an issue that when I talk to physicians that are in employed relationships they have to get pretty comfortable with a loss of autonomy about choices of work hours choices of nursing. Like staffing models for their practice have where they send their test and I think that may be one of the issues that you studied when you looked at consolidation.

 

SPEAKER: ROSS:

Lea mention quality. Do we know if there's any difference in quality between the services that hospital based physician will provide versus an independent physician.

 

SPEAKER: VIVIAN

We did not look at quality measures in this study. There have been multiple other studies and they've been reviewed and and the differences are very mixed. According to the different studies but you know we were working on it. We are working on one particular study that's looking at at physician hospital integration and Medicare measures of quality and we actually found no difference. But one thing that did affect quality much more was actually the market concentration of the hospitals. So if you had more concentrated hospital markets then quality as measured by Medicare actually went down.

 

SPEAKER: ROSS:

Interesting

 

SPEAKER: DAN

And I think it to be very careful with measuring quality for independent physicians because keep in mind many of these quality measures require sophisticated datasets and collection and the complex processes in the office to collect the data. You have to have enough members that go through the data set to make it valid and for an independent physician practice even capturing that data set is complicated. Does not necessarily mean that independent physicians have lower quality just that they may not have the tools and sophistication which is kinda where Lee was going. If you're going to get paid based on the quality of that data then some people throw their hands up and say well if I can't beat I've got to join up because I have to join into these kind of models so that I can get access to those kind of tools.

 

SPEAKER: ROSS:

So are they joining them. What are the numbers look like are most are most doctors in Texas affiliated with the hospitals. What are we seeing, what’a the landscape like?

 

SPEAKER: LEE

In the State of Texas a large proportion of the physicians in practice in active practice are still independent. You're seeing that change slowly based upon specialty and certain specialties are consolidating and they're becoming much more corporate tied. Anesthesia is probably the the the specialty that comes to my mind along with emergency physicians and I think it's due to the way patients access those particular providers that it just lent to consolidation in those particular…

 

SPEAKER: DAN

And I think there's a couple of nuances there to do so. So when Lee says it's it's kind of going slowly let's keep this in mind this isn't slow to me that half the primary care physicians in Texas today are employed in employed relationships. Now when you say employed that doesn't necessarily mean hospital employed and to lee, kinda putting a nuance on Lee, it doesn't necessarily mean that anesthesiologist and emergency physicians are employed by hospitals because at the same time we've seen this sort of hospital consolidation there's been an explosion in what I call mega group models where you know group practice when I was growing up as doctor was you know you might have 50 doctors and the bigger groups in the city might have 150 but today you've got groups that might have a thousand physicians within those walls.

 

SPEAKER: ROSS

OK so what I'm hearing is that consolidation is driving up the cost of health care in Texas. It is more profitable for doctors to pursue that payment model doesn't necessarily impact quality and it is more expensive for the patient. So Lee,  we have a legislative session coming up and 2019 for the state of Texas. What can we do about it? How can lawmakers in our state better protect Texans?

 

SPEAKER: LEE

Well by being mindful of attempts to change the law that makes it easier to grow larger bigger in a particular marketplace. Have to watch how hospitals can employ physicians and whether or not additional loopholes are created there. I think it's more on the defensive side in terms of a legislative posture that will be examining this issue to ensure that there aren't others who come in, other stakeholders who decide I want to set a benchmark for what I at least get paid and that benchmark is that on some factor that I control. So a build charge kind of benchmark whether that bill charges that by an institution or an individual profession it becomes problematic. And I think we're seeing a move especially with out of network issues for benchmarks to be set. California's set a benchmark. Florida's set a benchmark for certain out of network payments. New York… Connecticut has one. So if Texas begins to entertain a payment benchmark we need to make sure that it is an honest benchmark one that's beyond the control of the person who's being paid

 

SPEAKER: ROSS

What we've already identified that providers, doctors can get paid more through this payment model. So I'm wondering if value based care programs and incentivizing doctors and other ways to maybe not go down that route is part of the solution. Does that help, Accountable Care Organizations, other value based care models.

 

SPEAKER: LEE

Yes. And fortunately, Texas has a pretty good environment for allowing those sorts of arrangements to be put into place. Certainly under the HMO model in Texas each HMOs are able to compensate providers on a on a basis other than a discounted fee without getting too technical. Other lines of business are actually limited in how they can pay providers and they're limited to only a discounted fee for service.

 

SPEAKER: DAN

But I think it's important to know about ACOs too is that ACOs are complicated to set up. So you have to have data population health tools you got to have enough of a mass of physicians that follow quality guidelines to make it happen so entry into that market was generally limited to hospitals. Now when hospitals enter into the market. Keep in mind you heard Dr. Ho talk that that adds a whole another level of cost to the table. So I've been particularly excited to see the growth of physician centric accountable care organizations where they really are independent physicians that have come together to say we are going to collectively pool our resources to get these tools and data sets and population health tools. And to me that gives them a certain tailwind because they're going into those that competition for quality and value and cost with a much lower overall cost because they don't have things like the facility fee and the expenses that might be true to hospital. Not to say that the hospital CEOs aren't adding value but to me they're going to have to work extra hard to compete with a very sophisticated physician centric CEO.

 

SPEAKER: ROSS:

Are you talking about the Texas Medical Association's TMA PracticeEdge.

 

SPEAKER: DAN

It's a great example so rural physicians in Texas would never have had access to participate in physician centric accountable care organizations because they just didn't really have the resources and the skill sets and the expertise because nobody was funding it like in a big city if a hospital decides to fund it they can bring technology and resources to the table and at the expense of purchasing datasets on quality, rural hospital rural physician practices wouldn't be able to do that. And plus even if they put all their patients in the same bucket they might not have enough patients to even make a valid study to be able to look at that analysis. So TMA PracticeEdge by helping to build bridges among community physicians and allow them to coordinate care resources population health data has really. I think it sets Texas apart and in a county is rural, a state as rural as Texas, It allows physicians in these counties to really I think start to make a difference.

 

SPEAKER: ROSS

Giving independent doctors an opportunity maybe lowering drug pricing advantages that the hospitals might have, Dr. Ho. I'm wondering what are what are some of your ideas of ways that we might be able to protect independent physicians in Texas.

 

SPEAKER: VIVIAN

Yeah I completely agree with the notion of providing some infrastructure and support for these smaller practices because I worked on another paper where I looked at a shared savings program introduced by an insurer to a to a an independent physician practice. And it did they save four percent when they introduce that program. But the insurer invested and paid for a nurse to be at the doctor's clinics and do call ups of particular high risk patients and and help them track through their records. So you need to invest you can't just introduce value based payment drop it out of the sky and expect it to work. And I worry that that's what Medicare is doing at the federal level that they've set many different types of regulations but they provided no resources for these smaller physicians. But another issue is you know the federal government wanted to do something for for hospitals with with large large safety net population so they introduced what's called the hospital 340 B program to allow those those hospitals to be able to make some money off of the expensive medications that they they were selling but what they didn't think about was that they didn't give independent physician practices access to the same advantage. And what's that's that's leading to is is independent physician practices in oncology are disappearing because chemotherapy is such a big part of treatment and the physician independent oncologists have thrown in the towel and they said we cannot compete with the hospitals anymore because of this hospital 340 B program. So that's something that you need to figure out very quickly or else we're going to have a change in the landscape.

 

SPEAKER: ROSS:

So hospitals are getting discounted drugs and not you would think the hospitals could afford it. They're the bigger organization but the independent physicians who might need the help more aren't getting it.

 

SPEAKER: VIVIAN

Exactly.

 

SPEAKER: DAN

I mean the law was put in effect years ago. It was initially just so that poor people could get access to medications that were really expensive and they could be offered through non-profit health organizations that's kind of what

 

SPEAKER: ROSS

Good intent.

 

SPEAKER: DAN

I think these examples are always pretty powerful but if you're an outpatient physician and you're doing infusions in your office you might have to pay a thousand dollars for a unit of drug and you might get reimbursed by some sort of payer government. Blue Cross somebody maybe. Eleven hundred dollars So your profit on the drug is a hundred dollars. It's going to cost you 500 you know maybe it's going to cost you maybe 200 dollars to administer in your office. You might get paid a little bit more for that so your profit margins pretty low on maybe 1500 dollars worth of cost if you go to the hospital and get the same service they that thousand dollar unit drug they might only pay 400 dollars for it. So automatically they have a 600 dollar profit margin and instead of charging maybe 200 dollars for infusion they may charge 1000 dollars for infusion and their costs might be a little more. But still you can see their profit margin might be sixteen hundred two thousand dollars on the same infusion that an outpatient physician might only get paid 100 dollars.

 

SPEAKER: ROSS

Interesting

 

SPEAKER: DAN

that that causes them to close their infusion centers and inadvertently that's bad overall because that forces patients to have to use a different environment back to Lee's model. It causes consolidation of these patients into one central resource that then can dictate hours. They can decide what drugs are available what physicians are available for you to see. I mean it just causes the loss of autonomy also on the patients community.

 

SPEAKER: LEE

Exactly

 

SPEAKER: ROSS

Were you going to add something else.

 

SPEAKER: LEE

Well no, Dan actually captured my thought before I get it out

 

SPEAKER: ROSS:

All right well it sounds like consolidation in hospital based physicians are helping to increase the cost of health care in Texas and there are some things that we can do to better empower our independent physicians and the state of Texas. Great.

 

SPEAKER: DAN

Thanks for being here. Thanks for joining us for this edition of Blue Promise.

 

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