Economic Credentialing (Part III): "Now its come to distances...."

This is the third article in a series on economic credentialing, this one focusing on the reasons for the growing impasse between hospital management and hospital medical staffs.

"Now its come to distances" is the refrain in an old Leonard Cohen song about the anguish of parting. Hospitals and their medical staffs have never been particularly close but the degree of animosity and confrontation being experienced by many community hospitals and their medical staffs today is unprecedented and the distances are growing daily. The reality is that doctors and hospitals need each other and that most successful institutions have developed a reasonable modus vivendi to accommodate each others diverse peculiarities and interests in favor of the common and community good. The detente, however, is unraveling in community after community with many observers wondering why?

The reasons have a lot to do with economics and the changing face of medicine. In the past physicians needed hospitals more than they need them now. The hospital used to be the center of most physicians' worlds. The Hospital was where physicians sent their sick patients and where physicians met and interfaced with their colleagues and friends. Physicians gladly accepted medical staff responsibilities, attended meetings regularly and participated in call.

Hospitals were happy to receive patients and to keep them as long as they reasonably could - that is how they made their money. The more patients, the more money. The more doctors, the more patients. With insurance companies and the government picking up the tab. Life was good. It was easy for doctors and hospitals to get along.
One of the first fissures in the harmony of hospitals/physician relations started with the replacement of medical staff rotation in the hospital emergency rooms with trauma specialists. Most physicians were only too happy to give up the inconvenience and burden of emergency room rotation and to spend their time on their own patients or specialty. Hospitals and patients also benefited by the increased efficiency and overall quality from using emergency room specialists.

The relief of the emergency room burden however provided a greater measure of distance between physicians and their hospitals. There was less interaction and fewer occasions for colleginascentThis nascent alienation from the hospitals grew over the years as physicians found themselves increasingly pulled from the hospital core to an outer orbit by the centrifugal force of changes in the economics of the health care industry. The widespread use of hospitalists to provide rounding services on patients in the hospital is a symptom of this alienation and distancing.

Further hospital proclivity to award exclusive service contracts for pathology, radiology, anesthesia, etc. inevitably supported a hospital culture where the hospital based physicians played a larger and more visible role in hospital politics and administration than admitting physicians because the hospital was the seat of their economic engine.
There is a saying that when the gods want to punish you they give you twenty years of good luck - then take it away. There came a time when the galloping surge of health care costs could no longer be sustained on purely fee for service basis. With the fading of the "age of Aquarius" came the birth of managed care. Managed care would realign the incentives of doctors and hospitals to keep patients out of hospitals and to keep then healthier though investment in preventive health care. What managed care did was to place doctors and hospitals into direct economic competition with each other for a scarcer health care dollar.

Managed care is a little reminiscent of the government paying farmers not to grow crops. The competition centered on how much you could get paid for doing so little. In the health care business this translates into competition for young and healthy covered lives with high rates per member per day. Managed care effectively vitiated the old Marcus Welby, family doctor paradigm as managed case plans began to control the referral of patients and hospitals and physicians scrambled to become preferred providers in a bewildering multitude of managed care health plans. Some doctors and many hospitals started their own plans in an effort to gain more control over or preferably the upper hand on their economic destiny.

A managed care company became essentially a fungible commodity in the market place. It would agree to provide an array of healthcare benefits for a price. The price would frequently but not always be a function of the market. The managed care company would have to make its money by being able to negotiate favorable hospital and physician network contracts to cover its patients within the cost of its own market price from its patients. The hospitals, the physicians and the managed care companies all sought to minimize the compensation of the others by gaining a greater share themselves in negotiations.

Hospitals and physicians sought greater leverage in negotiations though size and organization. The lynch pin of the managed care system is the primary care provider who is incented to limit referrals to hospitals and physician specialists but directed the flow of patients ultimately unless overridden by the plan. Hospitals sought control over primary care physician groups by purchasing physician practices in a primary care control feeding frenzy. Specialist groups sought alliances and mergers with primary care groups. Hospitals were competing more and more directly with their own medical staffs.

The advent of Medicare DRGs "designated related groups" as the vehicle for compensation for hospitals further acerbated tensions between hospitals and physicians because hospitals were paid on a fixed fee basis dependent upon the nature of the treatment, not the length of stay. Hospitals needed to shorten length of stay in order to maximize reimbursement for Medicare patients while physicians were compensated on a procedure based scale. The length of stay (and the number of procedures) tended to increase physician compensation at the expense of a hospital's return.

Traditionally physicians viewed hospitals as capital sources capable of funding the acquisition of new and transforming diagnostic equipment that has revolutionized the healthcare industry. The hospital would bill the technical fee for an x-ray or other scan and the physician would bill a professional fee for the reading. Like computers generally medical diagnostic equipment is becoming less expensive and more mobile. More and more specialists and subspecialist physicians are competing with hospitals for the technical fees for diagnostic procedures and for ambulatory surgery by doing it themselves in their own facilities.

Many physicians no longer need hospitals as much as they become less dependent on a hospital for technical services. Surgeons, cardiologists, pulmonologists, GI specialists are setting up their own centers and specialty hospitals to provide for their patient needs and enhance their income.

Hospitals and physicians can never fully divorce themselves from each other without catastrophic ramifications to the quality of health care. Accommodation and collaboration on each side and the community will be necessary to preserve the public weal in the healthcare system of the future. As Leonard Cohen said: "Hey, that's no way to say goodbye...."