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Hospital Feeding Frenzy To Hire Docs

What Hospital-Physician
Realignment Means For You

Hospital

Hospital (Photo credit: José Goulão)

If you’ve been hit with a hospital “facility fee” for a doctor’s office visit (see “Hospital Scams About To Explode“), you may not be happy to learn that similar medical bill padding lay in store for most Americans.

That’s because the hottest thing in healthcare these days is hospitals hiring doctors. This is a departure from the traditional model of medical practices that were independent of the hospitals to which they admit their patients.

Physicians have often been on the medical staffs of multiple hospitals in order to have admitting privileges at those hospitals. But with the exception of hospital-based physicians (generally radiologists, anesthesiologists and pathologists), they were seldom employees of the hospitals.

This made physicians highly-sought commodities for hospitals, as patients can only be admitted to hospitals on doctors’ orders. The more doctors a hospital could add to its medical staff, the more patients it could expect to fill its beds and pad its revenues.

This meant that doctors are the critical customers for hospitals – and highly coveted because they account for volume hospital admissions. Some might generate hundreds of admissions annually, accounting for millions in  hospital revenue. Physician recruitment has therefore become a primary tool in the hospital survival toolbox.

And now this often highly competitive process of physician recruitment has been taken to another level entirely.

A recent article on this subject in Health Leaders magazine (March, 2013) entitled “The Drive To Hire Docs” was riddled with terms like “fervor”, “frenzy”, and a “market aflame with zeal to employ (docs)”.

“Buy Now, Figure It Out Later”

One hospital executive quoted in the article – the CFO of a large hospital system – laid out the dubious rationale for hospitals:

“(Organizations, meaning hospitals) have to grab the opportunities when they occur…I’m…referring to employing physicians…You have to act…After that, we have to go through a process of rationalizing what people (newly-employed physicians) are doing…

“I know it sounds like ‘buy now, figure it out later’, but the market is very competitive.”

Sounds a lot like “Ready, fire, aim”, doesn’t it?

Get Ready For More of Same

This fervor and frenzy shows no sign of letting up despite the supposedly anti-competitive effects of Obamacare. Survey results shared in the Health Leaders article show that hospital leaders expect more of the same for at least the next several years.

According to their September 2012 “Health Leaders Intelligence Report”:

“While the (independent) medical staff model is currently used by 67% of organizations (hospitals), that will drop in three years to 50%…The change in the healthcare environment (meaning Obamacare) is causing seasoned and green physicians to make the flight to safety by working for hospitals.”

That’s a pretty steep drop in physician independence in three short years. Among other things, it signals that one effect of Obamacare is that the majority of physicians will, for the first time in America, be hospital employees.

Obamacare Anti-Competitive?

But wait a minute. Wasn’t one of the big criticisms of Obamacare that it was so profoundly anti-competitive? Wasn’t it supposed to drive physicians into early retirement?

Instead, it’s driving them into the waiting arms of hospital executives – many paid outrageous salaries (see “Bitter Pill“, Steven Brill’s exhaustive piece in TIME) – anxious to gain control of their physician-customers.

This point is important enough to reiterate: It’s doctors, not patients, who are the primary customers of hospitals. Patients are consumers of hospital services, but in most cases it’s still doctors who decide which hospitals their patients use.

And any time you can gain control of your customers’ purchasing decisions – effectively guaranteeing they’ll generate revenues for your hospital and not your competitors – well, that’s enough to ignite a “frenzy to employ”. A veritable “feeding frenzy”, you might say.

And I just did.

Who’ll Pay The Price?

This might be of little significance, or interest, if it didn’t auger so poorly for our futures as healthcare consumers.

The theory among some healthcare reformers that might cause some of them to welcome this development is that it will give hospitals greater control over the full spectrum of medical services. This includes doctors’ behavior in ordering tests and procedures they have little control over under the traditional medical model in America.

This is seen as essential for the Accountable Care Organizations (ACOs) encouraged under Obamacare. ACOs hope to control the quantity and quality of medical services and ultimately improve the value proposition of our healthcare (see Our Healthcare Sucks for more on this).

Whether doctors as employees proves beneficial or detrimental to America’s healthcare crisis – a crisis of both safety and affordability – will depend on the extent to which current payment incentives are changed to favor quality, safety, and value rather than volume of services. That requires replacing fee-for-service payments with alternative payment formulas that reward such outcomes.

Unfortunately, Obamacare comes up short in doing so. As a result, fee-for-service payments are likely to remain dominant for many years to come.

This means that bogus facility fees that off-load hospital overhead costs onto routine doctors’ office visits – often doubling and tripling the costs of such visits – are likely just the start of what we can expect.

That’s because there’s little evidence to support the ACO theory in practice. Most ACOs have shown improvements in quality and coordination of care. but little by way of cost savings.

What we have instead is strong evidence of a history of hospitals figuring ways to circumvent the spirit of such reforms to their own ends (see above link to my facility fees post and “Medicare Patients At Financial Risk As More Hospitals Game System” for examples).

History tells us to expect more of the same.

After all, when was the last time you heard of “fervor” and “frenzy” leading to anything good?

Weigh in below with your own thoughts.

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1 Awesome Comments So Far

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  1. Paul Shepherd
    April 17, 2013 at 7:57 am #

    It was an interesting read to know how and why the treatment charges are so high in hospitals. Truely, doctor’s control which hospital their patients would get admit to.

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