Doctors, hospitals reunite over finances

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Hospitals and doctors are seeking greater commitments from each other as a way to gain economic security — but don’t call it a marriage yet.

Newfound hospital and doctor commitments are likely to take several different forms — joint ventures, partnerships, employment — as the way health care is delivered changes nationwide, thanks to a combination of health care reform issues and financial pressures of ever-rising health care costs.

In Colorado Springs, the two rival hospitals are approaching those relationships in different ways.

Penrose-St. Francis Health Services only employs eight doctors, physicians whose niche practices make it difficult to survive outside the hospital environment — cardiovascular surgeons, gynecological oncologists and thoracic surgeons.

“We don’t want to hire doctors, at least not right now,” said Jamie Smith, Penrose chief operating officer. “In this market, it doesn’t make sense. But we are always looking for ways to partner, things like joint ventures, doctor-leased office buildings — any creative way to build partnerships.”

Over at Memorial hospital, CEO Larry McEvoy believes the future of health care is dependent on integration between private-practice doctors and hospitals.

“We are looking to create that integration, because we simply believe that doctors in private practice are not going to be able to continue, just due to the economics,” he said. “So we look at hiring doctors. Joint ventures aren’t the way to go because the regulatory environment is making those more and more difficult.”

While their approaches differ, the hospital systems are each still following a national trend.

Nearly three-fourths of doctors are already in a financial relationship with a hospital, and half want one, according to a PricewaterhouseCoopers report, “From Courtship to Marriage,” which surveyed thousands of doctors nationwide to get their take on the burgeoning relationship.

Call it a sign of the financial times.

Insurance companies are examining their own bottom lines and are getting ready to reduce reimbursement levels, even as the cost of delivering care is rising. Health care reform measures mean that doctors and hospitals must work together to reduce readmission rates, or face financial penalties.

Federal regulations also mean doctors and hospitals must get cozier, using accountable care organizations and bundled payments from insurance companies and government sources. Doctors and hospitals will no longer be paid simply by the service provided, but by the outcomes of those services.

It’s easier said than done.

The relationships mean both sides must overcome years of mistrust spawned when doctors opened outpatient surgery center and imaging centers to compete with hospitals.

Some hospitals are opening their arms, showing just how much they have to offer.

Penrose officials say a partnership with it offers a number of benefits.

“We have a partnership with Penrad, an imaging group,” Smith said. “They operate their imaging services at the hospital — it makes sense to get involved, since these things were cropping up everywhere.”

Penrose also has a partnership with Audubon Surgical Center, an outpatient surgical group.

“These are true financial risk partnerships,” he said. “We own a percentage of Audubon and Penrad. It spreads the risk between the doctors and the hospitals. Our medical office building near St. Francis Hospital is a joint venture. It’s to both the physician and the hospital’s advantage — both have skin in the game.”

Penrose recently started a partnership with the Rocky Mountain Cancer Center — essentially an agreement to stop competing in certain areas of cancer care.

“We didn’t actually hire anyone from RMCC, we just work together,” Smith said. “It makes sense to stop going toe-to-toe and work on providing care. It means our patients get more clinical trials — and that means a lot to those who have exhausted all their possibilities.”

McEvoy believes there is a better way, one that involves physicians in all areas of the hospital, including planning for the future.

“We want care to be driven by the physicians. They have the expertise, the knowledge,” he said. “If we want to provide better quality care at a lower cost — and that is something both the marketplace and the patients are demanding — you have to involve doctors.”

Health care overhaul at the federal level is driving the hospital’s need to employ more doctors.

The PricewaterhouseCoopers report says hospitals with low quality could stand to lose more than $1.4 million annually under the new federal guidelines that end fee-for-service care and reward quality of care and integrated services.

“We need doctors for quality outcomes,” McEvoy said. “And, doctors need us. We can end the administrative burden for them, and they can focus on delivering medicine.”

Reform measures cut payments to doctors when patients are readmitted to hospitals — that alone provides economic incentive for the two to work together, he said.

Insurance companies are paying doctors less — and that is driving the trend. Colorado Springs is slightly behind the rest of the nation, because its payer mix has allowed doctors to remain independent longer.

But thanks to a recession with a jobless recovery, more doctors are seeking partnerships to ease financial pressures.

“It makes sense — instead of being competitors, to be partners,” Smith said. “Doctors have some of the control, some of the financial benefit. It beats being shut out of the market.”

The health care landscape is changing, McEvoy said. Hospitals have to change with it.

“It’s enormously complicated,” he said. “In the past, for 50 years, hospitals bought the equipment and allowed the doctors privileges to bring their expertise to the hospital. Now doctors are saying they have the expertise, they want to be involved in the wider conversation as well.”

Both hospitals and doctors benefit from the arrangement, he said.

“It’s been an arms race,” McEvoy said. “And that’s changing because there is an absolute drive to get costs down. And we can do that through collaboration, through partnerships that are crucial for providing better care. Even though the business models are different, the intent is the same — to create a collaborative health care industry.”

And if doctors and hospitals can create a harmonious relationship, the patients are the ones who benefit, he said.