The following is an excerpt from a a recent Repertoire feature. To read the entire article, “The Independents,” click here


It’s true that some physicians are giving up their private practices in favor of hospital employment. But Norman Chip Harbaugh isn’t one of them. Neither is Jacqueline Fincher or Keith Michl. Rather, these physicians fully intend to maintain their independent status. But they won’t do it by standing still.


Harbaugh, for example, founded an independent practice association, Kids Health First Pediatric Alliance. Fincher’s practice is also part of an IPA, and she and her colleagues are tightly networked with colleagues through national and statewide associations. And Michl is set to embark to transform his solo practice to one based on “affordable personalized healthcare.”


“We see a strong trend of doctors who are moving into hospital ownership,” says Dave Gans, vice president of innovation and research, Medical Group Management Association. He doesn’t believe predictions like that of the consulting firm Accenture, which in June published a report predicting that by 2013, less than one-third of physicians are expected to remain independent. Still, the trend is unmistakable, says Gans.


As of December 2010, more than 11 percent of MGMA’s 12,000 practices were hospital-owned. Seven years earlier, in 2003, that number was slightly more than 8 percent. While those numbers seem small, they represent a 40 percent growth in hospital-owned practices, notes Gans. As of December 2010, 28 percent of the doctors represented in MGMA’s membership were in hospital-based practices, compared to 17 percent in 2003 – a 65 percent increase.


MGMA data, as well as that of the American Medical Association, indicates that it is the larger practices that tend to seek hospital ownership. The average size of MGMA’s physician-owned practices is 16.6 doctors, while that of its hospital-owned practices is 70.6, says Gans. Three-fourths of MGMA’s physician-owned groups are single-specialty, which tend to be smaller than multispecialty groups.


Reimbursement a big reason


There are many reasons why doctors are turning to hospital systems for employment or to sell their practices, points out Gans. But reimbursement is king.


  • The federal government as well as private payers are forcing doctors and hospitals to lock arms by offering them “bundled payments” or “global payments,” that is, reimbursement for episodes of care, both inpatient and outpatient. Accountable care organizations are one manifestation. Another are Blue Cross and Blue Shield’s so-called “alternative quality contracts,” such as that signed in December 2010 with Beth Israel Deaconess Physician Organization, an independent practice association associated with Beth Israel Deaconess Medical Center in Boston.


  • Value-based purchasing, which rewards providers for providing high-quality, cost-effective care, could replace traditional reimbursement methods, which reward physicians for providing more care. As a result, value-based purchasing could change the way many doctors look at their practice patterns.


  • Reimbursement for some outpatient procedures is declining. In the past, Medicare encouraged the use of outpatient care by offering higher reimbursement for procedures performed in the outpatient setting than for similar procedures offered in the inpatient setting. Now, the government is clamping down, allowing the pendulum to swing back to hospitals. As a result, doctors who formed their own freestanding cath labs or imaging centers are being drawn back to the hospital, with its greater capital base.


Personal reasons


Economics aside, many doctors are drawn to hospital employment for personal reasons, says Gans. “The doctor who practices in many of these large institutions has the history and culture of that institution with him, and that’s huge.” There’s a certain prestige to being part of Cleveland Clinic, for example. And being part of a larger hospital system or IDN offers opportunities for subspecialization. “It’s difficult to subspecialize in private practice, because you need a broad referral network, which you can get if you’re part of a large health system.”


Being part of a large organization, such as an IDN, also offers the opportunity to network with many colleagues and to take advantage of continuing education opportunities, says Gans.


Then there are the much-talked-about lifestyle issues. “Many doctors are saying, ‘I would forego some income for lifestyle,’” says Gans. “That’s what you’re hearing, not just among doctors, but societal-wide. That helps to understand why many younger doctors are looking for the security of employment. They want to work hard when they’re working, but they also want the opportunity to be somewhere else [in their off-hours], to take vacations and leave their patients behind. That’s very different from doctors of previous generations.”


All that said, some physicians remain drawn to private practice. “One reason is autonomy,” says Gans. “The other is the opportunity for self-direction. Doctors don’t want to be part of a bureaucracy. They want to be flexible.


“In my opinion, we’ll see a resurgence of the IPA. It provides the opportunity for contracting and negotiating clout; it also offers the ability to sustain information systems on behalf of many of its doctors and to help the communication function. Doctors need electronic health records, but they oftentimes need that bridge [that the IPA can afford]. The IPA becomes the alternative option for the doctor to remain independent.”


Preserving the physician/patient relationship


You don’t need to tell this to pediatrician Chip Harbaugh, M.D., FAAP, managing partner of Children’s Medical Group in Atlanta. Harbaugh has been in practice 22 years. His group has 19 providers – 13 physicians, two physician assistants and four nurse practitioners – in two locations.


“My basic premise is, I want to preserve the physician/patient relationship. I feel doctors who have that relationship with their patients and know them can provide better quality and caring healthcare. I think physicians perform better when challenged by other physicians and not dictated to by payers or anyone else.”


Harbaugh has made an effort to get a broad perspective of the healthcare industry. He serves on a number of committees of the American Academy of Pediatrics, dealing with quality, education, practice management and healthcare financing. He sits on the physician board of insurer UnitedHealthcare, representing 60,000 pediatricians, and he participates in the Centers for Disease Control and Prevention’s Clinical Laboratory Improvement Committee. He also sits on committees of a number of pharmaceutical companies, including Novartis, Merck and Pfizer.


But it is his entrepreneurship that may do most to keep Harbaugh free from “being dictated to.”


Eighteen years ago, he founded Kids Health First Pediatric Alliance, a physician-owned independent physician alliance which now comprises 210 primary care pediatricians in about 35 practices. More recently, he co-founded 1st Physicians Resource, a co-operative designed to provide all physicians – not just pediatricians – a variety of outsourced business services, such as medical billing, health insurance review, human resources administration, benefits and pharmacy management, IT review, etc. Another company, 1st Healthcare Payment Systems, offers credit card processing, collections, etc., to physician practices. And a fourth, Kids Time Pediatrics, provides after-hours emergency care for kids, by pediatricians.


“[1st Physicians Resource] allows physicians to come together, remain independent and lower their overhead,” he says. “It allows them to feel there’s hope. They don’t have to sell out to the hospital.”

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