The story line on 2011 is simple: It’s healthcare reform and the continuing call for providers to hold the line on healthcare costs while improving quality. This week on Repertoire’s blog we’ll take a look at some of the leading stories of 2011 based off of the December issue’s cover story. For the full story and issue visit


Physician-hospital alignment


Talk of “alignment” of physicians and hospitals marked the landscape in 2011, with implications for patients, providers, payers and supply chain professionals.


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 represented a 40 percent growth in hospital-owned practices, noted Dave Gans, MGMA’s vice president of innovation and research. (October 2011 Repertoire.) 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.


There are many reasons why doctors are turning to hospital systems for employment or to sell their practices, said Gans, who listed three of them:


  • 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.


Early in 2011, MDSI (publisher of Repertoire) released the results of its “2011 Physician Alignment Survey,” in which hospital and IDN supply chain executives were asked about alignment activities. Eighty-five percent reported that their hospital or IDN was actively acquiring or hiring physicians or physician practices. Seventy-eight percent of the materials executives said they planned to maintain one prime distributor to service both hospitals and non-hospital facilities, while 22 percent said they planned to work with two prime distributors – one to service acute-care facilities, one to service non-acute-care facilities.


Doug Shaver, senior vice president of strategy and business development for McKesson Medical-Surgical, told Repertoire (May 2011) that while materials managers may be planning to maintain one prime distributor relationship for all sites of care, they might change their mind once they see all that’s involved in servicing their newly acquired physician practices.


“The spend, if you will, for these physician practices is approximately 1 percent of the materials manager’s total responsibility,” said Shaver. “So the dollars we’re talking about are relatively small. Materials managers have huge responsibilities; they manage a very, very big spend amount; and typically, they have objectives every year to save their IDNs money. When you’re looking at 1 percent of the total spend, their total savings opportunity is minimal compared to the rest of the IDN’s budget.”


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