Physician-Hospital Relationships: The Hospital Morphs from Revenue Center to Cost Center

by Vince Kuraitis JD, MBA and Jaan Sidorov MD, MHSA, FACP

In our introductory posting of this series, we noted that economic incentives previously aligning doctor-hospital interests were changing. This creates the potential for The 100 Year Shift – physicians awakening to possibilities for stronger partnerships with payers than with hospitals.

In this post, we will zero in on the changing economic position of hospitals and the effect this is having on physician-hospital relationships. We will examine the trend of hospital employment of physicians and point out challenges and tensions for the future. [This is a long now might be the time to refill your coffee cup.]

Table of contents for the series--The 100 Year Shift? Strategic Realignment among Physicians, Hospitals and Payers

  1. The 100 Year Shift? Introduction and Overview
  2. Payment Transformation: From Volume to Value
  3. Physician-Hospital Relationships: The Hospital Morphs from Revenue Center to Cost Center
  4. The Practice of Medicine: from Marcus Welby to ???

Payment Transformation: From Volume to Value

by Jaan Sidorov MD, MHSA, FACP and Vince Kuraitis JD, MBA

In our introductory posting, we suggested that a huge shift is underway in the health care industry.  Decades of hospital-physician cooperation are not only eroding, we suggest this trend could accelerate.  Instead of a natural clinical and economic affinity with hospitals, we foresee the potential for physicians forming a new dyad with insurer-buyers.

In this post, we will examine what we and many other commentators view as inevitable: the demise of volume-based payment systems and how the drive for greater value will cause physicians and insurers re-examine their normally antagonistic relationship.

Table of contents for the series--The 100 Year Shift? Strategic Realignment among Physicians, Hospitals and Payers

  1. The 100 Year Shift? Introduction and Overview
  2. Payment Transformation: From Volume to Value
  3. Physician-Hospital Relationships: The Hospital Morphs from Revenue Center to Cost Center
  4. The Practice of Medicine: from Marcus Welby to ???

“The Top Ten Things You Need To Know About Engaging Patients”…and the Why

HowardrosenHi all, my name is Howard Rosen (Founder & CEO of LifeWIRE Corp), co-author of the recently published white paper report entitled “Top Ten Things You Need To Know About Engaging Patients.” You can access a copy here through the Institute for Health Technology Transformation (scroll down to “Whitepapers”.)

According to the Pew Internet and American Life Project, 88% of American adults with Internet access research health information online and 60% say Internet info influenced a decision about how to manage a health condition. Further, going online no longer is a one-way stream of information from computer to patient, but has launched into the web 2.0 reality of social networking. Patients go online to find meaningful engagements with other patients and now – not so uncommonly – with their providers. Such a trend provides opportunity for providers to distinguish themselves competitively, and more importantly, to improve the patient experience and quite pos­sibly their health outcomes.

The report is a compilation of what key health IT experts from across the United States think are the most important things you need to know about engaging patients in the digital age. There are also four key recommendations for practical action. It discusses how healthcare organizations that provide high quality outcomes for patients will be the ones who prosper under new health reform models, such as Accountable Care Organizations (ACOs) and the Patient-Centered Medical Home (PCMH). This report also explores the concerns that come with patient engagement and the advantages and strategies that should be explored.

Is Hospital-Physician Integration Sustainable?

Reprinted courtesy of MCOL.

Perspectives on a Selected Key Topic |     April 2011/May 2011     |   Volume Three Issue Two


Will a material number of hospitals and their core medical staffs, that are relatively independent, evolve into highly integrated delivery systems during this decade, and why?


William J DeMarco MA, CMC
President and CEO, Pendulum HealthCare Development Corporation

The great momentum brought about by government and private payers demand for more accountability is unstoppable. Rapid consolidation of hospitals and consolidation of physicians by physician groups, hospitals and now insurers will shift referral patterns and consumer preference. 1 out of 4 hospitals will fall short of providing value and close or be absorbed within 10 years.

Physicians will be offered higher prices to sell out to insurers and investors who value the short supply of PCPs and will try to control care demand by retooling the care system building ASC and small scale short stay hospital.

True clinical integration will follow for the survivors. The ability to prospectively develop clinical budgets and bundles of services will connect regional tertiary and quaternary care facilities to local hospitals so integration can be regionalized across larger populations and payer segments.

Once these delivery systems realize they need a product recognizable to individual consumers they will seek alliance with select insurers or create their own insurance company thereby achieving the true definition of integration which is to integrate financing and delivery of care.

This offers the shared savings with themselves and stabilizes patient flow and overhead to achieve value to purchasers and users of care.

We think these opportunities will be at a tipping point on a market by market basis over the next 5 years and will be a national definition of success within 8 years. We believe this will happen because already the bond rating companies are looking at physician alignment and payer alignment as factors in establishing credit worthiness of hospitals for expansion and mergers.

Benjamin Isgur
Director, PricewaterhouseCoopers LLP’s Health Research Institute

Integration is certainly on the rise. The notion of independent physicians may be a myth because so-called independent physicians are becoming increasingly financially tethered to hospitals. In fact fifty-six percent of physicians PwC surveyed want to more closely align with a hospital in order to increase their income. The new health reform law focuses on population health and adopts a Medicare compensation model that penalizes poor quality and rewards cost savings and electronic information sharing. Some commercial payers are also pushing this business model.

The Crucial Distinction Between “Accountable Care” and ACOs

AccountablecareWhile in Philadelphia earlier this week, my colleague Dr. David Nace presented me with a print copy of McKesson Relay Health’s newest whitepaper — Providing Accountability: Accountable Care Concepts for Providers.  I felt honored as he handed it to me and confided that it was one of only six copies in print.  I took time to read it carefully on the long flight home.

The whitepaper is a great overview of accountable care and ACOs (Accountable Care Organizations). It’s a quick and easily digestible read.

However, there is one key point articulated in the paper that I’d like to emphasize here:

accountable care is not synonymous with ACOs.

HSR Study: Focus on High-Cost Medicare Beneficiaries

Following the Money: Factors Associated with the Cost of Treating High-Cost Medicare Beneficiaries. Health Services Research; February 9, 2011

Access to the full online article is currently available for free on the Center for Studying Health System Change website.

Key excerpts:

Conclusions. Health reform policies currently envisioned to improve care and lower costs may have small effects on high-cost patients who consume most resources. Instead, developing interventions tailored to improve care and lowering cost for specific types of complex and costly patients may hold greater potential for ‘‘bending the cost curve.’’

This research uses patient-level data and a much richer set of explanatory factors than previous studies to examine key patient, physician, practice, and market characteristics associated with costs of high-cost Medicare beneficiaries, defined as the top 25 percent of beneficiaries arrayed by expected Medicare costs… we estimate determinants of Medicare expenditures (costs) at the beneficiary level….After exclusions, the analysis sample comprised approximately 1.6 million beneficiaries.

Is “CMS Innovation Center” an Oxymoron?

A press release earlier this week announced the new CMS Center for Medicare and Medicaid Innovation.

If you went to their Twitter feed today, here’s what you’d see:



This struck me as a great pictorial representation of the broader challenges the CMS Innovation Center faces:

  • They’ve kinda sorta figured out there’s a conversation going on out there — they’ve joined Twitter
  • They haven’t figured out that they need to listen:  Following = 0
  • They haven’t figured out they they need to talk:  Tweets = 0

I remain hopeful, but the CMS Innovation Center has a long way to go.  Dr. Berwick, opening up this closed organization is going to be the challenge of your lifetime.

Medicare MAPCP Medical Home Demo: CMS Kicks Sands in the States’ Faces

by Jaan Sidorov, MD and Vince Kuraitis

The Medicare MAPCP (Multi-Payer Advanced Primary Care Practice) demo promised to be Medicare’s Biggest Change in 40 Years

…but the emerging reality isn’t living up to the promise.

In this post, we’ll discuss:

  1. The Promise
  2. An Overview of the MAPCP Demo
  3. Our Main Takeaway: Emerging Reality Suggests Medicare Will Be a “Difficult” Partner
  4. Conclusion: Think Twice Before Signing Up

1) The Promise

The sandbox metaphor was first used by the National Academy for State Health Policy:

For the 10 or more states that are active stakeholders in multi-payer medical home initiatives, the promise of Medicare getting in the sandbox with them and playing (a.k.a. paying) is an exciting proposition. The addition of Medicare as payer to some of these state initiatives may be the critical tipping point that results in widespread primary care delivery system reform in states by involving more practices, payers and patients.

Is HITECH Working? #7: Where’s Plan B? Congress and ONC need to address major flaws in HITECH.

by Vince Kuraitis JD, MBA and David C. Kibbe MD, MBA

Pop quiz: Among early-stage companies that are successful, what percentage are successful with the initial business model with which they started (Plan A) vs. a secondary business model (Plan B)?

Harvard Business School Professor Clay Christensen studied this issue.  He found that among successful companies, only 7% succeeded with their initial business model, while 93% evolved into a different business model.

So let’s take this finding and reexamine our human nature. In light of these statistics, what makes more sense:

  • Defending Plan A to your dying breath?
  • Assuming Plan A is probably flawed, and anticipating the need for Plan B without getting defensive?

We question many of the assumptions underlying HITECH Plan A. We also want to talk about the need and content for Plan B in a constructive way.

In this essay we’ll discuss:

1) The Need for HITECH Plan B

2) Questioning Assumptions — Issues to Reconsider in Plan B

a) Rewarding Incremental Progress
b) Addressing Root Causes for Non-adoption of EHR Technology
c) Questioning Health Information Exchanges (HIEs) as Building Blocks for the Nationwide Health Information Network (NHIN)
d) Catalyzing Movement Toward Modular EHR Technology
e) Focusing Incentives on High Leverage Physicians
f) Recalibrating Expectations for EHR Technology Adoption
g) Getting Bang-for-the-Buck in Achieving Meaningful Use Objectives
h) Comprehensively Revamping Privacy/Security Laws vs. Tweaking HIPAA
i) Maximizing Sync Between HITECH and PPACA
j) Leveraging Potential for Patient-Driven Disruptive Innovation
k) Promoting EHR Adoption Beyond Hospitals and Physicians, e.g., long-term care, home health, behavioral health, etc.
l) Dumping Certification

3) Summing Up

Is HITECH Working? #6: HITECH and Health Reform Objectives are Synergistic

by Vince Kuraitis JD, MBA and David C. Kibbe MD, MBA


….or to be more specific, HITECH is synergistic with payment reform that could come from the recently passed national health care reform legislation — the Patient Protection and Affordable Care Act (PPACA).

We’ll keep this post fairly short and try to avoid many of the more divisive aspects of this topic. The need for healthcare payment reform is well understood on both sides of the aisle:

Realizing the full potential of health IT depends in no small measure on changing the health care system’s overall payment incentives so that providers benefit from improving the quality and efficiency of the services they provide. Only then will they be motivated to take full advantage of the power of electronic health records. Dr. David Blumenthal,  New England Journal of Medicine, April 9, 2009