Hospitals…Thinking About Getting Into Health Insurance? 6 Reasons To Lie Down Until the Urge Goes Away.

Greg Masters reports on a recent Kaiser Health News article: Hospitals Look to Become Insurers, As Well as Providers of Care”.

This is the dumbest idea I’ve heard since “I’m going to invest all my money in Facebook’s IPO and get rich!”

Here are six reasons why:

The Practice of Medicine: from Marcus Welby to ???

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

Physicians face great uncertainty. According to a survey conducted by The Physicians Foundation, the great majority of physicians (89%) believe the traditional model of independent private practice is either “on shaky ground” or “is a dinosaur soon to go extinct.”

In the face of this uncertainty, many physicians are jumping to a conclusion that “I have to sell my practice to the hospital.” In this post of our series on The 100 Year Shift, we will examine physician practice.  We’ll show that the economic and clinical environment  is changing rapidly and that selling to the hospital is one option. However, it is not the only option.

Table of contents for 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 ???

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 post...so now might be the time to refill your coffee cup.]

Table of contents for 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 ???

Will Health Plans Continue to Buy Up Hospitals?

I doubt it.

IMHO, the recent acquisition by Highmark Blue Cross Blue Shield of West Penn Allegheny Health System (WPAHS) for $475 M is unique to local market conditions. It was done as a last resort and should not be taken as a signal that health plans are starting a hospital buying binge.

Why are hospitals unattractive investments for health plans:

Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities

It’s time to call it — the Medicare Shared Savings (SS) ACO is dead-in-the-water.

Ironically — at the same time — commercial payers are awakening to ACO opportunities.

Please read further.

Aetna, Cigna, Wellpoint Recreating Their Business Models

Major U.S. health insurers, including Aetna Inc., Humana Inc. and WellPoint Inc., are retooling to become more than just health plans, in the wake of the federal health-care overhaul that is changing the rules for the industry’s core business.

Diversification plans, touted in meetings with investors this year, include stepped up acquisitions and partnerships that will allow the companies to employ doctors directly, deliver health-information technologies, and participate in new hospital-doctor groups known as accountable-care organizations.

Wall Street Journal; May 12, 2011

Does this make sense? Absolutely!

BlogTalkRadio Interview — Is Hospital-Physician Alignment Sustainable?

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Why have hospitals increasingly been buying physician practices?  Are these marriages based on true love or convenience? Will these marriages survive?

To address these questions, let’s take the long view (50–100 years) and revisit 7 assumptions that have driven us to today’s healthcare non-system:

  1. Healthcare payment systems have rewarded piecemeal work.
  2. Despite uneasiness, hospital-physician relationships have been cooperative.
  3. Physicians can function effectively in small/medium size practices.
  4. The healthcare mindset: built on control, not collaboration.
  5. Barriers to sharing patient info and coordinating care are high.
  6. The hospital has been the economic bedrock of the community.
  7. Health plans are the bad guys.

For more details and discussion, tune in to tomorrow to BlogTalk Radio. Host and ACO guru Gregg Masters will be interviewing me and we’ll discuss the topic of “Is Hospital-Physician Integration Sustainable?”

The details:

Wednesday May 11th 2011 broadcast, at 11AM Pacific/2PM Eastern

Click here to add a reminder to your calendar or to read more information about our session.

UPDATE: May 11, 2011. A replay or download of the interview is now available by clicking here.

Is Hospital-Physician Integration Sustainable?

Reprinted courtesy of MCOL.

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


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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?

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William J DeMarco MA, CMC
Demarco1
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
Isgur2
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.

Tire Kickers Need Not Apply: 8 First Impressions of the Medicare ACO Rule

On March 31, CMS released the long-awaited “Medicare Shared Savings Program: Accountable Care Organizations” document (ACO Rule). Read the details here (strong suggestion: unless you’re working on your PhD in ACOs, start with the fact sheets).

There are many surprises. Here are eight first impressions on this 429 page tome:

  1. The bar has been set high…very high.  Tire kickers need not apply.
  2. Don’t expect to see many or any small ACOs.
  3. Patients will be confused by ACOs.
  4. Concerns over maintaining competition and avoiding antitrust are being taken seriously.
  5. CMS scores points for coordinating the ACO Rule across Federal agencies.
  6. CMS loses points for micromanagement and a controlling mindset.
  7. Possible losers — hospitals, ACO vendors.
  8. Possible winners — physicians, health plans.

The details follow.

The 6th Thing to Watch in the Medicare ACO Regulations

Health care lobbyists and advocates are bracing for six pages of the health care reform law to explode into more than 1,000 pages of federal regulations when the Department of Health and Human Services releases its long-delayed accountable care organization rules this week. Politico

What should you be looking for as you snuggle by the fireplace this weekend reading the draft ACO regs?

Rob Lazerow writes a helpful article listing 5 Things to Watch in the Medicare Shared Savings Program Proposed Rule. His list of five key design issues includes:

  1. How will patients be assigned to ACOs?
  2. To what cost benchmark will ACOs be compared?
  3. How will bonuses be calculated and paid?
  4. For which quality metrics will ACOs be responsible?
  5. What is the application process?

I’d like to add a sixth  item — which actually would be #1 on my list.

As I’ve previously written, IMHO the central issue around ACOs is:

Are (hospitals and doctors) viewing ACOs as a way to truly develop patient centric, collaborative care or as a means toward consolidating market power against payers? We really don’t know.

So here’s item #6: