Friday, October 01, 2010

Health Care's Seismic Tremors

Today marked the official announcement that the 12-man cardiology group, North Shore Cardiology, will officially join NorthShore University HealthSystem on 1 January 2011.

In other words, they'll be employees of our large hospital system like me.

For long-term readers of this blog, most will recognize this as an expected result of our most recent health care climate change. These days with reduced payments for services and tests, paired with the threat of bundled payments for episodes of care around the corner, such a consolidation is a logical consequence for cardiology practices in large urban environments. Private cardiology groups have felt a particularly heavy blow to revenues after the government slashed payments for some diagnostic tests nearly 40% since the first of the year (hospital systems were not affected to this extent).

For patients, they shouldn't note much difference, but referrals to hospital facilities will now be along hospital affiliation lines, rather than patient geographical preference. Subspecialist referrals also might be a bit different, since subspecialist utilization will be along the lines of hospital affiliation as well. It will not be to the employee-cardiologist advantage to refer cases outside your own system since that would be like biting the hand that was feeding you.

There used to be some advantages to cardiologists to remain independent. For instance, they could advocate for greater roles on leadership in the hospital administrative levels or insist on better staffing for their patients by threatening to refer their patients to a competing health care system. But this method also used patient referrals as pawns in these political games.

No longer will that occur.

But doctors will increasingly find greater conflicts between the needs of their patients and the needs of their business-minded hospital employers. Their loss of independence will require they been seen as "productive" lest their salaries or jobs be cut. They are now dispensable workers rather than critical caregivers and entrepreneurs.

There is also the challenge of joining cardiology groups and maintaining a fair compensation arrangement. Hospital systems need skilled specialists and deals are always cut to consummate these unions. No doubt there was a long process of bargaining on both sides of the deal. For those already in large systems, they understand that they also are at risk as hospital systems look to thin their payroll overhead. Fortunately, the expected bolus of patients to the system in 2014 paired with the stiff competitive environment locally is likely to help deter physician layoffs in the near future.

But there are competitive advantages - a strength in numbers if you will - to having a solid group of cardiologists at your health center, especially ones based close to the hospitals themselves. It forms a formidable competitive environment for others who want to stake a claim to the geography inhabited by these doctors for they are the locals - well known by the community - and supplanting them will come with significant costs in terms of marketing and facilities to those who might desire to enter the area.

The seismic shifts in health care delivery are well underway - from ongoing practice consolidations like ours with larger and larger competing urban health systems, to McDonald's threatening to drop their "mini-med" insurance plans and Principle Financial Group exiting health insurance altogether.

It's going to be an interesting time, but one thing's for certain...

... resistance (at least for the forseeable future) is futile.



jimbino said...

Thank goodness for Mexico, so far from God and so close to the American medical consumer market!

Keith said...


I often think about the issues you raise here. How is significant change made that benefits our patients? Is it better for physicians, patients or both to have this consolidation take place? Should physicians stop whining about the state of their profession if they throw in the towel and concede their futures to the blue suits? After all, if you feel the allure of higher revenue through the market leverage of a big institution, you have to realize that you may become an expendable employee at some point, just as many middle managers have become in this latest recession.

Furthermore, where does your allegaince lie? Do you refer only to those in system so as not to "bite the hand that feeds you" or do you refer to who you think is the best fit for your patient? Will physicians eventually be doing the bidding of their masters or their patients?

I don't disagree with the concept of organized medical groups, but I do worry about an imbalance of control, where medical organizations are controlled by the MBA's with little health care experience or knowledge. Physicians constantly are aceding their influence on the process by allowing themselves to be bought off with a fat paycheck to do the corporate bidding. This, it seems, is the scarier senario to worry about.

Anonymous said...

I thank God my husband's specialty is, at least for now, off the radar of consolidation and even mandated coverage. He's solo, medicare and medicaid don't cover his services, so he's not a provider, and he has a thriving practice and we're looking at his retirement in 10-15 years. For now we're hunkering down, saving like crazy, paying off all debt and looking into the future when he can retire!

The Happy Hospitalist said...

The great thing about having just one cardiology group at a hospital with "exclusive rights" is that if the hospital starts yanking their chain, they can all walk out immediately and leave the hospital high and dry.

I would suggest such "organization" actually strengthens the cardiologists bargaining as "employees".

Anonymous said...


As during the industrial revolution - capitalization -wherein skilled artisans became disposable workers, this change in system strikes a familar note. Overwhelmed entrepreneurs joined unions. Welcome to the revolution!