Doctors: Don’t surrender to market forces

Forming alliances, direct contracting are options

By Elizabeth Gallup, MD, JD, MBA

Physicians are nearly drowning from the undertow of insurance, hospital, and other administrators who have seemed to gain control of the health care agenda in the vacuum of physician leadership. We have been largely in absentia during the roll call for the vote on managed care (or as some have called it, managed cost). However, unlike lemmings that march toward the sea, we are not without recourse. We can flex our atrophied political muscles and win contests of will and stamina in the managed care marketplace.

Growth of physician organizations has skyrocketed over the years. This is due to a lot of different forces. The red ink is flowing from insurers and hospitals trying to manage the physician practices they so aggressively purchased. Currently, a conservative estimate is that only 17% of the hospitals that acquired practices between 1989 and 1994 achieved a positive return on their investment. About a year ago, a group of physicians in the South picked up their check for $1.5 million, the goodwill price for which they sold their practice. Six months later, the same physicians were complaining bitterly about the relationship with their hospital employer. (See story about an alternative to hospital ownership of physician practices, p. 145.) Within one year, they had hired an attorney and found a way to leave the organization and strike out on their own again, even though it meant that they had to leave their own community.

Fighting back against the control and dominance of hospital systems is one of the market forces causing physicians to form independent groups to capture and aggressively manage capitated contracts. Direct contracting between physician and payers is growing because capitated contracts must be physician-driven. Therefore, payers are giving physician-driven networks the nod to set better utilization and quality benchmarks. In these networks, patients are best situated to receive the best care for the dollar, and high-performing physicians are more likely to be satisfied and motivated on the job.

In addition to the attractiveness of maintaining or regaining autonomy through participation in physician-driven organizations, the timing for direct contracting is fortuitous for physicians. The federal government has finally cleared the way for physician-sponsored networks (PSN) to directly market to and manage the Medicare population. PSNs are going straight to the Medicare patient, and in some cases, even straight to the employers with their products.

Physicians form larger organizations

Whether in partnerships with hospitals, practice management organizations, payers, or investment firms, physician organizations have had to band together to create larger, stable groups to capture and manage contracts. Not unlike hospitals merging for economies of scale, physicians are transitioning from solo and small group practices to multispecialty clinics, group practices without walls, independent practice associations, cooperatives, and hybrid physician organizations. Whereas in 1985, 70% of medical practices were one- or two-person practices, by the year 2000 the statistic will have flip-flopped, with more than 70% of physicians expected to be practicing in groups of 10 or more persons or in contracting alliances with physician organizations.

Though no constituency carries the silver bullet to eradicate health care delivery problems, physicians have the ability to push the envelope. One of our more powerful tools is outcome measurements. To date, the focus of managed care has been on cutting costs, primarily through cutting reimbursements. This includes care denial. With the public outcry against the straitjacket of managed care protocols, more organizations are focusing their attention on gaining quality and efficacy through improved outcomes. It is with our pens that outcomes are improved, and our organizations should be spearheading this effort. Physicians bring to the table the consummate skills for managing diseases, especially diseases requiring extensive treatment and teamwork.

A solid physician organization that will withstand the rigors of time, organization stresses, and capitalization issues often requires a partnership with another organization. (See story for tips on choosing the right partner, p. 153.)