When medical practices join hospitals or larger health systems, they can be in for changes much bigger than a new name on the sign out front.
But that hasn’t kept increasing numbers of practices from merging. A 2009 study by the Medical Group Management Association predicted that by this year, 40 percent of primary care physicians and nearly 20 percent of specialist physicians would be employed by hospitals.
In Pennsylvania today, the actual percentage of physicians who are employed instead of practice owners is more like 60 percent and growing, according to Rick Shaffner, senior vice president and COO of Holy Spirit Health System.
“There are decreasing numbers of physicians coming out of residency programs, lower reimbursement rates for physicians, increasing levels of malpractice risk and decreasing numbers of physicians in Pennsylvania,” Shaffner said. “Physicians have been seeking refuge through stronger hospital affiliations.”
That doesn’t just mean tiny practices, either.
Last year, Dr. Joseph Cincotta was medical director of the Heritage Medical Group, which included about 60 providers in 12 locations. In April, the 14-year-old group merged with PinnacleHealth, and Cincotta is now medical director of PinnacleHealth Medical Group.
Cincotta said he didn’t remember which party made the first move; the decision came down to a determination that, given the trends in health care, “We felt that we would be better off” merging.
The merger became official on April 1. Although the physicians’ offices haven’t moved and the staff hasn’t changed, Cincotta said, the process of integration is far from complete. One example is the electronic medical record system.
“Right now we’re running on a different EMR platform than the PinnacleHealth doctors are,” Cincotta said.
The expenses of EMR are a major factor pushing many practices to merge, he said, but it’s not just the installation cost. Heritage already had installed the system before the merger. EMR systems will enable the use of aggregated patient data to manage care, he said, but that doesn’t come automatically, and it involves a lot of analytics.
“It’s a great tool, but you’ve got to have the infrastructure to leverage that,” Cincotta said.
Chris Markley is senior vice president of strategic services and general counsel of PinnacleHealth System. He said mergers have added 24 existing primary care, specialty and imaging practices to PinnacleHealth in the past 15 months.
All 500-some workers at those practices have undergone PinnacleHealth’s new employee orientation, but the integration process has a way to go.
“One of the big challenges is trying to integrate processes and technology,” Markley said. “We don’t try to immediately change everything.”
The goal is a highly integrated system of care with a free flow of information, Markley said, but he noted that although merging systems and using the same technology and protocols is a good way to do that, it’s not the only way.
“We work very closely with a lot of physicians who aren’t employed with PinnacleHealth,” he said. “There are other models besides just employment that lead to good implementation of care.”
At Holy Spirit, Shaffner said, there have been six physician practice group deals since September 2009. Some of those practices have stayed in place, while others have relocated “due to building leases ending or to consolidate other services with them.”
Holy Spirit also puts all new employees through orientation, including classroom and online instruction, as well as individualized training. In some cases, Shaffner said, a specialized training program is customized for a larger physician practice.
Relationships between hospitals, physicians/clinicians, payers and patients will continue to change, Shaffner said. With more practices being purchased by health systems, referral patterns are shifting, and practices do lose their autonomy to a certain degree.
But, he said, the result will be worth the adjustments: “Collaboration between clinicians, administrative and finance staff, and others is necessary to create a measurable improvement in the quality, cost and value of health care.”
Pitfalls of merging
In health care, bigger is not automatically better.
In June, the Robert Wood Johnson Foundation released an update to a 2006 study on the impact of hospital mergers on price, costs and quality of care. It reported that preliminary data indicate physician-hospital mergers have similar outcomes — but noted the case studies come from the 1990s, as current physician-hospital mergers are too recent to have been studied.
The update said a key distinction is whether mergers are consolidations, in which two separate entities are brought together, or true integrations, which feature elimination of unnecessary duplication, creating systems to bring the programs together and comprehensive management of the organization as a whole.
“Consolidation without integration does not lead to enhanced performance,” the report said, citing increased prices and a lack of improvement in care.
The report also noted that the Federal Trade Commission has become more aggressive in pursuing antitrust cases against hospital mergers.
Central Pennsylvania has seen its own variant of those concerns with the 2005 creation of Urology of Central Pennsylvania from five independent practices in the Harrisburg area; the five cited a desire to operate more effectively and offer more services to patients. Last October, however, Pennsylvania Attorney General Linda Kelly announced that UCPA was paying $100,000 as part of an agreement to resolve monopoly concerns.
Before the merger, Kelly said, doctors in the practices referred patients to a variety of radiation oncology centers in the area. Afterward, they opened their own radiation oncology center and referred nearly all patients there. Kelly said the move substantially lessened competition, which then allowed UCPA to request price increases for its services from area health insurers.
UCPA denied wrongdoing. As part of the agreement, it must provide patients prescribed radiation oncology or CT scans with a list of other local providers of those services.
Nils Frederiksen, spokesman for the Pennsylvania Attorney General’s office, said whether any particular health care merger may constitute a violation of antitrust rules is based on the circumstances.
“A merger of two organizations in Philadelphia is going to have a much different impact on the marketplace there than one in Carlisle will have,” Frederiksen said. “Our concerns are always the same: Will this have a negative impact on competition, on price, on access to services in that particular area?”