California law allows affiliation, but bars health systems from directly employing physicians
Providers may still be waiting to see where federal reforms will lead the American health care system when it comes to payment models or expanded access. But many physicians and hospital administrators say at least one trend seems to be unwavering: the demand for improved coordination among hospitals, doctors and other elements of the delivery system.
Confidence in this need for improved clinical integration is one of the factors prompting a rash of agreements tightening the links between doctors and hospitals nationwide including one inked earlier this year between the newly formed DCHS Medical Foundation and the San Jose Medical Group.
"The genie is out of the bottle. Nobody can put the genie back in the bottle. This journey is going to continue, with or without health care reform," said Robert Issai, president and chief executive of Daughters of Charity Health System of Los Altos Hills, Calif., the parent company for the medical foundation.
Daughters of Charity Health System is a regional health ministry with hospitals serving multiple markets along the California coast between San Francisco and Los Angeles. Ultimately, plans call for the DCHS Medical Foundation to expand its reach in collaboration with local medical staffs at all six of the system's hospitals, according to the announcement. Initially though, the foundation is focusing on the San Jose area.
The DCHS Medical Foundation employs more than 200 primary care and specialty physicians in the San Jose Medical Group. Those doctors provide patient care at San Jose's O'Connor Hospital, a member of the Daughters of Charity Health System, and through existing multispecialty, community-based clinics in San Jose.
"With health care reform comes a new culture and the demand for closer collaboration and partnerships between hospitals and physicians," Issai said when announcing the agreement in April. "Coordinating and integrating hospital and physician clinical services through the DCHS
Medical Foundation furthers our mission and serves the best interests of our patients and the communities we serve," Issai said.
Physician employment
Over the past decade, the number of physicians contractually aligned with hospitals has increased steadily, according to a recent report by the Robert Wood Johnson Foundation. Interest in such arrangements has sharpened since the Patient Protection and Affordable Care Act was approved by Congress in 2010, said Maribeth Shannon, director of the market and policy monitor program at the California Healthcare Foundation, a nonprofit philanthropic foundation.
In a May 2011 article in the New England Journal of Medicine, Dr. Robert Kocher and Nikhil R. Sahni attribute hospitals' appetite for physician practices in part to the fact that the federal law promotes new payment systems that raise the importance of population health management and include bundled payments to Accountable Care Organizations (in which a single payment is made for all providers involved in an episode of care). The authors also attribute the trend to the market power inherent in large integrated delivery systems.
The authors cite the Medical Group Management Association's findings that the latest wave of practice acquisition has been going on for more than a decade. Physician practices owned by hospitals increased from around 20 percent in 2002 to over 50 percent by 2008.
In California, one of only a few states where state laws prohibit the "corporate practice of medicine," the story is different. While private and not-for-profit hospitals can't directly employ doctors (California law exempts public hospitals and teaching hospitals), they have the option to set up contractual arrangements including affiliated medical foundations with independent boards and governance. Medical foundations can employ physicians directly.
"We're seeing more interest in forming these medical associations in the last two years than we have in the last 10," Shannon said.
This is the model chosen by the Daughters of Charity Health System and the San Jose Medical Group, and the model is becoming increasingly popular. "With the passage of the Affordable Care Act there is more interest in hospitals and physicians coming together in a tighter fashion to support things like ACOs," said Shannon.
The new payment and delivery models envisioned by health care reformers encourage integration in order to improve patient care and cut costs by reducing preventable readmissions, managing chronic diseases and avoiding duplication of tests and treatments. This clinical streamlining requires better alignment and communication between physicians, hospitals, physical therapists, long-term care providers, home health agencies and other members of the care team.
"Clinical integration is important for physicians because they need to know why the patient is in their office," explained Dr. Dean Didech, chief medical officer for the DCHS Medical Foundation. "They need to know the results of the tests that were done and which tests were done. They need to know what the plan was from the physician who took care of (the patient) in the hospital, or the reason the primary care physician is referring them. The hand-offs need to improve."
Physician-led care
The DCHS Medical Foundation is an independent organization with its own board of directors made up of representatives from San Jose Medical Group and Daughters of Charity Health System. An important aspect of the board is that most of its members are physicians, said Ernest Wallerstein, the foundation's president and chief executive. Wallerstein, like Didech, came to the foundation from San Jose Medical Group.
"It's a physician-directed organization. The majority of the board members are physicians, and the majority of the operating committee are physicians," Wallerstein said. "We think it is absolutely critical that physicians direct how health care is going to be delivered. They're the ones that best understand the needs of the patients."
The foundation pays the physicians in the group and handles all the other business management aspects of a medical practice including billing, marketing, human resources and technology. "In our case, we strongly believe that the efficiencies we will generate will actually lower the cost of care for a given patient population," Wallerstein said. "We believe that the savings we generate and share with the financially responsible party will allow us to increase the reimbursement for the physicians for the care they provide while lowering the cost of care."
But the foundation is more than a merger of businesses, Wallerstein said. Its administrative infrastructure will eventually lead to true integration of patient care services along the care continuum. In the first six months of operation the foundation is well on its way in accomplishing an important step of integrating the electronic medical records between the hospital and the foundation's clinics and doctors' offices, Wallerstein said. This will enable "real-time" communication between clinicians at different care sites, so everyone involved can stay up to date on procedures, test results and changes in a patient's health status.
"Clinical integration is important to providing good care and reducing duplicate care. And those are the kind of things that don't happen without a special, dedicated organization to make them happen," Wallerstein said.
Copyright © 2012 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.