Plans must pay physicians for relationship building

Physician visits are down significantly, while physicians old and young are fleeing independent practice for hospital employment. According to the American Hospital Assn., physician employment by hospitals has risen almost 60% in the last decade.

It isn’t working out very well for hospitals or those who pay the bills. In 2011, according to MGMA, hospitals lost an average of $189,000 per employed physician. Hospital systems are making up the losses by incenting employed doctors through relative-value-unit compensation arrangements to use the hospital’s expensive imaging and laboratory services more.

They are also dramatically marking up the cost of physician services for Medicare and private insurers.

Hospitals are using market muscle to compel independent physicians to choose sides by threatening to exclude them from ACO arrangements unless they bring all their patients to a single hospital system. For many health system executives “aligning” physicians isn’t about saving money; it’s about achieving market power and growing the franchise.

If physicians are to exert influence over the future shape of healthcare, insurers and employers must support an independent physician sector by paying for care in a way that empowers physicians to improve care and save money.

A recent paper commissioned by The Physicians Foundation, “A Blueprint for a More Effective Physician-Directed Health System,” found that insurers must be willing to pay for “relationships” between their subscribers and physicians. Payment for these relationships should not overlay on the present cumbersome fee-for-service system but function rather as a low maintenance, low overhead substitute payment model.

Relationships are essential not merely for healthy patients with traditional primary care physicians. For patients with chronic disease risks that compromise their health, relationships are even more important and should encompass the relevant specialists. Those relationships are essential to help patients manage their part of the clinical risks they face.

When patients become acutely ill and require complex care, rather than paying for hospitalizations, procedures and multiple lines of physician services, insurers should pay for complete clinical solutions supervised by physicians. A single, severity-adjusted payment would be made to a “general contractor” who would coordinate all care from diagnosis and staging through intervention and recovery. Unscheduled care and diagnostic visits would continue to be paid on a fee basis.

Physician enterprises, both single and multi-specialty, as well as physician sponsored Independent Practice Associations should be able to function as general contractors for clinical solutions. Simply paying hospitals a bundled payment around a complex clinical intervention, including associated physician fees, will only accelerate the consolidation of the physician sector under hospital control.

Rather, when a patient is given a diagnosis of a serious condition, insurers should present patients multiple choices, including physician sponsored options, and patients should be able to benefit from reduced cost sharing or even bonus payments for selecting the “high value” option. These choices should transcend those offered by the local hospital monopolies.

Unless patients are given choices and opportunities to save money, and physicians given management responsibility within a defined budget, insurers are unlikely to be able to contain healthcare expenses meaningfully because they will be prisoners of local hospital monopoly pricing.