Case study: Physician integration could hurt more than it helps
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Two large hospital systems in the metropolitan area—Greenville Hospital System University Medical Center (GHS) and Spartanburg Regional—have recently begun to increase the number of physicians they hire, but at the same time, the hospitals are struggling with an economic downturn, population growth and more and more patients who are uninsured.
In July 2010, a team of HSC researchers visited the Greenville-Spartanburg region and conducted a Community Tracking Study, interviewing more than 45 healthcare leaders including insurers, physician groups, state and local health agencies, among others.
Since 2007, GHS has increased its number of employed physicians from 160 to more than 550—employing five times the number of physicians it did a decade ago. Spartenburg Regional now employees almost 270 physicians, up from 180 physicians three years ago.
“Physicians continue to sign on to the hospital-employment model for various reasons, including maintaining their patient base, improving reimbursement and rising costs of practice,” the researchers wrote in the report "Greenville & Spartanburg: Surging Hospital Employment of Physicians Poses Opportunities and Challenges."
However, “many respondents noted that moving to an employed model does not necessarily result in well-coordinated care for patients." This may be due to the fact that hospitals are still attempting to develop the clinical-care processes and practice tools needed to facilitate coordinated patient care.
Another problem within the area is that both GHS and Spartanburg Regional use different inpatient and outpatient EHRs that are “not interoperable," making coordinated care difficult to configure. Additionally, the increase of hospital-physician alignment, particularly under a fee-for-service reimbursement model, involves risks.
“The greater negotiating leverage of aligned providers over health plans can lead to increased overall costs through higher payment rates,” HSC reported. “Increased provider alignment also can affect patient access to care when contracts between large hospital systems and payers are not renewed, disrupting the plan’s provider network.”
The survey also concluded that:
- Although BlueCross BlueShield of South Carolina dominates the commercial insurance market, it and other insurers have lost leverage in payment rate negotiations due to the increased hospital-physician consolidation. In addition, employers have also had to trim employee health benefits due to the economy; and
- In response to high rates of emergency department use by uninsured and Medicaid patients, new initiatives are attempting to increase the integration and coordination of care for Medicaid and uninsured patients, even as the state faces a significant Medicaid budget shortfall.
Since the start of the recession, Medicaid enrollment has increased by more than 100,000 people, reaching almost 850,000 people by 2010’s year end. South Carolina now has an estimated $228 million Medicaid shortfall through the end of fiscal year 2011 and a $663 million shortfall that will begin July 1.
And while the state of “South Carolina is legislatively prohibited from directly reducing provider payment rates,” HSC reported, the South Carolina Medicaid agency is currently operating with a $100 million deficit.
The enaction of the health reform bill will have a major impact on these health systems and state officials have estimated that the state expects an additional 400,000 people to enroll in Medicaid—one-third of the state’s population.
The report said that the following questions are still unknown:
- How will the increasing hospital employment of physicians affect the balance of power among providers and health plans? Will increased employment lead to effective hospital-physician integration? Will this mean greater efficiencies and improved quality of care or higher costs?
- Will GHS and Spartanburg Regional, with their cadres of employed physicians, be at the vanguard of ACO formation? If so, how will care delivery change in the community?
- How will employers cope with increasing premiums? Will more small employers simply opt not to offer health insurance or will additional shifts to consumer-driven health plans help moderate premium increases?
- Will state and local initiatives to improve coordination of care for Medicaid and uninsured patients succeed?
- How will the South Carolina Medicaid program resolve pending budget shortfalls and prepare for a possible influx of 400,000 new enrollees under health reform coverage expansions?
“The stepped-up employment of physicians, particularly primary care physicians, highlights hospitals’ efforts to gain market share, feed referrals to employed specialists, capture admissions, and position themselves for expected payment reforms under health reform,” HSC President Paul B. Ginsburg, PhD, concluded.