Trendspotter: Do We Want Hospitals to Run Health Care?

Major changes in the healthcare delivery system are coming, and they will affect every physician. The question is whether those changes will have the effect we all want or whether they will lead to unintended consequences that we don’t want.

Back in the 1990s, during the debate over the Clinton plan and in the period following its rejection, hospitals and physicians began preparing for what they assumed was going to be a massive shift to prepaid managed care. While that never happened, many physicians joined larger single-specialty and multispecialty groups, and hospitals purchased many practices, some of which they later returned to their owners. Something similar is happening now as hospitals snap up practices right and left in anticipation of a reform-driven shift to various types of financial risk. According to one estimate, around half of the doctors in the country are already working for hospitals, and there are some markets where hardly any private practices still exist.

Some experts believe that the fragmentation of our delivery system is responsible for much of our out-of-control spending and the poor quality of care, especially at the primary level. In that view, the disorganization of American medicine, coupled with fee for service and overspecialization, encourages redundant, wasteful, and even harmful care. But I question whether hospitals and healthcare systems are the right agents to reduce this fragmentation by employing more and more physicians.

The problem with the hospital-centric view of the world is that it’s all about hospitals. Whether for-profit or not-for-profit, hospitals seek to maximize their revenues, their market share, and their competitive advantage. In that sense, they’re very much like corporations in any other field. When they employ physicians, they’re thinking about the value of each doctor’s admissions – about $1.5 million per year, on average – and whether they want their competitors to get those referrals. They may also be considering how a particular physician or group can help sustain or grow existing or new service lines and feed new imaging equipment.

Having hospitals run a revamped, better-organized system creates other issues as well. One is related to the mal-distribution of specialists, which is endemic across the country. Some communities are saturated with specialists, while other communities have very few or no specialists in certain key fields. As hospitals control an increasing percentage of physicians, some facilities will not be able to provide certain kinds of care, because the competing hospital in town has locked up all of the specialists who are capable of providing those services.

There is much validity in the concept of “accountable care organizations”--combinations of hospitals and doctors that can provide particular services or types of services for a budgeted payment, with the ability to share in cost savings. ACO supporters say that these organizations might be “virtual” organizations that tie together independent practices and hospitals through information technology. Unfortunately, however, one outcome of the move toward ACOs and payment bundling-both goals of the reform legislation-might be the growth of hospital power in many communities. And I don’t think we should place responsibility for the future of healthcare in the self-interested hands of hospitals.

I’m not predicting that this is the only possible result of current trends. We’re also facing the influx of millions of newly insured patients in 2014, and it’s clear that there won’t be enough primary-care physicians to care for them. That will be true even if every primary-care doctor in the country is working for a hospital by then. So we’re going to see an increasing emphasis on community health centers, which have received a steep increase in funding from the Obama Administration. Those clinics, which now care mostly for poor patients who have little money, will soon be seeing more middle-class patients-just as retail clinics do. So they will be competing with hospitals, but I don’t see them ever having the same power and influence that the healthcare systems do.

What we need now is for policymakers to give some serious thought to the long-term implications of the trends that are now being set in motion. It’s always easier to make course corrections along the way than to deal with unintended consequences later on.