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Ann Thorac Surg 1995;60:1476-1480
© 1995 The Society of Thoracic Surgeons
Department of Cardiothoracic Surgery, Cedars-Sinai Medical Center, Los Angeles, California
Abstract
The format for future cardiothoracic surgical practices includes the option of a hospital-based group where provider groups and the hospital share the responsibilities and obligations of clinical care and the cost of that care. Based on personal experience at the Cedars-Sinai Medical Center, Los Angeles, three separate contract relationships during our tenure have reflected the evolution of cardiothoracic surgeons' relationship to our patients and the hospital in which we work. Although other organizational modes may prove equally successful, the hospital-based group practice is a viable structure that supports the preservation of quality in the work performed. This relationship helps to maintain a steady volume of patients enabling research endeavors, which are primarily funded through practice incomes, to continue and it also provides a platform for networking with defined patient referrals, shared services, and benchmarking with other centers.
When initially asked to make this presentation in support of the proposition hospital-based group practice offers the best opportunity for the future practice of cardiac surgery, we thought this would be a relatively straightforward exercise. In approaching the issue, we decided to share with you what has been a very personal experience and let you decide for yourselves.
An Evolving Relationship
Twenty-five years ago when Dr Matloff arrived at the Cedars-Sinai Medical Center from the original Peter Bent Brigham Hospital, he followed what he believed to be the predominant model at The Brigham and developed cardiac surgery as a hospital-based team of full-time, salaried cardiac surgeons, anesthetists, surgical cardiologists, perfusionists, and nurses.
For the first 12 years, and with a three-page contract, our clinical practice and research activities proceeded without significant external concerns. However, there were some monumental internal battles that occurred as a result of attempts to develop a variety of initiatives that would have been good for cardiovascular services, the hospital, and the community, such as local and regional outreach programs, a thoracic organ transplant program, a cardiovascular institute, and international programs in other countries. These did not work out because of perceived concerns in other departments about issues of control.
Essentially, at that time there was not enough of an economic problem for the hospital to pursue innovative changes, and therein lies the underlying reason why having a hospital base can be problematic: the politics of departmental images and proper timing.
Twelve years ago for very compelling corporate and tax reasons, Cedars reorganized our group after the model of service departments. We became the fourth cog of clinical laboratories, radiology, and the emergency room, working as a contract group with a new 28-page, one-appendix contract that exquisitely defined our relationship with the hospital. This was an excellent relationship because no one else was involved with what we were doing and the hospital and our group were careful to live by the terms of the agreement.
However, over the last 4 to 5 years, we began to have increasing problems with external forces, notably the Internal Revenue Service. They were concerned about the potential for fraud in our relationship with the hospital, having to do with perceived patient referral patterns. In each of those years we were audited and there was never a penalty assessed.
At the same time, the hospital began to be more concerned about the changes that were beginning to characterize the healthcare market. California has very structured corporate practice of medicine statutes; as the hospital began to develop its strategies for dealing with managed care, there was a sense we would all be better off if the cardiac surgical group was once again salaried. And so in our third iteration of a contract, we now have more than 80 pages, with five appendices. This evolution in contract size and complexity fairly reflects and parallels what has happened to the environment in which we work.
Over the past months, we have struggled with the task of trying to cogently develop the arguments for why cardiothoracic surgeons should consider doing what we have returned to. Although we intuitively believe we have done the right thing, we are concerned to tell you it is something that our specialty should also consider on a wider basis.
Historically, the practice of cardiothoracic surgery has involved a multitude of arrangements and clinical case mixes; adding a hospital to the equation only has the potential to exacerbate the complexity of the solutions. There have been no studies to explore the universe of concepts of cardiothoracic surgical practice, and the experiences of cardiothoracic surgical practice are anything but reproducible. It is an individual and experiential world we live in. Even if we agree that being hospital-based is appropriate at this time, how do you do it? Should it be as private practitioners committed geographically full time, as contracted physicians who are salaried or have a percentage participation agreement, or as some other variation on the theme?
The title, ``Ideal Practice for the Future?'' somehow suggests or implies there has been an ideal practice mode in the past, and that we are now uncertain about what that model will be in the future. We believe the only certainty is that whatever our future model will be, it will have to be flexible because the future will be defined by largely unforeseen changes.
Future Considerations
With this long and carefully worded disclaimer, let us list some of the issues that are affecting the future of cardiothoracic surgical practice. Then we will try to explore what the potential of being hospital-based is relative to surviving these changes.
Future considerations include but are not limited to preservation of the quality of our work; the ability to forecast our incomes, let alone maintain them, especially in the face of the Health Care Finance Administration's forthcoming reevaluation of practice/malpractice expenses; maintenance of our clinical volumes through new strategies for contracting, participation in demonstration projects, or regionalization strategies; contending with both clinical and financial case-mix changes and especially with managed care; continuing our research endeavors, especially those funded through practice income, with continued access to new technology at a time when institutional review boards and hospitals are increasingly concerned about the Office of the Inspector General; legal considerations, including malpractice, fraud, and antitrust; networking, with defined patient referrals, shared services, and benchmarking; the practice of telemedicine; concerns about introducing new colleagues to our practices to ensure continuity of our services for the community; hospital staff reorganization strategies; changing hospital governance; economic credentialing; working through practice guidelines, clinical pathways, and patient care protocols; nursing staff organizational changes; bioethical concerns about the rationing of care; and the costs of hospital management, particularly in relation to the costs of complying with federal and state regulations. The list is potentially overwhelming. Obviously we will only touch on a few of the issues here.
Let us begin with some considerations of professional fees and income. High costs and their secondary effects on access are the most compelling concern for healthcare today. Because the numbers of patients will probably not decrease because of the demographics of our aging population, and because efforts to maintain health for a variety of social as well as medical reasons have not been particularly effective, the primary methodology for cost containment has come to focus on fundamental healthcare system reforms that use certain economic principles to control behavior. In this case, constructing methodologies for reimbursement based on economic disincentives to provide services has become the means for placing physicians at financial risk in their medical decision making. It is this assumption of risk in relation to income, not the act of administrative interference in medical decision making per se, that is the essence of managed care.
Not surprisingly, the role of physicians in generating the high and increasing costs of healthcare, especially as we are perceived to drive hospital costs, has received singular attention. Our distinguished guest contributor, Victor Fuchs, PhD, has pointed out in a 1990 New England Journal of Medicine article [1] that although the percentage of healthcare expenditures for hospital care in the United States and Canada were quite comparable at that time, the level of United States physician fees from 1971 to 1985 had exceeded general inflation by 23%, whereas in Canada fees had decreased by 18% below the level of inflation.
As a result, a number of legislative physician payment reform initiatives followed in the Omnibus Budget Reconciliation Acts of 1989 and 1990 [2]. This was the origin of the resource-based relative value scale as the basis for Medicare fee schedule, of Medicare volume performance standards, of the limits on balanced billing, and of the recalculation of practice/malpractice expenses that is to come.
Taken in aggregate, the Omnibus Budget Reconciliation Acts of 1989 and 1990 resulted in an approximate 50% reduction in inflation-adjusted dollars of average reimbursement for covered Medicare cardiac surgical procedures to about $2,500 for coronary bypass. By the time the practice expense component of reimbursement is recalculated, this figure is projected to be well under $2,000 per case.
Assuming Medicaid reimbursement does not decrease further, and that may or may not happen, Medicare reimbursement in 1997 could be less than that paid under Medicaid in 1992. This has to be a significant concern because the Physician Payment Review Commission has reported to Congress their belief that low levels of physician reimbursement have been a factor in the failure of Medicaid [3]. One, therefore, has to wonder and be concerned about what the future of Medicare is, assuming these projections become reality.
Notwithstanding, there has to be even greater concern about the forthcoming recalculation of the practice/malpractice expense provision of the Omnibus Budget Reconciliation Act of 1989, because this factor can account for a greater percentage of total cardiac surgical reimbursement than the actual provision of the service paid for through the work relative value scale.
Whenever it occurs, with practice/malpractice expenses reduced from 30% to 50%, reimbursement for coronary bypass could be reduced to a range of approximately $1,500 to $1,750.
Will Hospital-Based Surgeons Fare Better?
It is our contention that hospital-based cardiothoracic surgeons will best be able to sustain these further reductions in surgical reimbursement. It is not only that there is a larger financial base to work from within the hospital, but having one's practice in a single location facilitates improvements in professional productivity, increases involvement in hospital matters, and promotes practice flexibility through increased options for adjusting to change.
With regard to the volume performance standards, Dr Fuchs has argued that the only independent variable in the equation for calculating the cost of healthcare is the volume of services provided [4]. Thus, being hospital-based, especially with an exclusive arrangement, gives some security to volume concerns relative to fee-for-service contracts. At the other extreme, if a hospital also has capitated populations under contract, less is better. A combination of these two contrasting volume considerations makes for a fine, if not impossible, balance in noninstitutional practice settings. Being hospital-based provides greater flexibility for resolving these contrasts.
Parenthetically, these considerations of the Medicare fee schedule are and will continue to be increasingly relevant to commercial or indemnity insurance patients as well, because all payers are increasingly adopting the resource-based payment concept. Thus, cost shifting is occurring from health maintenance organizations, as well as from the uninsured and the Medicare and Medicaid populations, to the self- and indemnity-insured patient population. Today everyone is looking to reimburse providers well under 50% of traditional levels of cardiothoracic surgical service reimbursement fee schedules. One has to be extremely concerned about one's ability to survive in such an environment.
As solo or small group practitioners working outside of committed hospitals, it will be virtually impossible to assume the risks inherent in managed care contracting for large populations. Big will be better because of the access hospitals have to patients and capital. Clearly, as office groupings change to larger configurations, medical staffs will also need to change. In larger, nonuniversity hospitals such as Cedars, the full-time hospital-based model is becoming increasingly attractive for its flexibility in entering into and contending with arrangements that carry financial risk as a consequence of medical decision making.
Beyond a single-organ medical or surgical group configuration, we believe the best organizational construct will be the one that will be described for us from the Texas Heart Institute: a single, comprehensive and integrated medical-surgical healthcare delivery system in which the cardiologists, surgeons, and others form a single group that shares the responsibility for the quality of the clinical as well as financial outcomes.
As the business of practicing medicine becomes more complex, a number of organizational models have evolved to contend with the business functions that have evolved. At Cedars we are pursuing each of these strategies with the ultimate goal of becoming an integrated healthcare system.
The ``group practice without walls'' involves a strategy to purchase primary care and internal medical practices that are remotely located. We have a medical foundation, an Independent Practice Association, a Preferred Provider Organization, and a Physician Hospital Organization. These various configurations allow us to care for capitated as well as fee-for-service patient populations and to contract for other tertiary or quaternary specialty referrals that are often carve-outs from other insurance products.
These multiple strategies have been undertaken to manage managed care contracting and to help us avoid bankruptcy. There is nothing new under the sun when it comes to the economics of excessive numbers of providers working for the same limited number of consumers in an increasingly constrained financial market. The medical marketplace is no longer a free market; it has been and increasingly will be a regulated market. Thus, in the longer term, a configuration that results in surgeons and medical practitioners sharing equally in clinical and financial outcomes for defined patient groups will probably prevail. It is doubtful we will ever get to the model based on a ``super-cardiac provider,'' that is, a single practitioner who functions as a cardiologist and a surgeon as we know them today. In such a setting financial considerations would be taken out of the equation of diagnostic and therapeutic decision making because the same person would be reimbursed, regardless of what he or she decides to do for the individual patient.
Until that time arrives, not everyone will survive. There will be ``winners'' and ``losers.'' The only question that remains is whether or not the losers will have an opportunity to retrain as molecular biologists or whether they will attend business school as an option. We have already been told that our problem as physicians is our resistance to change. Business views change as an opportunity for profit, and this difference in perspective between medicine and business is what we must overcome in our thinking if we are to survive the changes that are enveloping our profession.
Hospital Environments in the Future
Now, we want to turn to another aspect of how our primary workplaces, hospitals, will be configured in the future, and make some observations about the circumstances under which we can best be organized to work in that environment. We believe you will immediately appreciate why we speak for a hospital-based practice when you think about Figure 1
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When one puts this model together with the various clinical organizations defined earlier, the schematic in Figure 1
is how it will all play out, especially for those who choose to practice as hospital-based physicians.
Local groups that share the responsibilities and obligations of clinical care and financing will be related through information and data management technology. Each of these groupings will relate to a core facility, not necessarily a hospital, and to each other. Individual patients will be cared for based on past experience contained in the shared clinical and financial databases that will define these groups to give the best clinical outcome at the most cost-effective price. Cedars has entered into such a relationship with eight other Southern California hospitals of varying size and clinical capability. This network will be known as Prime Care.
For purposes of further interdependent development, regional groupings (Fig 2) can and will evolve with affiliated or sister hospitals in California. For cardiac services such a network is quickly becoming a reality.
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), current West Coast institutions could relate to and work with, on an almost continuous basis, other institutions across the country. Through a sharing of patient care protocols and practice guidelines, these institutions should be able to benchmark experiences and evolve a pattern of care that could eventually constitute a national standard of cardiovascular practice; one that defines the costs of care and that are associated with defined clinical outcomes.
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Beyond these boundaries (Fig 4), with the power of databases and with the rapidly evolving technology that is the basis for the future of telecommunications, a Telemedical practice could even develop to involve multiple sites around the world.
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You must appreciate that being hospital-based is not all great strategies and more patients. The nature of your practice in a hospital-based circumstance will largely be determined by the mix of patients who use the hospital. You have to take them as they come. Over the past 4 years in our cardiac surgical case-mix, Medicare as prime insurance and commercial or indemnity insurance as a second category are both down in yearly steps, as the percentage of managed care cases and Medicaid patients has increased. Although this is very bad news for an office-based private practice, it has not yet adversely affected our hospital-based group. This is certainly not to say it will not in the future. But to this time there has been the flexibility to adjust by being hospital-based.
Another concern has to do with the fact that hospital administrative costs have risen more rapidly over the last decade than either professional or ancillary departmental costs [5]. Unfortunately, there are data to suggest that this phenomenon may be the consequence of federal regulatory statutes that are often obtuse, if not hidden [6]. Certainly, although we can control our direct costs, indirect costs are a problem; they can get out of hand, even become unaccountable, and this is real cause for concern.
There are other data that suggest not all is lost. Over the past year hospital cost increases have moderated, but overall the costs of healthcare are still increasing at a rate twice the average of the consumer price index, 4.9% versus 2.4% [7]. These considerations place our problems in the larger perspective; however we work through our own decisions as to how we proceed, we must keep this larger picture in focus.
Finally, we have not yet confronted the issue of what one does when the chief executive officer informs us that hospital income is down to a degree that necessitates a salary reduction, or even worse, a reduction in staff. There does not seem to be a great deal of data to argue our point that we are not deserving of a salary cut. What do we do then, unionize? We do not think so.
Future Successful Practices
There are some principles we believe will be critical to experiencing successful clinical practice in the future, regardless of how we organize ourselves.
This is not a message you have heard for the first time, and we think you will hear it again, repeatedly, in the future. The important thing is that you be aware of the consequences of the changes occurring that affect the practice of medicine in general and cardiothoracic surgery in particular and with this base of knowledge in place actively plan your strategies for the future. The worst thing is to be ignorant of what is happening; the second worse is to fail to plan for change. You can be the master of your future only if you take control of the planning for that future. If you let others do it for you, you will almost certainly end up as an ``unhappy camper.''
Footnotes
Presented at Preparing Your Practice for Change: Thoracic Surgery Into the Next Decade, Atlanta, GA, Sep 24–25, 1994.
Address reprint requests to Dr Matloff, Cedars-Sinai Medical Center, 8700 Beverly Blvd, 6 Northeast, Rm 6215, Los Angeles, CA 90048.
References
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