News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Doctors Opt For More Resources, Fewer Administrative Burdens Over Independence

There’s an interesting trend which has significant implications for pathologists and the clinical laboratory testing industry over the long term. For a variety of reasons, growing numbers of physicians are selling their medical practices to hospitals and health systems. This is creating a noticeable reduction in the number of private practices in the United States.

As commercial laboratory executives know, when a medical group practice is purchased by a hospital or health system, the clinical laboratory test referrals are redirected to the laboratory outreach program of the new owners. That means a reduction in the number of potential laboratory test clients in that regional market.

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It’s a practice option that has been accepted by physicians. Many doctors now consider that the benefits of selling their practice to the hospital brings benefits—more resources, less time spent on non-medical tasks—that outweigh the loss of independence. Add to this mix the attitudes of Generation X and Generation Y physicians, who view a practice integrated with a hospital-based health care system as the most attractive working situation and don’t mind practicing medicine as employees and not partners in a professional corporation.

This trend has some experts going so far as to predict that the independent physician practice may soon be a relic of the healthcare past. With Medicare and other payers looking to bundle costs and tie reimbursement to quality, hospitals are buying up physician practices to put all the players on the same team. With physicians as employees, hospitals can more easily align financial incentives around quality measures to meet payer goals.

Hospitals offer physicians access to sophisticated electronic medical record (EMR) systems and practice management that takes the coding, billing and insurance headaches out of the physician’s purview. A large practice within a hospital system also means physicians spend fewer nights and weekends on call. Young physicians, for whom quality of life is a high priority, find this arrangement more attractive than independent practice.

John A. Deane, CEO of Southwind Health Partners, a physician practice management consulting firm, recently told Modern Healthcare, “The ‘secret sauce’ is practice management and EMR systems… structuring the governance so it’s physician-led and professionally managed.”

Nearly half of all physician practices are now owned by hospitals, according to the 2008 Medical Group Management Association’s  (MGMA) annual Physician Compensation and Production Survey.

A 2009 survey by the American College of Cardiology found that only 33% of cardiologists expect to remain in private practice or a small group practice. Another 38.1% said they will actively pursue integration with a health care system, partly in response to a CMS proposal to cut the overall cardiology fee schedule by about 20%.

Hardest hit by the Medicare fee cuts will be many of the diagnostic studies done in cardiology offices. CMS officials acknowledge that some cardiology practices will close, but that the cuts are necessary to move more dollars into primary and preventive services. With dramatically lowered revenue in the offing, cardiologists are actively seeking partnerships with hospitals.

Atul Gawande, M.D., a New York surgeon who has studied and written about the regional cost disparities in Medicare payments, has noted that integrated, cooperative health systems were better able to increase quality while holding down costs. Systems similar to the Mayo Clinic model, with a broad spectrum of specialists and primary care doctors working as employees, tend to breed greater physician collaboration than independent practices. They also tend to reduce duplication of diagnostic tests and increase coordination of medications. This is due in part to an EMR system that makes the patient’s medical record available to every physician in the system,” stated Gawande.

These systems also tend to breed a culture of medical practice that is less defensive and more cost conscious, according to Gewande. Physician practicing in these types of arrangements are better able to meet the dual goals of quality and cost established by payers.

For hospital-based clinical pathology laboratories, the trend to more hospital/health system-owned physician practices is likely to mean increasing volumes of outpatient work. With physicians working as employees of hospital/health care systems there is a natural alignment of incentives to send clinical laboratory tests to the hospital’s in-house laboratory.

Moreover, integrated health systems are in a position to foster better integration of clinical care. That may favor pathologists and clinical laboratory scientists, who are well-positioned to help clinicians be more effective at ordering the right test at the right time—then assisting in the interpretation of the laboratory test results and decisions about the most appropriate therapies. –K. Branz

Related Information

A New Practice Routine, by Vice Galloro, Modern Healthcare, March 1, 2010.

The Cost Conundrum: What a Texas town can teach us about health care

CMS Proposes Major Payment Cuts for Cardiology