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Evolution of the operational structure of cardiology practice
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Cardiology practices, just like the rest of the American health care enterprise, continue to evolve to meet the needs of our patients while conforming to the economic, regulatory and social realities of our time.
Hospitals, which account for approximately 30% of health care expenditures in the U.S., have been consolidating for decades to improve efficiency, reduce fragmentation of services, eliminate redundancy and lower costs — goals more easily articulated than accomplished. Creation of large regional and national hospital networks has enabled hospitals to strengthen their bargaining power with insurance companies, suppliers and government, maximizing their charges and profits and providing revenue to expand and compete, building new hospitals and ambulatory care centers. This strategy has virtually eliminated small, independent community hospitals in some locales and has had profound effects on the structure of medicine and cardiology practice operations.
Physicians, who account for another 20% of national health care expenditures, have also been consolidating to gain many of these same advantages, often joining hospitals forming vertically integrated service lines, providing not only essential physician services to hospital inpatients, but also serving as conduits for patient referrals. Large hospital organizations have the financial and management resources to provide sophisticated information technology services for billing, electronic health records and reporting of quality measures as well as creating infrastructure to encourage collaborative relationships between specialists, primary care physicians and nonphysician professionals. This is especially important in coordinating the long-term care of chronic diseases such as HF, atrial fibrillation, hypertension, hyperlipidemia and ischemic heart disease.
Close collaboration between hospital organizations and physicians does not necessarily involve direct employment of physicians; alternatives include exclusive contracts, tiered insurance networks, closed panels and other arrangements made through hospital-controlled foundations. Vertical integration of physician and hospital services can also enhance physician as well as hospital revenue through more effective bargaining with payers and suppliers and restriction of highly specialized services such as transcatheter aortic valve replacement to designated centers.
Consolidation, horizontal acquisitions
Solo practice or practice in small groups of 10 or fewer physicians dominated the structure of medical practice 3 decades ago, but is now uncommon, especially among younger physicians who rarely enter small independent practices after completing training. Considerable variation in practice structure still exists, related to medical specialty and geographic location, but an estimated 70% of cardiologists are now employed by or are in exclusive relationships with hospitals.
The remaining 50% of American health care expenditures is spread among insurance companies, pharmacies, pharmacy benefit managers, medical products wholesalers, and pharmaceutical and medical device manufacturers. These for-profit ventures have also been consolidating, most often with horizontal acquisitions and mergers of similar companies such that there are now only a handful of large, dominant medical insurers, benefits managers and pharmaceutical manufacturers. Potentially more disruptive is the entry of companies like Amazon into the medical supply business, alignment of pharmacies and insurers and direct employment of physicians and other patient care professionals by insurance companies and pharmacies. Individual practicing physicians caring for one patient at a time can feel overwhelmed by these mega-trends.
Hospital employment, although common for cardiologists, is not the only organizational alternative to independent practice. Large regional or even nationwide groups of physicians in specialties such as radiology, anesthesiology, emergency and acute care medicine have formed autonomous employment groups, contracting with multiple hospital organizations. Some operate mostly in the growing ambulatory care arena, including dialysis centers, long-term care hospitals and freestanding surgical centers. Others focus on aggregating primary care specialists, surgeons, pediatricians and dermatologists.
Publicly traded companies Envision Healthcare and Mednax now employ more than 10,000 anesthesiologists, emergency medicine and pediatric specialists. Strategic Radiology, a radiologist-owned coalition of private radiology practices, employs more than 1,000 radiologists nationwide. Cardiology Consultants of Philadelphia is the largest independent cardiology group in the U.S., with 96 cardiologists. Many smaller organizations providing physician services exist, many physician-owned, but the interest of private equity firms in medical practices indicates that hospitals are not alone in recognizing the potential financial benefits of investing in medical practices.
Costs outpace inflation
Private equity investment in medical practice is not a new phenomenon or guaranteed success; similar ventures in the business of physician practice management formed by PhyCor and MedPartners in the 1990s proved unsuccessful, leading to bankruptcy or exit from the business. Whether these new large physician groups can improve quality, reduce costs and avoid conflicts of interest detrimental to individual patient care while providing a favorable return on investment remains to be determined. The corporate practice of medicine has its skeptics.
Overshadowing development of an optimal practice structure for delivery of professional cardiac and other medical services is the fact that the cost of health care, now 20% of gross domestic product, has been growing faster than overall inflation since the 1960s. U.S. costs are dramatically higher than those in other developed countries, with scant evidence that health outcomes are superior. Health care is not only the nation’s largest employer, with its own vested interests, but is also the largest single budget item for individuals, employers and the government. The sustainability of these new practice models will ultimately depend on their ability to deliver high-value, high-quality care at a sustainable cost in the uncertain environment of health care payment reform.
Innovation, flexibility required
Consideration also must be given to physicians’ job satisfaction and limitations on physician autonomy imposed by these new organizational structures. Senior physicians approaching retirement may be more amenable to divesting themselves of their ownership interest in their medical practices than younger physicians who have many decades yet to work; frequent job turnover is not desirable. To be successful, these new organizational structures will need to address the high physician burnout rate and job dissatisfaction related to the intrusion of management functions and record-keeping duties into the patient-physician relationship. Front-line physicians are already suspicious that occupants of the C-suite do not fully appreciate the sacrifices made by their “workforce.” Innovation and flexibility in evolving practice structure to meet the needs of both patients and medical professionals is essential.
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- L. Samuel Wann, MD, MACC, FESC, is a cardiovascular specialist at Ascension Healthcare Milwaukee. Wann is also Section Editor of the Practice Management and Quality Care section of the Cardiology Today Editorial Board. He can be reached at 2350 N. Lake Drive, Suite 400, Milwaukee, WI 53211; email: samuelwann@gmail.com.
Disclosure: Wann reports no relevant financial disclosures.