Expenditures and Quality: Hospital- and Health System-Affiliated Versus Independent Physicians in Virginia.

OBJECTIVES: The American Medical Association has reported that 2016 was the first year in which fewer than half (47.1%) of all practicing physicians owned their own practice. Across the United States, there has been consolidation of physicians and hospital and health systems, resulting in questions about the effect of this on healthcare expenditures. The aim of this study was to compare the expenditures per patient between hospital- and health system-affiliated physicians and independent physicians. METHODS: The author used Virginia's new statewide all-payer claims database to analyze expenditures and quality for 3 years for hospital- and health system-affiliated physicians versus independent physicians. The database had all claims statewide for Virginians with individual or group commercial insurance coverage: 1.95 million patients in 2013, 2 million in 2014, and 2.1 million in 2015. The average annual expenditure for each physician was adjusted for average patient condition burden (risk) and differences in geographic input costs using regression analysis. Measures of primary care quality were obtained from the claims data using evidence-based measures from national health quality organizations. RESULTS: Hospital- and health system-affiliated physicians had annual expenditures per patient ranging from 10.3% to 14.6% higher than independent physicians. Most of the measures of primary care quality were not significantly different. CONCLUSIONS: Virginia patients, employers, and managed care companies incurred higher per-patient expenditures with hospital and health system physicians than with independent physicians.

What Role Does Efficiency Play in Understanding the Relationship Between Cost and Quality in Physician Organizations?

BACKGROUND: The belief that there is inefficiency, or the potential to improve patient health at current levels of spending, is driving the push for greater value in health care. Previous studies demonstrate overuse of a narrow set of services, suggesting provider inefficiency, but existing studies neither quantify inefficiency more broadly nor assess its variation across physician organizations (POs). DATA AND METHODS: We used data on quality of care and total cost of care from 129 California POs participating in a statewide value-based pay-for-performance program. We estimated a production function with quality as the output and cost as the input, using a stochastic frontier model, to develop a measure of relative efficiency for each PO. To validate the efficiency measure, we examined correlations of PO efficiency estimates with indicators representing overuse of services. RESULTS: The estimated production function showed that PO quality was positively associated with costs, although there were diminishing marginal returns to spending. A certain minimum level of spending was associated with high quality even among efficient POs. Most strikingly, however, POs had substantial variation in efficiency, producing widely differing levels of quality for the same cost. CONCLUSIONS: Differences among POs in the efficiency with which they produce quality suggest opportunities for improvements in care delivery that increase quality without increasing spending.

Total expenditures per patient in hospital-owned and physician-owned physician organizations in California.

IMPORTANCE: Hospitals are rapidly acquiring medical groups and physician practices. This consolidation may foster cooperation and thereby reduce expenditures, but also may lead to higher expenditures through greater use of hospital-based ambulatory services and through greater hospital pricing leverage against health insurers. OBJECTIVE: To determine whether total expenditures per patient were higher in physician organizations (integrated medical groups and independent practice associations) owned by local hospitals or multihospital systems compared with groups owned by participating physicians. DESIGN AND SETTING: Data were obtained on total expenditures for the care provided to 4.5 million patients treated by integrated medical groups and independent practice associations in California between 2009 and 2012. The patients were covered by commercial health maintenance organization (HMO) insurance and the data did not include patients covered by commercial preferred provider organization (PPO) insurance, Medicare, or Medicaid. MAIN OUTCOMES AND MEASURES: Total expenditures per patient annually, measured in terms of what insurers paid to the physician organizations for professional services, to hospitals for inpatient and outpatient procedures, to clinical laboratories for diagnostic tests, and to pharmaceutical manufacturers for drugs and biologics. EXPOSURES: Annual expenditures per patient were compared after adjusting for patient illness burden, geographic input costs, and organizational characteristics. RESULTS: Of the 158 organizations, 118 physician organizations (75%) were physician-owned and provided care for 3,065,551 patients, 19 organizations (12%) were owned by local hospitals and provided care for 728,608 patients, and 21 organizations (13%) were owned by multihospital systems and provided care for 693,254 patients. In 2012, physician-owned physician organizations had mean expenditures of $3066 per patient (95% CI, $2892 to $3240), hospital-owned physician organizations had mean expenditures of $4312 per patient (95% CI, $3768 to $4857), and physician organizations owned by multihospital systems had mean expenditures of $4776 (95% CI, $4349 to $5202) per patient. After adjusting for patient severity and other factors over the period, local hospital-owned physician organizations incurred expenditures per patient 10.3% (95% CI, 1.7% to 19.7%) higher than did physician-owned organizations (adjusted difference, $435 [95% CI, $105 to $766], P = .02). Organizations owned by multihospital systems incurred expenditures 19.8% (95% CI, 13.9% to 26.0%) higher (adjusted difference, $704 [95% CI,$512 to $895], P < .001) than physician-owned organizations. The largest physician organizations incurred expenditures per patient 9.2% (95% CI, 3.8% to 15.0%, P = .001) higher than the smallest organizations (adjusted difference, $130 [95% CI, $-32 to $292]). CONCLUSIONS AND RELEVANCE: From the perspective of the insurers and patients, between 2009 and 2012, hospital-owned physician organizations in California incurred higher expenditures for commercial HMO enrollees for professional, hospital, laboratory, pharmaceutical, and ancillary services than physician-owned organizations. Although organizational consolidation may increase some forms of care coordination, it may be associated with higher total expenditures.

Do physician organizations located in lower socioeconomic status areas score lower on pay-for-performance measures?

BACKGROUND: Physician organizations (POs)--independent practice associations and medical groups--located in lower socioeconomic status (SES) areas may score poorly in pay-for-performance (P4P) programs. OBJECTIVE: To examine the association between PO location and P4P performance. DESIGN: Cross-sectional study; Integrated Healthcare Association's (IHA's) P4P Program, the largest non-governmental, multi-payer program for POs in the U.S. PARTICIPANTS: 160 POs participating in 2009. MAIN MEASURES: We measured PO SES using established methods that involved geo-coding 11,718 practice sites within 160 POs to their respective census tracts and weighting tract-specific SES according to the number of primary care physicians at each site. P4P performance was defined by IHA's program and was a composite mainly representing clinical quality, but also including measures of patient experience, information technology and registry use. KEY RESULTS: The area-based PO SES measure ranged from -11 to +11 (mean 0, SD 5), and the IHA P4P performance score ranged from 23 to 86 (mean 69, SD 15). In bivariate analysis, there was a significant positive relationship between PO SES and P4P performance (p < 0.001). In multivariate analysis, a one standard deviation increase in PO SES was associated with a 44% increase (relative risk 1.44, 95%CI, 1.22-1.71) in the likelihood of a PO being ranked in the top two quintiles of performance (p < 0.001). CONCLUSIONS: Physician organizations' performance scores in a major P4P program vary by the SES of the areas in which their practice sites are located. P4P programs that do not account for this are likely to pay higher bonuses to POs in higher SES areas, thus increasing the resource gap between these POs and POs in lower SES areas, which may increase disparities in the care they provide.

Implementing clinical and financial collaboration between payers and providers.

An IPA learned three important lessons while implementing a clinical and financial collaboration with its payers: Eliminate mixed messages. Focus on delivery and operational changes, not just payment change. Set realistic expectations and deliver on them.

Capital Gains: Attracting Investors Without Losing Independence.

Can physicians line up venture capital without letting go of their independence? It's not so easy.

Clinical utilization and cost outcomes from an integrative medicine independent physician association: an additional 3-year update.

OBJECTIVE: Our initial report analyzed clinical and cost utilization data from the years 1999 to 2002 for an integrative medicine independent physician association (IPA) whose primary care physicians (PCPs) were exclusively doctors of chiropractic. This report updates the subsequent utilization data from the IPA for the years 2003 to 2005 and includes first-time comparisons in data points among PCPs of different licensures who were oriented toward complementary and alternative medicine (CAM). METHODS: Independent physician association-incurred claims and stratified random patient surveys were descriptively analyzed for clinical utilization, cost offsets, and member satisfaction compared with conventional medical IPA normative values. Comparisons to our original publication's comparative blinded data, using nonrandom matched comparison groups, were descriptively analyzed for differences in age/sex demographics and disease profiles to examine sample bias. RESULTS: Clinical and cost utilization based on 70,274 member-months over a 7-year period demonstrated decreases of 60.2% in-hospital admissions, 59.0% hospital days, 62.0% outpatient surgeries and procedures, and 85% pharmaceutical costs when compared with conventional medicine IPA performance for the same health maintenance organization product in the same geography and time frame. CONCLUSION: During the past 7 years, and with a larger population than originally reported, the CAM-oriented PCPs using a nonsurgical/nonpharmaceutical approach demonstrated reductions in both clinical and cost utilization when compared with PCPs using conventional medicine alone. Decreased utilization was uniformly achieved by all CAM-oriented PCPs, regardless of their licensure. The validity and generalizability of this observation are guarded given the lack of randomization, lack of statistical analysis possible, and potentially biased data in this population.

Independent practice associations: Advantages and disadvantages of an alternative form of physician practice organization.

BACKGROUND: Value-based purchasing (VBP) favors provider organizations large enough to accept financial risk and develop care management infrastructure. Independent Practice Associations (IPAs) are a potential alternative for physicians to becoming employed by a hospital or large medical group. But little is known about IPAs. METHODS: We selected four IPAs that vary in location, structure, and strategy, and conducted interviews with their president and medical director, as well as with a hospital executive and health plan executive familiar with that IPA. RESULTS: The IPAs studied vary in size and sophistication, but overall are performing well and are highly regarded by hospital and health plan executives. IPAs can grow rapidly without the cost of purchasing and operating physician practices and make it possible for physicians to remain independent in their own practices while providing the scale and care management infrastructure to make it possible to succeed in VBP. However, it can be difficult for IPAs to gain cooperation from hundreds to thousands of independent physicians, and the need for capital for growth and care management infrastructure is increasing as VBP becomes more prevalent and more demanding. CONCLUSIONS: Some IPAs are succeeding at VBP. As VBP raises the performance bar, IPAs will have to demonstrate that they can achieve results equal to more highly capitalized and tightly structured large medical groups and hospital-owned practices. IMPLICATIONS: Physicians should be aware of IPAs as a potential option for participating in VBP. Payers are aware of IPAs; the Medicare ACO program and health insurer ACO programs include many IPAs.

Economic profiling of physician specialists: use of outlier treatment and episode attribution rules.

This paper examines the influence of episode attribution methodology and cost outlier methodology on the accuracy of physicians' economic profiles. Four years of claims data from a mixed model HMO were processed using the leading episode grouper software. Episode grouped results then were applied to construct input distributions for a simulation model. For each of four specialties (cardiology, family practice, general surgery, and neurology), we employed sets of 18 simulations to investigate the effects of three alternative episode attribution methodologies and six alternative cost outlier methodologies on sensitivity, specificity, and positive predictive error in classifying cost-efficient and cost-inefficient physicians. For identification of cost-efficient physicians, the most accurate profiling results were obtained when Winsorizing outliers at 2% and 98% of episode-type cost distributions, and attributing responsibility for episode costs to physicians who accounted for at least 30% of associated professional and prescribing fees. No consistent combination of outlier methodology and episode attribution rule was found to be superior for identifying cost-inefficient physicians.

Pay for performance: its influence on the use of IT in physician organizations.

The introduction of information technology (IT) in physician organizations and practices is a source of great interest to physician leaders and policy makers. In this article, the authors describe what may be the nation's largest pay-for-performance program, its performance metrics, and incentives for the implementation and use of IT in medical groups and independent physician associations (IPAs). Results include the increased use of electronic clinical data, point-of-care technology, and the generation of more actionable reports for quality improvement. Noteworthy are the efforts by physician organizations to enhance data collection to demonstrate improved clinical performance and earn financial incentives.

Physicians as gatekeepers. The impact of financial incentives.

Incentives encouraging physicians to reduce their use of diagnostic tests are controversial. We studied physicians enrolled in an independent practitioner association who see both fee-for-service and prepaid (health maintenance organization [HMO]) patients concurrently. We asked the following questions: (1) Do physicians order fewer tests for their patients enrolled in an HMO relative to their patients seen on a fee-for-service basis? (2) Are any reductions in testing selective or indiscriminate? We reviewed the charts of 273 new patients, 167 enrolled in a fee-for-service system and 106 enrolled in an HMO, who were seen by 17 physicians "for a check-up," and graded test use as "indicated" or "discretionary." We used multiple logistic regression to control for the effects of patient age and sex. Patients in the HMO underwent fewer tests than did patients in the fee-for-service system, as well as fewer discretionary tests, but received the same proportion of preventive services. We conclude that physicians ordered fewer tests for patients in the HMO, apparently because of selective omission of discretionary tests. Physicians also did not reduce preventive services for patients in the HMO relative to all other physicians.

PacifiCare ordered to pay 6.9 million dollars to bankrupt IPA.

PacifiCare of Texas was ordered to pay a physician group nearly 7 million million for improperly terminating a capitated contract. The group's attorney believes the arbitrator's decision sends a message to health plans to contract fairly.

Doctor group sues to keep capitation arrangement.

An independent practice association has sued Humana Kansas City Inc. over the health plan's decision to terminate its capitated contract. The suit alleges breach of contract and seeks an injunction to keep the flow of capitated dollars coming.

One-year costs of second-line therapies for depression.

BACKGROUND: We compared patterns of medical resource utilization and costs among patients receiving a serotonin-norepinephrine reuptake inhibitor (venlafaxine), one of the selective serotonin reuptake inhibitors (SSRIs), one of the tricyclic agents (TCAs), or 1 of 3 other second-line therapies for depression. METHOD: Using claims data from a national managed care organization, we identified patients diagnosed with depression (ICD-9-CM criteria) who received second-line antidepressant therapy between 1993 and 1997. Second-line therapy was defined as a switch from the first class of antidepressant therapy observed in the data set within 1 year of a diagnosis of depression to a different class of antidepressant therapy. Patients with psychiatric comorbidities were excluded. RESULTS: Of 981 patients included in the study, 21% (N = 208) received venlafaxine, 34% (N = 332) received an SSRI, 19% (N = 191) received a TCA, and 25% (N = 250) received other second-line antidepressant therapy. Mean age was 43 years, and 72% of patients were women. Age, prescriber of second-line therapy, and prior 6-month expenditures all differed significantly among the 4 therapy groups. Total, depression-coded, and non-depression-coded 1-year expenditures were, respectively, $6945, $2064, and $4881 for venlafaxine; $7237, $1682, and $5555 for SSRIs; $7925, $1335, and $6590 for TCAs; and $7371, $2222, and $5149 for other antidepressants. In bivariate analyses, compared with TCA-treated patients, venlafaxine- and SSRI-treated patients had significantly higher depression-coded but significantly lower non-depression-coded expenditures. Venlafaxine was associated with significantly higher depression-coded expenditures than SSRIs. However, after adjustment for potential confounding covariables in multivariate analyses, only the difference in depression-coded expenditures between SSRI and TCA therapy remained significant. CONCLUSION: After adjustment for confounding patient characteristics, 1-year medical expenditures were generally similar among patients receiving venlafaxine, SSRIs, TCAs, and other second-line therapies for depression. Observed differences in patient characteristics and unadjusted expenditures raise questions as to how different types of patients are selected to receive alternative second-line therapies for depression.