Economic evaluation of the impact of physician-hospital integration and physician boards on hospital expenditure per patient: A 5-year longitudinal study.

BACKGROUND: This study aims to contribute to the ongoing policy and scholarly debate on physician-hospital integration (INT) and health care cost by providing evidence for the role of physician boards in mitigating hospital expenditure associated with INT. METHODS: We conducted our study of the relationship between INT, physician boards, and hospital expenditure using data on hospitals in California. We obtained data from the Centers for Medicare and Medicaid Services, American Hospital Association, and California Office of Statewide Health Planning and Development from 2002 to 2006. A hospital fixed-effect ordinary least square (OLS) regression analysis was used. RESULTS: Hospital expenditure was higher in a hospital with an integrated arrangement (e.g., a hospital that adopted an integrated salary model) than under other independent arrangements between physicians and hospitals, and the proportion of physician members on hospital boards negatively moderated the effect of integration on hospital expenditure. CONCLUSIONS: Physician boards may provide a context that affords benefits that can reduce hospital expenditures under INT. This finding highlights the importance to having a supportive organizational design when implementing INT.

First national survey of ACOs finds that physicians are playing strong leadership and ownership roles.

The extent to which physicians lead, own, and govern accountable care organizations (ACOs) is unknown. However, physicians' involvement in ACOs will influence how clinicians and patients perceive the ACO model, how effective these organizations are at improving quality and costs, and how future ACOs will be organized. From October 2012 to May 2013 we fielded the National Survey of Accountable Care Organizations, the first such survey of public and private ACOs. We found that 51 percent of ACOs were physician-led, with another 33 percent jointly led by physicians and hospitals. In 78 percent of ACOs, physicians constituted a majority of the governing board, and physicians owned 40 percent of ACOs. The broad reach of physician leadership has important implications for the future evolution of ACOs. It seems likely that the challenge of fundamentally changing care delivery as the country moves away from fee-for-service payment will not be accomplished without strong, effective leadership from physicians.

Vertical integration: hospital ownership of physician practices is associated with higher prices and spending.

We examined the consequences of contractual or ownership relationships between hospitals and physician practices, often described as vertical integration. Such integration can reduce health spending and increase the quality of care by improving communication across care settings, but it can also increase providers' market power and facilitate the payment of what are effectively kickbacks for inappropriate referrals. We investigated the impact of vertical integration on hospital prices, volumes (admissions), and spending for privately insured patients. Using hospital claims from Truven Analytics MarketScan for the nonelderly privately insured in the period 2001-07, we constructed county-level indices of prices, volumes, and spending and adjusted them for enrollees' age and sex. We measured hospital-physician integration using information from the American Hospital Association on the types of relationships hospitals have with physicians. We found that an increase in the market share of hospitals with the tightest vertically integrated relationship with physicians--ownership of physician practices--was associated with higher hospital prices and spending. We found that an increase in contractual integration reduced the frequency of hospital admissions, but this effect was relatively small. Taken together, our results provide a mixed, although somewhat negative, picture of vertical integration from the perspective of the privately insured.

Redesigning care for patients at increased hospitalization risk: the Comprehensive Care Physician model.

Patients who have been hospitalized often experience care coordination problems that worsen outcomes and increase costs. One reason is that hospital care and ambulatory care are often provided by different physicians. However, interventions to improve care coordination for hospitalized patients have not consistently improved outcomes and generally have not reduced costs. We describe the rationale for the Comprehensive Care Physician model, in which physicians focus their practice on patients at increased risk of hospitalization so that they can provide both inpatient and outpatient care to their patients. We also describe the design and implementation of a study supported by the Center for Medicare and Medicaid Innovation to assess the model's effects on costs and outcomes. Evidence concerning the effectiveness of the program is expected by 2016. If the program is found to be effective, the next steps will be to assess the durability of its benefits and the model's potential for dissemination; evidence to the contrary will provide insights into how to alter the program to address sources of failure.

Independent practice associations and physician-hospital organizations can improve care management for smaller practices.

Pay-for-performance, public reporting, and accountable care organization programs place pressures on physicians to use health information technology and organized care management processes to improve the care they provide. But physician practices that are not large may lack the resources and size to implement such processes. We used data from a unique national survey of 1,164 practices with fewer than twenty physicians to provide the first information available on the extent to which independent practice associations (IPAs) and physician-hospital organizations (PHOs) might make it possible for these smaller practices to share resources to improve care. Nearly a quarter of the practices participated in an IPA or a PHO that accounted for a significant proportion of their patients. On average, practices participating in these organizations provided nearly three times as many care management processes for patients with chronic conditions as nonparticipating practices did (10.4 versus 3.8). Half of these processes were provided only by IPAs or PHOs. These organizations may provide a way for small and medium-size practices to systematically improve care and participate in accountable care organizations.

Are your physician-integration strategies sustainable?

Before embarking on a physician-integration strategy, hospitals and health systems should perform a detailed analysis of the following four critical areas to ensure that the strategy is competitive and sustainable: Strategic objectives; Financial resources; Requisite experience and functional capabilities; Organizational structure, culture, and commitment.

Integration without employment.

Three models for hospital-physician alignment may offer hospitals for which large-scale physician employment is not practical the best means to prepare for payment changes under accountable care: Comanagement arrangements Clinical joint ventures Professional services agreements with performance incentives.

Making it work: characteristics of high-performing hospital-physician networks.

Physician practice is in the midst of another historic change--from solo and small groups to large, hospital-sponsored employed-physician networks. The question remains as to whether these large, hospital-centric physician organizations are sustainable. This article examines the stress points that physicians and practice managers face as they find themselves thrust into new but often ill-defined business models. It offers insights and pathways to help them navigate the changes that will be necessary for these business models to survive, evolve, and thrive.