Pressures on reimbursement and requirements through healthcare reform seem to demand a new model of care — one that takes down walls between providers and contains costs by eliminating redundancy and waste. In a webinar sponsored by healthcare management and technology company MED3OOO, titled "Steps to Successful Physician Affiliation," Stephen Newman, MD, Chief Operating Officer of Tenet Healthcare, discussed the current state of the healthcare industry and the need for collaboration between physicians, hospitals and payors. Here is a synopsis of the thoughts Dr. Newman shared during the webinar.
The current landscape of healthcare
In the United States today, less than 20 percent of all healthcare is delivered through a pre-paid model, Dr. Newman says. While that trend has not changed much over the last 10 years, he predicts that the next 10 years will be a different story: By 2021, he believes 40-50 percent of healthcare will be delivered in a pre-paid model.
"To quote the vernacular, today we have a model of delivering through a 'sick care' system, not a 'well care' system, and I think that's more than just clichés," he says. "I think the orientation of both the delivery system and the payment systems today pay providers for intervals of care and episodes of care, as opposed to taking responsibility for the health of large populations of patients, which certainly has the potential to improve efficiency [and] effectiveness, drive down cost of care and really improve clinical outcomes over time."
As payment models shift towards fee-for-value rather than fee-for-service, he believes physician employment will increase as well. According to Dr. Newman, 52 percent of U.S. physicians are currently hospital employees — a number that has increased by 10 percent over the last four years. Due to increasing pressures on reimbursement, primary care physicians and specialists are turning away from the complexities of running a business in favor of concentrating the majority of their time on clinical care.
The struggle to stay financially viable is more of a challenge for small practices, which make up a large portion of practices in the United States today, Dr. Newman says. "The majority are not more than three or fewer physicians," he says. "This really exacerbates the cost pressures on practices which can't really take advantage of economies of scale at that small level and have to duplicate a lot of costs, which drive overhead considerably." As pressure increases on reimbursement per unit of service, private practice physicians are working harder and bringing home less money, making employment more and more attractive.
The macroeconomic imperative driving integration
Dr. Newman has traveled extensively around the United States, speaking to physicians and executives about the current state of the healthcare industry. He says he has witnessed significant differences in how hospital executives and physicians view the present and future of healthcare, especially as it pertains to healthcare reform. Despite those differences, "there are a few things that I think are incontrovertibly true," he says.
First, the demand for services is increasing rapidly as the "baby boomer" population reaches the ages of 55-70 — the period of life during which consumption of inpatient and outpatient resources doubles. "That aging of the population and their demand for services is really translating to a huge wave of increased consumption and demand on the system," he says.
Second, the individual mandate introduced by the Patient Protection and Affordable Care Act, as well as the expansion of Medicaid, will introduce 32 million newly insured patients into the healthcare system over the next five years. "At the same time, the large purchasers and payors have basically told us, 'enough is enough' with respect to what they're paying for the healthcare of those they're [responsible for]," he says. "Whether we're looking at the largest single payor — the federal government — or state governments or large national or multi-national corporations, or even small businesses, they have spoken loudly that they don't intend to spend more of their total revenues on healthcare going forward." The creation of these 'economic ceilings' creates an imperative for providers to work together to improve care and for insurers and healthcare systems to create new models of payment, he says.
The current environment for physicians
Despite the differences in physician opinion on healthcare reform and the future, Dr. Newman says there are several aspects of physician practice that are similar — if not identical — in every part of the country. "The variable fixed costs are increasing overhead for private physicians … [and] what's difficult is that standard fee-for-service payments are not keeping up with that escalation, thereby compressing margins in the physician's office," he says. "Once again, the physicians have less to take home at the end of the day than they had in the past, in addition to reductions in some professional fees by some payors."
Dr. Newman says that as a company that employs hundreds of physicians, Tenet Healthcare is able to eke out a small increase for its physicians annually. Despite the company's power and reach, however, the increases do not keep up with the basic variable and fixed cost increases of physician practices. "So even being a large employer of physicians as a company, we have difficulty keeping up with these cost pressures," he says.
Like many healthcare leaders, Dr. Newman has noticed that the goals of the average physician are changing. "Younger physicians clearly have a different value system from those physicians like myself who graduated from medical school in the mid-70s," he says. "They're clearly different, and what we see is most physicians coming out of residency and fellowship want to work fewer hours and see fewer patients each day. They'd like to spend more time with patients, do a more comprehensive job with patients." He says while this mindset is perfectly valid, the conflict between the desire to spend more time with each patient and the need to generate revenue creates friction.
"One of the ways to keep income up with respect to physicians today is to hire physician extenders to increase throughput," he says. He says while some group practices have avoided hiring physician extenders in the past, the future of healthcare will demand allied health professionals to handle the increased patient load. Hospitals and practices need excellent nurse practitioners, physician assistants and other paraprofessionals to assist in patient care — the problem is that not enough of them are being trained, Dr. Newman says. He says health systems must work with local training colleges to expand programs for physician extenders.
The current environment for hospitals
This summer, Dr. Newman will celebrate his 47th year working in hospitals. In the nearly-50 years he has spent in the industry, he says he has never seen a more difficult time to operate a hospital. "By the same token, the disruption in our system today — from the perspectives of both physicians and hospitals — provides great opportunities to work together to improve quality of care under the ceiling of cost containment, and to really improve the quality of life of those that either come into our offices from the physician perspective or come to inpatient or outpatient facilities from the hospital perspective," he says.
The current costs of care delivery from the hospital perspective are enormous, he says. Supply costs and labor costs are escalating, and physicians now require payment to provide call coverage. In addition, days per thousand and admissions per thousand are down, as well as prescriptions written in physician offices and elective surgical procedures. "There is only one solution in today's fee-for-service system that allows hospitals to be successful, and that is the need to take market share," he says.
Why should we clinically integrate?
Dr. Newman says these economic pressures are forcing the industry toward a possible solution: clinical integration. In order to clinically integrate, physicians and hospitals must collaborate on the delivery of care in the outpatient, inpatient and post-acute environment. "I would see the real motivation for clinical integration is to create the best outcome for patients," he says. "Secondly, working together, we can jointly employ the latest in evidence-based medicine clinical care." He says there are inconsistencies in how care is rendered across the country, even within groups and entities in the same markets. "We now know through dissemination of tried and proven empiric scientific data what are the best ways to treat certain patients or keep patients healthy," he says. "If we communicate, collaborate and work together, we can disseminate the evidence-based clinical care and standardize clinical care … to provide the best health delivery in the communities we serve."
How do we clinically integrate?
Dr. Newman says clinical integration may take a number of forms. "A lot depends on the demographics of the population you're serving, what the payors are interested in, what the employers are interested in and where the physicians are in their acceptance of organizing both individually and collectively with hospitals or other agencies to deliver care," he says.
Before physicians and hospitals can clinically integrate, Dr. Newman says they must build a level of trust around a common vision. "If we don't have that trust and build a common vision and reach agreement on financial control … we're not really going to go anywhere," he says. "We have that artificial wall built between hospitals and physicians."
He says clinical integration requires a vehicle, which may take the form of a physician hospital organization or another entity that involves risk-sharing agreements and shared governance. Hospitals and health systems must also use IT systems to share information and reduce redundancy in both the inpatient and outpatient environment. IT can also assist in adopting standard evidence-based medicine protocols; Tenet used a panel of 128 physicians to develop 480 order sets that standardize care across the system.
Whatever vehicle hospitals and providers use to integrate, Dr. Newman says integration is a necessity rather than an option. "I believe the imperative is clear: We're in a macroeconomically driven situation where we as healthcare providers must take responsibility in the area of cost containment to find a better way to provide better care to our patients," he says.
Learn more about MED3000.
Learn more about Tenet Healthcare.
Read more about physician-hospital integration:
-5 Opportunities for Physicians and Hospitals to Realign in Preparation for ACOs
-How to Transform ACOs From Theoretical to Practical Organizations
-The Journey to a Successful ACO
The current landscape of healthcare
In the United States today, less than 20 percent of all healthcare is delivered through a pre-paid model, Dr. Newman says. While that trend has not changed much over the last 10 years, he predicts that the next 10 years will be a different story: By 2021, he believes 40-50 percent of healthcare will be delivered in a pre-paid model.
"To quote the vernacular, today we have a model of delivering through a 'sick care' system, not a 'well care' system, and I think that's more than just clichés," he says. "I think the orientation of both the delivery system and the payment systems today pay providers for intervals of care and episodes of care, as opposed to taking responsibility for the health of large populations of patients, which certainly has the potential to improve efficiency [and] effectiveness, drive down cost of care and really improve clinical outcomes over time."
As payment models shift towards fee-for-value rather than fee-for-service, he believes physician employment will increase as well. According to Dr. Newman, 52 percent of U.S. physicians are currently hospital employees — a number that has increased by 10 percent over the last four years. Due to increasing pressures on reimbursement, primary care physicians and specialists are turning away from the complexities of running a business in favor of concentrating the majority of their time on clinical care.
The struggle to stay financially viable is more of a challenge for small practices, which make up a large portion of practices in the United States today, Dr. Newman says. "The majority are not more than three or fewer physicians," he says. "This really exacerbates the cost pressures on practices which can't really take advantage of economies of scale at that small level and have to duplicate a lot of costs, which drive overhead considerably." As pressure increases on reimbursement per unit of service, private practice physicians are working harder and bringing home less money, making employment more and more attractive.
The macroeconomic imperative driving integration
Dr. Newman has traveled extensively around the United States, speaking to physicians and executives about the current state of the healthcare industry. He says he has witnessed significant differences in how hospital executives and physicians view the present and future of healthcare, especially as it pertains to healthcare reform. Despite those differences, "there are a few things that I think are incontrovertibly true," he says.
First, the demand for services is increasing rapidly as the "baby boomer" population reaches the ages of 55-70 — the period of life during which consumption of inpatient and outpatient resources doubles. "That aging of the population and their demand for services is really translating to a huge wave of increased consumption and demand on the system," he says.
Second, the individual mandate introduced by the Patient Protection and Affordable Care Act, as well as the expansion of Medicaid, will introduce 32 million newly insured patients into the healthcare system over the next five years. "At the same time, the large purchasers and payors have basically told us, 'enough is enough' with respect to what they're paying for the healthcare of those they're [responsible for]," he says. "Whether we're looking at the largest single payor — the federal government — or state governments or large national or multi-national corporations, or even small businesses, they have spoken loudly that they don't intend to spend more of their total revenues on healthcare going forward." The creation of these 'economic ceilings' creates an imperative for providers to work together to improve care and for insurers and healthcare systems to create new models of payment, he says.
The current environment for physicians
Despite the differences in physician opinion on healthcare reform and the future, Dr. Newman says there are several aspects of physician practice that are similar — if not identical — in every part of the country. "The variable fixed costs are increasing overhead for private physicians … [and] what's difficult is that standard fee-for-service payments are not keeping up with that escalation, thereby compressing margins in the physician's office," he says. "Once again, the physicians have less to take home at the end of the day than they had in the past, in addition to reductions in some professional fees by some payors."
Dr. Newman says that as a company that employs hundreds of physicians, Tenet Healthcare is able to eke out a small increase for its physicians annually. Despite the company's power and reach, however, the increases do not keep up with the basic variable and fixed cost increases of physician practices. "So even being a large employer of physicians as a company, we have difficulty keeping up with these cost pressures," he says.
Like many healthcare leaders, Dr. Newman has noticed that the goals of the average physician are changing. "Younger physicians clearly have a different value system from those physicians like myself who graduated from medical school in the mid-70s," he says. "They're clearly different, and what we see is most physicians coming out of residency and fellowship want to work fewer hours and see fewer patients each day. They'd like to spend more time with patients, do a more comprehensive job with patients." He says while this mindset is perfectly valid, the conflict between the desire to spend more time with each patient and the need to generate revenue creates friction.
"One of the ways to keep income up with respect to physicians today is to hire physician extenders to increase throughput," he says. He says while some group practices have avoided hiring physician extenders in the past, the future of healthcare will demand allied health professionals to handle the increased patient load. Hospitals and practices need excellent nurse practitioners, physician assistants and other paraprofessionals to assist in patient care — the problem is that not enough of them are being trained, Dr. Newman says. He says health systems must work with local training colleges to expand programs for physician extenders.
The current environment for hospitals
This summer, Dr. Newman will celebrate his 47th year working in hospitals. In the nearly-50 years he has spent in the industry, he says he has never seen a more difficult time to operate a hospital. "By the same token, the disruption in our system today — from the perspectives of both physicians and hospitals — provides great opportunities to work together to improve quality of care under the ceiling of cost containment, and to really improve the quality of life of those that either come into our offices from the physician perspective or come to inpatient or outpatient facilities from the hospital perspective," he says.
The current costs of care delivery from the hospital perspective are enormous, he says. Supply costs and labor costs are escalating, and physicians now require payment to provide call coverage. In addition, days per thousand and admissions per thousand are down, as well as prescriptions written in physician offices and elective surgical procedures. "There is only one solution in today's fee-for-service system that allows hospitals to be successful, and that is the need to take market share," he says.
Why should we clinically integrate?
Dr. Newman says these economic pressures are forcing the industry toward a possible solution: clinical integration. In order to clinically integrate, physicians and hospitals must collaborate on the delivery of care in the outpatient, inpatient and post-acute environment. "I would see the real motivation for clinical integration is to create the best outcome for patients," he says. "Secondly, working together, we can jointly employ the latest in evidence-based medicine clinical care." He says there are inconsistencies in how care is rendered across the country, even within groups and entities in the same markets. "We now know through dissemination of tried and proven empiric scientific data what are the best ways to treat certain patients or keep patients healthy," he says. "If we communicate, collaborate and work together, we can disseminate the evidence-based clinical care and standardize clinical care … to provide the best health delivery in the communities we serve."
How do we clinically integrate?
Dr. Newman says clinical integration may take a number of forms. "A lot depends on the demographics of the population you're serving, what the payors are interested in, what the employers are interested in and where the physicians are in their acceptance of organizing both individually and collectively with hospitals or other agencies to deliver care," he says.
Before physicians and hospitals can clinically integrate, Dr. Newman says they must build a level of trust around a common vision. "If we don't have that trust and build a common vision and reach agreement on financial control … we're not really going to go anywhere," he says. "We have that artificial wall built between hospitals and physicians."
He says clinical integration requires a vehicle, which may take the form of a physician hospital organization or another entity that involves risk-sharing agreements and shared governance. Hospitals and health systems must also use IT systems to share information and reduce redundancy in both the inpatient and outpatient environment. IT can also assist in adopting standard evidence-based medicine protocols; Tenet used a panel of 128 physicians to develop 480 order sets that standardize care across the system.
Whatever vehicle hospitals and providers use to integrate, Dr. Newman says integration is a necessity rather than an option. "I believe the imperative is clear: We're in a macroeconomically driven situation where we as healthcare providers must take responsibility in the area of cost containment to find a better way to provide better care to our patients," he says.
Learn more about MED3000.
Learn more about Tenet Healthcare.
Read more about physician-hospital integration:
-5 Opportunities for Physicians and Hospitals to Realign in Preparation for ACOs
-How to Transform ACOs From Theoretical to Practical Organizations
-The Journey to a Successful ACO