Will Physicians and Hospitals Ever Get Along? Prospects for Defragmentation in a Post Health Care Reform World

Elizabeth Weeks’ earlier post considers  how payment systems serve as a source of fragmentation, discussing the excellent example of how under Medicare reimbursement rules  physicians and other outpatient providers have little incentive to coordinate care with and consider the costs faced by hospitals.  Indeed, the misalignment between hospitals and physicians runs across many of the book chapters.   This is not surprising as the modern hospital is the epitome of fragmentation problems.  For example, Einer Elhauge (Introduction) notes how hospital-based services evidence team production problems. David Hyman (Chapter 2) observes that under the current reimbursement rules “providing integrated care doesn’t pay better than fragmented care – and in some instances, it pays worse.” Kristin Madison (chapter 5) discusses regulatory contributors to hospital-physician fragmentation, such as the corporate practice of medicine prohibition and health care fraud and abuse laws that may, counterproductively, impede even beneficial integration efforts. James Blumstein (Chapter 7) and Alain Enthoven (Chapter 4) call for greater regulatory flexibility to support integrated delivery systems. Also, Frank Pasquale (Chapter 11) thoughtfully discusses the hospital-physician battles over physician-led specialty hospitals.  A common theme is that at many medical centers physicians and hospital management work disconnected from each other or have relationships strained and full of discord.

The interesting question moving forward is whether health care reform will respond to these concerns and collapse the hospital-physician divide, a goal that has eluded reform attempts in the past? I’m hoping for the best but remain somewhat dubious.

The Patient Protection and Affordable Care Act takes only modest steps at tackling hospital-physician fragmentation. For example, among other initiatives, the law encourages experimentation with global payments to hospital-physician groups for services bundled together around an entire episode of care.  Further, the new law expands upon gainsharing-like demonstration projects, allowing physicians and hospitals to come together as accountable care organizations and share cost-savings resulting from productivity improvements.  Further, hospitals will, at least incrementally, face reimbursement tied more to outcomes, such as with reduced payments for preventable hospital readmissions.

All of these developments are welcome, but perhaps underpowered.  First, the law still leaves in place considerable legal barriers to integration, such as the corporate practice of medicine prohibition and regulatory requirements for completely independent medical staffs. Second, concerns have been raised that the planned reimbursement offered through some of the demonstration projects will not be different or broad enough to attract a sufficient number of providers to participate in a meaningful way.  As Robert Berenson observes, bundled payments may be based on fee-for-service payments that already have their fragmentation problems and some specialty providers faring well under the traditional fee-for-service system may be reluctant to voluntarily join bundled payment initiatives. Third, as Kristin Madison discusses in her book chapter, many of the successful integration efforts between hospitals and physicians have so far focused on specialty line services like cardiac care – areas attractive because they are high volume and high cost and also areas suitable for reliable quality measures applied to a standardized set of repetitive services. But integration in other service areas will be much messier and harder – there are not well accepted, reliable quality measures, the services may be less standardized, and the data may need extensive risk-adjusting.   Given this uncertainty, hospital-physician groups could completely miscalculate the risk in taking on global payments, leading to painful disruptions just as integration efforts are getting underway.  Fourth, and most critical in my view, is that it would be a mistake to underestimate the importance of medical culture and physician autonomy.  Many physicians highly value clinical autonomy and remain distrustful of integration efforts that seemingly threaten their clinical discretion.  This orientation can make physicians resistant to ceding authority even to their physician clinical peers, let alone to larger integrated delivery systems.   Aligning the economic incentives of physicians and hospitals certainly helps with shifting professional attitudes.  However,  in my opinion, it is a necessary but not sufficient condition for defragmentation.  There still remains the equally hard job of changing the culture and engaging physicians so that they feel more committed to the overall mission of cost and quality control within a larger integrated delivery system.

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