Legal issues in accepting capitation

The effort to reduce the cost of medical, hospital, and ancillary services increasingly focuses on shifting the financial risk for the cost of these services to those who provide them. Shifting arrangements include capitation for physicians classified as "primary care" physicians; capitation arrangements that include primary and specialty services; risk shifting to medical groups, IPAs, and other physician organizations; as well as the packaging of physician and hospital services on a "full risk," "per case," or other basis. Accepting financial risk for the cost of medical and other health care services, as well as the responsibility for managing the provision of services, may very well be the only remaining opportunity for providers to maximize reimbursement and maintain administrative and clinical self-direction. However, physicians must work with managed care organizations (MCOs) through negotiation of contracts and throughout the relationship to make sure: Unnecessary financial and legal risks to the MCO and physicians are eliminated. Risks that cannot be eliminated are apportioned between the MCO and physicians. All risks are managed in a coordinated fashion between the MCO and physicians.     

Management education for medical students.

There is little doubt that the economics, management, and delivery of health care in the United States are currently in an unprecedented state of flux. Prospective payment, cost containment, and corporatization of health care delivery are rapidly replacing retrospective fee-for-service reimbursement and unmanaged provider practice patterns. Though ultimately certain to affect significantly physicians now in training, these changes have been afforded little attention in the undergraduate medical curriculum. At Hahnemann University, this is no longer the case. "Management Education for Medical Students" is an elective, intensive, eight-week experience for senior medical students. Following a thorough orientation to the workings of organizations through which health care is delivered, medical students receive both didactic and project-oriented instruction in university hospital administration during the first four weeks. During the course's second half, students are offered specialized training in the part of medical management that links the clinical and the financial aspects of health care management.     

Primary care: the driver in health care reform

The changes occurring in the health care industry have resulted in a cost-quality competition that has not been present in the past. Because of this competition, managed care is a growing way of financing and providing health care to the people of the United States. Managed care depends heavily on competent primary care physicians. Because primary care physicians are in short supply, the status and financial rewards of primary care practice are increasing. The primary care physician will be the dominant force in medical practice in the immediate future. He or she is capable in a managed setting of resolving the perceived problems of the health care industry in responding to the drivers of health care reform. Costs are reduced while quality is maintained. Access to health care is improved, and fragmentation of health care is significantly lessened.     

Quality improvement in the era of health reform

More and more scrutiny is certain for the health care field. The intense interest in medical quality management that has been a factor in the field for many years is certain to increase under any reform that the system undergoes. This is a unique opportunity for physician executives to play a leading role in the future course of health care delivery. The alternative of their involvement will be almost total control of the issue by regulators.     

Physician resiliency?

The profound changes in the health care industry have led to the anger, frustration, and unhappiness that physicians are feeling. It is important to examine physicians' responses to the threats to their professional autonomy, image, lifestyles, and relationships with their patients. The "learned helplessness" behavior exhibited by physicians is astounding, considering the education, status, and reputation of physicians as healers for those in need. This article explores the concept of resiliency among physicians and describes why physicians as a group may be less resilient than other individuals. In fact, the structure and training of the medical profession stacks the deck against those who want to change or to be resilient in the face of the changing environment.     

The role of the coordinator of care

Regardless of the specific outcome of the current health reform debate in Washington, it is likely that major changes to the health care system are in the offering. These changes, many of which are already in place or imminent in some locations, will have a major impact on the evolving relationships between physicians and hospitals. Most expect that these changes will accelerate the development of integrated health care delivery systems that will compete in the marketplace for a mixture of public and private health insurance dollars. In this system of "managed competition," health care dollars will flow to those systems that can ensure the best clinical outcomes while using the least economic resources. In this scenario, competing collaborative health networks that can manage the continuum of care will be central to the health care delivery system. The economic and political ties between physicians and hospitals will become more closely linked as government and private payers of health care services foster the development of these integrated, value-based health care delivery systems.     

Value-based health care. Part I: Physicians reestablishing clinical autonomy

Clinical decision-making was once the sole purview of physicians, but no longer. Medical judgment has been usurped by third parties in the name of cost control. To reestablish this rightful authority, physicians must organize to assume the financial risks for their patients' health, using objective, clinical information to deliver superior quality outcomes. To successfully manage their patients' clinical and financial risks, physicians need to: (1) establish a structure independent of the hospital medical staff for outpatient contracting; (2) secure a capital partner that supports their independent, clinical decision-making; and (3) be leaders in acquiring and effectively using clinical information that accurately risk-adjusts and integrates both inpatient and outpatient data for all episodes of care. Physicians who acquire these skills will secure premium contracts from purchasers who are demanding value-based health care delivery.     

Physician executive contracts: negotiating the future

Once viewed as a matter of standard protocol, physician executive contracts have become as complex as the health care industry itself. Historically, hospital administration and physicians negotiated a few key points, then sent the ideas to an attorney for insertion of standard legalize and boilerplate. Today, physician executive contracts are an important part of the changes in health care. They not only cover traditional hospital and physician relations, but increasingly apply to new types of relations (such as employment) between hospitals and physicians, physicians and physicians, and health plans and physicians. In this article, we will explore both the "content" and the "context" of physician executive contracts. Content will deal with the specific provisions typically included in contracts. Context will address issues associated with preparing for and negotiating a contract.     

The new health care civilization: integration of physician land and manageria

Changes occurring in health care demand that physicians expand their professional knowledge and skills beyond the medical and behavioral sciences. Subjects absent from traditional medical education curricula, such as the economics and politics of health care, practice management, and leadership of professional organizations, will become important competencies, particularly for physicians who serve in management roles. Because physicians occupy a central role in planning and allocating medical care services and other health care resources, they must be better prepared to work with other health care professionals to create a new civilization, even if this means leaving the cloistered domain of "physician land" to serve as interface professionals between the delivery of medical services and the management of health care. Our research findings and conclusions strongly suggest that economic, management, and leadership competencies need to be incorporated into the professional development of physicians, especially in postgraduate and continuing education curricula.     

Common denominators of success

There is no mystery to the success stories described in this column. In addition to a lot of hard work, a few basic principles have been applied to widely differing scenarios. These common denominators provide the philosophies and dynamics that can lead to your breakthroughs in quality health care delivery: (1) Trust--among the physicians and then between them and management and the board of directors; (2) positive physician culture and attitudes; (3) effective physician leadership; (4) patient care focus; (5) strong team orientation; and (6) true accountability by all stakeholders. Your job is to help your physicians feel they are major stakeholders in your health care delivery system and be their voice in clinical and financial decision-making at the highest level.     

How much administration is today's physician doing?

The substantial changes in the organization and financing of health care services that have occurred in the United States over the past decade have helped to facilitate a growing role for physicians in health care management. These administrative roles for physicians are becoming increasingly important within many health care institutions with regard to such issues as cost containment and cost effectiveness, quality assurance and professional standards, and access to care. The growing complexity and diversity of the delivery system have created the need for more physicians to become involved in "orchestrat(ing)" the management of the medical-industrial complex."     

Analyzing vendor and supplier contracts

Contracts increasingly govern the way medical groups operate their businesses. While physician employment contracts and contracts with HMOs and PPOs usually receive significant scrutiny and analysis, little attention has been paid to the myriad contractual relationships by which physicians secure services for their own practices.     

From primary care physician employment to private practice: easing the transition

In most cases, the practice acquisition and employment strategy of the 1990s has backfired, with acquired physician practices losing in the range of $50,000 to $100,000 or more per physician annually. There are two alternatives for addressing the operating deficits incurred from practice ownership and physician employment: (1) restructuring through the implementation of network-wide and practice-specific initiatives to improve financial performance; or (2) wholesale (i.e., all practices) or selective practice divestiture, depending on the individual practice financial performance and "fit" with the physician network strategic priorities. Unraveling a decade's worth of physician-health system relationships that are grounded by the notion of acquisition and employment is going to be a complex process for both parties. But given the magnitude of financial losses on acquired practices and the inability of health care providers to sustain future losses, there simply are not options beyond restructuring or divesting these relationships.     

Physician self-referral on the fast track

One of the most hotly debated areas of health care fraud and abuse has been the prohibition on physician self-referral. Now, this prohibition is limited to physicians referring patients to clinical laboratories in which they have an ownership interest and for which the services are reimbursed under the Medicare program. However, this law may be expanded to include other health care services to which physicians cannot refer, as well as to other federal programs and private payers. While Congress works toward this end, many state governments have already taken the lead in expanding the prohibition beyond clinical laboratories and the Medicare program. "Health Law" is a regular feature of Physician Executive contributed by Epstein, Becker, and Green. Mark Lutes of the firm's Washington, D.C., offices serves as editor of the column.     

Risk alignment in health care quality and financing: optimizing value

How should health care best consolidate rational cost control while preserving and enhancing quality? That is, how can a system best optimize value? A limitation of many current health management modalities may be that the power to control health spending has been expropriated from physician providers, while they are still fully responsible for quality. Assigning responsibility without authority is a significant predicament. There are growing indications that well-organized, well-managed groups of high quality physicians may be able to directly manage both types of risk-quality and financial. The best way to optimize responsibility and authority, and to control financial and quality risks, is to place such responsibility and authority within the same entity.     

Surfing Stark II: prohibition against self-referrals

In 1989, the Chairman of the House Ways and Means Subcommittee on Health, Fortney (Pete) Stark (D.-Calif.), turned the health care industry on its ear by introducing the "Ethics in Patient Referrals Act" to Congress. The bill, commonly known as "Stark I," prohibited physician referrals to entities in which they held a financial interest. As Stark's bill made its way through Congress, its substance was dramatically reduced by the legislative process. Ultimately, the law was incorporated as part of the Omnibus Budget Reconciliation Act of 1990. Stark I's main thrust is that it bars physicians from referring Medicare patients to clinical laboratories with which they have a financial relationship. Furthermore, laboratories providing those services must report information concerning any ownership arrangements between the referring physician and the laboratory. Now, to complicate the picture, providers must contend with amendments to the original law that extend the reach of its prohibitions. Called "Stark II," these amendments took effect on January 1, 1995. In this article, guidelines for dealing successfully with the requirements of the law are outlined.     

From managing access to managing care: the impact of primary care on health care delivery organizations.

Professional "revenge of the nerds" is currently taking place, as managed care evolves generalist physicians into new professional prominence. Primary care physicians are finding themselves at the center of health care market reform as health plans, insurers, and other financing organizations turn to them as the key to cost control. In short supply, they are prospering financially from the demand. As the source of patients, they are gaining in prestige from specialists and hospitals who once demeaned them. But these newfound roles are only the initial steps in the transformation of the primary care practitioner. The change that the generalists are experiencing is essentially managing access to care, not truly managing care itself. There are large and crucial differences between managing access to care and actually managing care. These differences are, in many ways, a higher calling for primary care practitioners as they refocus attention on patient outcomes, which will in itself result in a lower resource utilization above and beyond the crude controlling of access. What those differences are, what new roles they require, and what impact they will have on organizations that either house or contract with primary care physicians will be the focus of this article.     

The rudiments of an Internet-based health plan for consumers: an interview with John Danaher, MD, MBA. Interview by Richard L. Reece

Richard L. Reece, MD, interviewed John Danaher, MD, MBA, on August 16, 2000, to discuss how his new company is preparing for the perfect storm--the looming convergence of demanding consumers, defined contributions, and Internet-based health plans. He describes how his firm is putting financial and clinical tools in the hands of consumers and physicians, so consumers can be more enlightened in their health care choices. Danaher says, "We're not about buying goods and services online. We are transforming the way consumers buy health care and seek insurance. We're trying to be a 401 k where people get on, knowing their risk profile and return horizons. We aim to motivate consumers to be proactive in making health care choices. How do we make consumers responsible and motivated enough to take control of managing their health care costs? How well we articulate this call to consumer action will be the key to our success."     

Leading beyond the bottom line

Do physician executives approach managing and leading health care organizations like a CEO of a Fortune 100 company? Or does their training as physicians first give them a unique perspective, leading them to view organizational issues differently? The authors suggest that to be a physician executive is to be the practitioner, teacher, coach, and mentor for a new philosophy of leadership and management called Leading Beyond the Bottom Line. While the financial health of an organization is critical to its survival and its ability to fulfill its purpose, the trap is to focus on maximizing the bottom line. This new philosophy leads an organization to attend in equal measure to the (1) welfare of its patients, (2) its financial health, (3) the well-being of its employees, and (4) the building of its community. "The Optimal Organization" is one in which these four objectives are seen not only as related, but interconnected, and the goal is to maximize all of them. The legitimate role of the physician executive is to manage in search of Pareto Optimum, or the maximum benefit for all four organizational objectives. Clearly, this is a tougher job than maximizing profits or just optimizing profits and patient care.     

The evolving role of the primary care physician

In today's climate of health care reform, the title of this article might more appropriately be "Is the Role of the Primary Care Physician Evolving or Going the Way of the Dinosaur?" According to Koop, primary care is in trouble. Whereas only 29 percent of U.S. physicians are primary care physicians, in Great Britain, 72 percent of physicians are primary care physicians and in Europe and Canada the average is 50 percent. Many U.S. primary care physicians are in the later stages of their careers and nearing retirement age. Unless the supply increases, this number will dwindle further. However, in 1992, only 14 percent of U.S. medical school graduates were headed for primary care careers. Even if the supply of primary care graduates were increased to 50 percent of the graduating medical school class, it would be well into the next century before the ratio of primary care physicians to specialists would be equal. Primary care is at a critical juncture and the next few years will decide the fate of the primary care physician. Given the state of primary care today, I believe that a fundamental look at the assumptions regarding the role of primary care physicians is in order. The current health reform movement has placed a major responsibility on primary care to solve many of the problems in health care delivery today, such as cost, utilization, and prevention. Many health care organizations are planning strategies involving primary care providers, and physician executives can play a key role in these decisions.