For decades, doctors in picturesque Boise, Idaho, were part of a tight-knit community, freely referring patients to the specialists or hospitals of their choice and exchanging information about the latest medical treatments.
But that began to change a few years ago, when the city’s largest hospital, St. Luke’s Health System, began rapidly buying physician practices all over town, from general practitioners to cardiologists to orthopedic surgeons.
Today, Boise is a medical battleground.
A little more than half of the 1,400 doctors in southwestern Idaho are employed by St. Luke’s or its smaller competitor, St. Alphonsus Regional Medical Center.
Many of the independent doctors complain that both hospitals, but especially St. Luke’s, have too much power over every aspect of the medical pipeline, dictating which tests and procedures to perform, how much to charge and which patients to admit. In interviews, they said their referrals from doctors now employed by St. Luke’s had dropped sharply, while patients, in many cases, were paying more there for the same level of treatment.
Boise’s experience reflects a growing national trend toward consolidation. Across the country, doctors who sold their practices and signed on as employees have similar criticisms. In lawsuits and interviews, they describe increasing pressure to meet the financial goals of their new employers — often by performing unnecessary tests and procedures or by admitting patients who do not need a hospital stay.
In Boise, just a few weeks ago, even the hospitals were at war. St. Alphonsus went to court seeking an injunction to stop St. Luke’s from buying another physician practice group, arguing that the hospital’s dominance in the market was enabling it to drive up prices and to demand exclusive or preferential agreements with insurers. The price of a colonoscopy has quadrupled in some instances, and in other cases St. Luke’s charges nearly three times as much for laboratory work as nearby facilities, according to the St. Alphonsus complaint.
Federal and state officials have also joined the fray. In one of a handful of similar cases, the Federal Trade Commission and the Idaho attorney general are investigating whether St. Luke’s has become too powerful in Boise, using its newfound leverage to stifle competition.
Dr. David C. Pate, chief executive of St. Luke’s, denied the assertions by St. Alphonsus that the hospital’s acquisitions had limited patient choice or always resulted in higher prices. In some cases, Pate said, services that had been underpriced were raised to reflect market value. St. Luke’s, he argued, is simply embracing the new model of health care, which he predicted would lead over the long term to lower overall costs as fewer unnecessary tests and procedures were performed.
Regulators expressed some skepticism about the results, for patients, of rapid consolidation, although the trend is still too new to know for sure.
“We’re seeing a lot more consolidation than we did 10 years ago,” said Jeffrey Perry, an assistant director in the FTC’s Bureau of Competition. “Historically, what we’ve seen with the consolidation in the health care industry is that prices go up, but quality does not improve.”
A DRIVE TO CONSOLIDATE
An array of new economic realities, from reduced Medicare reimbursements to higher technology costs, is driving consolidation in health care and transforming the practice of medicine in Boise and other communities large and small. In one manifestation of the trend, hospitals, private equity firms and even health insurance companies are acquiring physician practices at a rapid rate.
Today, about 39 percent of doctors nationwide are independent, down from 57 percent in 2000, according to estimates by Accenture, a consulting firm.
Many policy experts have praised the shift away from independent medical practices as a way of making health care less fragmented and expensive. Systems that employ doctors, modeled after well-known organizations like Kaiser Permanente, are better positioned to coordinate patient care and to find ways to deliver improved services at lower costs, these advocates say. Indeed, consolidation is encouraged by some aspects of the Obama administration’s health care law.
“If you’re going to be paid for value, for performance, you’ve got to perform together,” said Dr. Ricardo Martinez, chief medical officer for North Highland, an Atlanta-based consultant that works with hospitals.
The recent trend is reminiscent of the consolidation that swept the industry in the 1990s in response to the creation of health maintenance organizations, or HMOs — but there is one major difference. Then, hospitals had difficulty managing the practices, contending that doctors did not work as hard when they were employees as they had as private operators. This time, hospitals are writing contracts more in their own favor.
“Hospitals are constructing compensation in ways that are based on productivity and performance,” said Steve Messinger, president of ECG Management Consultants, which advises on physician acquisitions.
But the consolidation of health care may be coming at a hefty price. By one estimate, under its current reimbursement system, Medicare is paying in excess of a billion dollars a year more for the same services because hospitals, citing higher overall costs, can charge more when the doctors work for them. Laser eye surgery, for example, can cost $738 when performed by a hospital-employed doctor, compared with $389 when done by an unaffiliated doctor, according to national estimates by the independent congressional panel that oversees Medicare. An echocardiogram can cost about twice as much in a hospital — $319, versus $143 in a doctor’s office.
Recently, the Office of Inspector General at the Health and Human Services Department sent a letter to emergency physicians across the country asking for information about inappropriate admissions. Federal regulators are also examining the higher numbers of physician contracts being created, searching for violations of laws that prevent hospitals from rewarding doctors for admitting patients or for ordering lucrative tests and procedures.
Health Management Associates, a for-profit hospital chain, EmCare, a Dallas-based emergency room staffing company for hospitals, and other hospitals have disclosed that they are the subjects of federal investigations. Regulators are looking into whether the hospitals improperly pressured physicians to admit patients.
PUMPING UP ADMISSIONS
According to two emergency room doctors who worked at Carlisle Regional Medical Center in southern Pennsylvania, the message could not have been clearer: More patients needed to be admitted.
The doctors were employed by EmCare, whose parent company was later acquired by the private equity firm Clayton, Dubilier & Rice in 2011 as part of a $3.2 billion deal. EmCare, in turn, was under contract to provide emergency room doctors for the hospital, which is owned by Health Management Associates. In interviews, doctors said that hospital administrators created targets for how many patients they should admit. More admissions translated into more dollars for the hospital.
Dr. Jean-Paul Romes, one of the physicians, recalled getting phone calls in the middle of the night questioning why he had not admitted an older patient whose hospitalization he could easily have justified.
“The pressure to admit was so high,” he said. Romes left the hospital last year.
After another physician, Dr. Cloyd B. Gatrell, raised concerns that the hospital had too few nurses to keep patients safe, an EmCare executive warned him to “back off,” according to a lawsuit Gatrell filed last year. EmCare later fired him at Carlisle’s request, according to the suit. Gatrell’s wife, Kathryn, a nurse at Carlisle, had been fired earlier and also filed a lawsuit. Both Gatrells maintained they were fired for bringing up patient safety concerns, according to Cloyd Gatrell’s lawsuit.
Health Management, which operates 70 hospitals, said United States attorneys’ offices in seven states were investigating physician referrals, including financial arrangements and the “medical necessity of emergency room tests and patient admissions.”
EmCare said in an emailed statement that it could not comment on continuing legal matters involving it or its clients, but that its “first concern is the well-being of the patient.”
Health Management is also the target of a suit filed last year in Florida state court by a former executive who says there were improper admissions. The executive, Paul Meyer, an officer in the company’s compliance office, was a longtime employee of the Federal Bureau of Investigation. He said in his lawsuit that he was fired from HMA in 2011 in retaliation for raising questions about what he felt were improper admissions at four of the chain’s hospitals. HMA said its overall admission rate from the emergency department had remained constant in recent years and that its practices were in line with those of other hospitals. It also said there was no indication that Carlisle admitted any patients unnecessarily. Hospital admissions are “based solely on what is best for patient care,” the company said in an emailed statement.
The company said that it had addressed all of Meyer’s concerns, and that he was fired for what the company said was a failure to cooperate in an internal investigation. Health Management fired the Gatrells, it said, “for performance issues,” an accusation Cloyd Gatrell strongly denied.
Other physicians say they are pushed to ignore what is best for patients by referring them to doctors working for the same hospital. Dr. Victoria Rentel, a family practice doctor near Columbus, Ohio, recalled feeling pressured when she was employed by a local hospital to send her patients to doctors there for tests and procedures.
“I routinely got reports about the money I kept in the system,” Rentel said, detailing how much revenue she was generating for the hospital through in-house referrals.
“I tended to refer to specialists I knew who would deliver better care,” she said. The hospital eventually closed the clinic where she worked.
Some physicians also complain about an emphasis on quotas. Dr. Patricia F. White, an emergency room physician who worked at Baptist Health in Jacksonville, Fla., said that starting in 2010, her compensation was partly calculated based on the number of patients she saw an hour, according to a lawsuit she filed in August against the hospital and Emergency Resources Group, which provided emergency room staffing to Baptist.
The staffing group said it had no choice but to agree to the hospital’s demands.
“If we don’t comply with their wishes as good partners, there is a termination notice in our contract,” wrote Paul Davidson, administrator for Emergency Resources Group, in a series of emails that were included with White’s lawsuit.
In an emailed statement, Baptist Health said that patients expected timely access to quality care and that an emergency room physician’s “productivity and efficiency are vital components to delivering good patient care as well as ensuring patient safety and satisfaction.” A lawyer for Emergency Resources Group echoed those sentiments in an emailed statement, adding that efficiency was only one component of physician compensation.
Doctors at numerous hospitals said it was often difficult, if not impossible, to criticize the policies instituted by hospitals or investor-owned physician groups because, as employees, they could easily be fired.
“We all have families, and we have mortgages,” said an emergency room physician. “If you get fired, it looks bad and it’s hard to get another job.”