Corporate Medicine Marches On - Putting Revenue Ahead of Patients

The ongoing transformation of physicians from independent professionals to corporate employees has attracted considerable recent media attention.

The Ranks of Corporate Physicians Grow

Several articles noted examples of the rush to corporate medicine.  In early November, Anna Wilde Matthews wrote in the Wall Street Journal about the push by for-profit health insurer/ managed care organization/ hospital chain Humana to hire more physicians to provide direct patient care. 

The insurer said Monday it is spending around $500 million in cash—or $850 million including debt—to acquire Metropolitan Health Networks Inc, a Boca Raton, Fla., company that operates health-care-provider networks serving people on Medicare, Medicaid and other plans. 


Humana also said its Concentra unit had acquired 55 primary-care practices in 2012.
Between direct employment, owning stakes in practices, or close contracting that also involves providing services to the doctors, Humana said it had close ties with around 2,300 physicians, and it planned to add 300 to 400 next year.
An article in Bloomberg in mid-November noted how several large for-profit hospital chains were seeking to hire physicians to provide direct patient care.

This year, HCA increased the number of doctors it employs through acquisitions and direct hiring by about 150 to 200 for a total of 3,200, said Samuel Hazen, president of operations for HCA, on a conference call Nov. 1 with analysts. The Nashville, Tennessee-based company plans to continue expanding the number of doctors it employs, though at a slower pace than over the past several years, he said.

Tenet spokesman Rick Black said acquiring physician practices is part of the company’s effort to 'ensure our hospitals provide the medical services needed by the communities they serve, and to foster the development of ongoing clinical initiatives that improve the quality of care that is delivered to patients and control costs.' He declined to comment on how many physicians Dallas-based Tenet has added through acquisitions.

Focusing on cardiology, the article highlighted a larger trend,

In Wisconsin, the number of heart doctors in private practice has declined to 11 percent from 62 percent of cardiologists in 2007, according to the American College of Cardiology, whose main offices are in Washington.  The trend is similar nationwide. The number of heart doctors working for U.S. hospitals has more than tripled, while the number in private practice has fallen 23 percent over five years, the ACC said. 

An article in the American Medical News provided the big picture,

Only 36% of practicing physicians will hold a practice ownership stake by the end of the 2013, down from 57% in 2000, according to Accenture’s analysis of data from the American Medical Association and MGMA-ACMPE.

These and several other articles began to describe the adverse effects of having physicians employed by corporations to take care of patients.  

Excess Costs

The Bloomberg article noted that the rush to employ physicians is

creating a new dynamic that threatens to raise the price of health care, even as the federal government and states strain to keep a lid on costs.

Under Medicare’s tangled payment system, hospitals get higher reimbursements than individual doctors for cardiology treatment, as they do for other specialty services, in some cases as much as three times more. At the same time, the added bargaining power gained by controlling more of the heart care in a geographic market has given large hospital systems added leverage in negotiating reimbursements from insurers, such as UnitedHealth Group Inc and WellPoint Inc.

'Clearly, in the short run, it raises costs,' said Paul Ginsburg, president of the Center for Studying Health System Change, a Washington-based nonprofit research group. 'We have a case where a physician becomes employed by a hospital and now a payer, like Medicare, has to start paying more.'


Medicare, the U.S. government’s health program for the elderly and disabled, pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physicians office, Medicare pays $150 for an echocardiogram, about $60 for a cardiac stress test and $10 for an electrocardiogram.

Doctors Pressured to Put Revenue Ahead of Patients' Welfare

A far more serious concern is that physicians who are now reporting to corporate executives will be pushed to actions that increase corporate revenue even if they put patients at risk.  The Bloomberg article noted,

While they may gain more stable incomes, doctors often have less freedom over how they care for their patients under strict hospital protocols. Some doctors are also under pressure to see more patients each day when they are employed by a hospital, ...

Two major examples of investigative journalism provided concrete examples of employed physicians enticed with incentives for making decisions that put revenue ahead of patients' interests, or threatened for doing the opposite.  An article in the New York Times provided these examples

Bonuses for Early, Possibly Premature Discharge

One Florida primary care physician said he could earn a $5,000 bonus for keeping patients in the hospital for less than three days, according to a lawsuit he filed this year. Hospitals, which are typically reimbursed a fixed amount of money for treating a specific illness, can make more money if patients stay for shorter periods of time.

Bonuses for Ordering Possibly Unnecessary Tests

Last month, the Justice Department reached a $9.3 million settlement with Freeman Health System, a hospital group in Joplin, Mo., which was rewarding doctors it employed partly based on how many tests they ordered. 

Pressure to Refer Patients Only to Other Physicians Employed by the Same Corporation
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,' Dr. Rentel said, detailing how much revenue she was generating for the hospital through in-house referrals.


In Boise, doctors are pressured to refer only within their own system, according to St. Alphonsus in its complaint. It reported a 90 percent drop in admissions to its hospitals by physicians employed by St. Luke’s.

Incentives for Possibly Unnecessary Admissions

The Times article provided evidence that physicians were pressured to admit patients regardless of need,

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.
According to two emergency room doctors who worked at Carlisle Regional Medical Center in 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. Dr. Romes left the hospital last year.

How Incentives for Unnecessary Admissions are Disguised

A major report on the famous muck-raking CBS television program 60 Minutes provided more detail about how Health Management Associates prettied up apparent demands to increase hospital admissions, no matter what.  The reporting was based on interviews with "more than 100 current and former employees," and featured an on air discussion with three former HMA physicians and one former HMA administrator, a video clip of a deposition by a former HMA executive vice president, and an interview with a former director of compliance with HMA.

All asserted that HMA pressured physicians to increase admissions to an arbitrary proportion of emergency department patients, at times between 16 ad 20 percent.   Several alleged that physicians who failed to meet that "benchmark" were threatened with termination of their jobs.  For example,

[Dr] Cliff Cloonan: My department chief said, we will admit 20 percent of our patients or somebody's going to get fired.

A former executive vice president of HMA contended that the admission quotas came from the very top of corporate leadership.

In August, a former executive vice president of the hospital chain - John Vollmer - testified under oath in a deposition, that HMA's aggressive admission policies came directly from the top: CEO Gary Newsome.

[John Vollmer: Mr. Newsome's thought was that an average of 16 percent was accomplishable at all hospitals or more and we should seek to do that and make that happen.]

Vollmer, who was also fired by HMA, became angry when the company lawyers challenged him.

[John Vollmer: I did my duty by informing HMA that what they are doing is wrong. You can't require them all to have 16 percent admission rates and beat up doctors and administrators and all these folks over it when you are doing it to increase your revenue for the facility.
HMA attorney: I'm going to move to strike what you just said.]

By using such a benchmark, the hospital executives seemed to be trying to maintain "plausible deniability" that they meddled in individual treatment decisions.  No one accused executives of directing the admission of a specific patient.  However, there seems to have been no way for a doctor to achieve the "benchmark" without unnecessary admissions.

[CBS Correspondent] Steve Kroft: They're saying, 'You will admit these people whether they're sick or not, whether they need to be hospitalized?'
[Dr] Scott Rankin: Correct--
[Dr] Cliff Cloonan: They never phrase it that way. They did say admit 20 percent. The reality of that is that there's only one way that that can happen. And that is if it is arbitrary. That is, if you do admit patients that don't need to be admitted.

Furthermore, the hospital corporation seemed to disguise the admission imperative as part of quality assurance.  This supposed quality assurance was administered through commercial health care information technology, "corporate wide computer software called Pro-MED which was installed in every emergency room. HMA says it was designed and approved by medical experts to improve the quality of patient care."  However,

The computer program also generated printed reports like this one evaluating each doctor's performance and productivity. On this document the doctors who hit corporate admissions goals received praise from company managers. Those who didn't knew it.

[Dr] Cliff Cloonan: The primary purpose of the scorecard was to track how you were doing in terms of revenue generation based on number of tests ordered and number of patients admitted to the hospital.
[Dr] Scott Rankin: It has nothing to do with patient safety and patient care. It has everything to do with generating revenues.

They say that when a doctor decided send to an emergency room patient home, the computer would often intervene, prompting the doctor to reconsider.

[Dr] Jeff Hamby: The minute I hit 'Home', it says, 'Qual Check.' And then it comes up with a warning, 'This patient meets criteria for admission. Do you want to override?'
[CBS Correspondent] Steve Kroft: What was the reaction from the administrators if you overrode the computer?

[Dr] Jeff Hamby: It was like being called to the principal's office.


Recent articles in the media have shown that physicians are increasingly practicing medicine as corporate employees (look here).  It is not clear how physicians in this situation can make sure they are always putting the interests of their individual patients ahead of other interests, including their corporate leaders' interests in increasing revenue and enriching themselves.  The most recent media reports discussed above add to the evidence that corporate physicians are constantly pressured to put short-term revenue generation ahead of patient welfare, and that they may specifically be pushed to admit patients unnecessarily, order unneeded laboratory tests, and discharge patients prematurely to satisfy corporate dictates.  One new wrinkle in this latest set of reports is how corporate executives may try to pretty up what they are doing by cloaking their actions within the quality assurance rubric, thus corrupting another important and well-intentioned component of health care.

The American Medical Association once declared "the practice of medicine should not be commercialized, nor treated as a commodity in trade." (Look here)  Despite such historic but now seemingly forgotten exhortations, and a complete lack of evidence of any benefits of the corporate practice of medicine to patients' or the public's health that might outweigh its obvious risks, the new movement to make every doctor a corporate employee marches on. 

A false hope of some resistance to it was just raised by that same American Medical Association in its new "AMA Principles for Physician Employment," but this only provided the ambiguous advice,

A physician’s paramount responsibility is to his or her patients. Additionally, given that an employed physician occupies a position of significant trust, he or she owes a duty of loyalty to his or her employer. This divided loyalty can create conflicts of interest, such as financial incentives to over- or under-treat patients, which employed physicians should strive to recognize and address.

How physicians could strive to recognize and address the inherent strong conflict of interest remains a mystery. 

Worse, while the principles recognized that physicians may be asked to sign "agreements or understandings (explicit or implicit) restricting, discouraging, or encouraging particular treatment or referral options," but rather than condemning such restraints on physicians' autonomy to give patients the best possible care, the principles only suggested that they "are disclosed to patients."

Furthermore, while the AMA response has been weak-kneed at best, I am not aware of any stronger responses from any other professional societies, or from state licensing boards, physician accrediting organizations, or any other organizations that are supposed to be concerned about patient's and the public's health, or about physicians' professionalism.

As I have said before, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

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