Hospitals Go Doctor Shopping To Help Bottom Line

Partner content from Kaiser Health News

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Hospitals are buying doctor practices at an increasing rate. They say it helps the quality of medicine, but it also helps a hospital's bottom line by providing a steady stream of patient referrals. One North Carolina hospital is out to hire the best doctors in town, and those just getting out of medical school.

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RENEE MONTAGNE, host:

Let's turn to a trend in medical care: more doctors giving up private practices and going to work for hospitals. Last year, half of all doctors finishing medical training were hired by hospitals, according to the Medical Group Management Association.

Yesterday we heard why doctors would choose working for a hospital over private practice. This morning we'll hear what's in it for hospitals, and whether this could drive up the cost of health care. Reporter Jenny Gold of our partner Kaiser Health News has the story.

JENNY GOLD: It may not be obvious, but Dr. Alden Parsons could be the future of medicine.

Dr. ALDEN PARSONS: Mind if I listen to your heart and lungs? You mind hopping up on the bed over here?

GOLD: She's a thoracic surgeon here in Raleigh, North Carolina. And like many recent medical school graduates, she decided to work for a hospital right after finishing her training.�

Dr. PARSONS: I don't know anybody that went out into their own practice.

GOLD: Some of her classmates went into academics, and the rest went to work for groups affiliated with a hospital. Parsons says she considered starting her own practice, but decided it would take too much money and too much time.

Dr. PARSONS: Trying to be a mother and a wife and a thoracic surgeon, you know, I really needed a job that could help me streamline things.

GOLD: And that's exactly what Rex Healthcare gives her. They provide all of the administrative support for the practice, and Parsons focuses on her patients. But the hospital isn't just hiring doctors like Parsons to be nice. It's a crucial part of their plan to improve the quality of their care, while also keeping up their bottom line in the midst of the quickly changing health care system.

Mr. STEVE BURRISS (Senior vice president of Operations and Ambulatory Care, Rex Healthcare): The group we're going to see is actually the first in this wave of most recent employment that we hired in this medical oncology practice.

GOLD: That's Steve Burriss, who hired Parsons and is in charge of Rex Healthcare's growing campaign to employ physicians. He's trying to make sure that the hospital has a steady stream of patients coming in, and one way to do that is by employing the doctors who refer them.

Mr. BURRISS: Anything that disrupts the stream of patients in your referral sources can have a really big impact on your ability to make money. Just a three percent change in any of that can really wipe out your whole bottom line.

GOLD: Over the past few years, he's hired about 30 physicians, and he's in talks with another 55. He doesn't have a lot of time. The Raleigh area is home to four major health care systems, each one clamoring to stake out their share of the patient market, particularly patients with private insurance. Burriss estimates there are only about 67 doctor practices left in the area that aren't yet affiliated with one hospital or and other.

Mr. BURRISS: Everyone is out trying to garner the same physicians, and it's very competitive. If we don't accommodate the needs that they have, they're going to look to someone else. So we just assume it be Rex Healthcare or our system, as opposed to someone else's.

GOLD: This isn't the first time hospitals have gone doctor shopping. In the 1990s, hospitals bought up as many practices as possible. Dr. Bill Jessee is the president of the Medical Group Management Association. He remembers the '90s as something of a disaster.

Dr. BILL JESSEE (President, Medical Group Management Association): The first thing a lot of physicians did was took a vacation. And when they came back, they weren't working as hard as they were before their practice was acquired.

GOLD: Less work wasn't what the hospitals were hoping for when they put the doctors on salary. They lost a lot of money and ended up divesting most of the practices, but they learned their lesson. This time, they're giving doctors a bonus based on how many patients they see, just like in private practice, and the hospitals still come out ahead.

Paul Ginsburg is president of the Center for Studying Health System Change.

Dr. PAUL GINSBURG (President, Center for Studying Health System Change): In many areas, physicians don't have much clout with insurers, and they get pretty low payment rates. And hospitals are able to negotiate much higher rates for physician services when they employ the physicians.

GOLD: That's because insurers don't need to have every doctor in their network, but they often do need to make every hospital available to their customers. And that gives hospitals a lot more leverage to negotiate their payments.

Dr. GINSBURG: It really leaves a large margin where a hospital can employ a physician, pay them somewhat better than they're being paid the current time, and still have something left over.

GOLD: And he says that extra money increases the cost of health insurance for everyone.

Dr. GINSBURG: In the short run, there's no doubt that increasing hospital employment of physicians raises the costs, because the physicians are getting paid more money.

GOLD: But he says in the long term, if doctors and hospitals can work together to avoid repeat tests and unnecessary procedures, it could not only improve the quality of care that patients get, it could actually save money.

For NPR News, I'm Jenny Gold.

MONTAGNE: This is NPR News.

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