Now It’s All About Leverage
Bundled payments will be a game changer for every hospital-based physician specialty in the future. This brings to mind the age old analogy of three wolves and one lamb discussing what’s for dinner. It takes little imagination to realize that “leverage” will be perhaps the most important factor in determining who is on the menu, and who gets the biggest portion of the bundled payments for specific patient care episodes proposed by Medicare.
As fee for service evolves to fee for value, the relative leverage of each hospital-based physician specialty will be crucial. Alignment with other specialists at the same hospital will also be an important factor in physician future reimbursement. Fortunately at least for emergency physicians, it appears that they will not be included in bundled payments for the foreseeable future. This does not diminish however the need to prepare for it appears to be an inevitable payment methodology that will include all physicians across the Acute Care Continuum in the future.
Large national and regional physician management companies are increasingly dominating hospital-based practices where physicians are not hospital employees. Currently, some of these physician management companies tend to focus on a single physician specialty, while others have expanded to manage the entire spectrum of hospital-based specialties. We can expect these companies to realize their advantage to increase their leverage within their client hospitals in anticipation of this new paradigm of physician reimbursement.
Physicians who manage single-specialty hospital-based practices at a single hospital will have less influence once bundled payments come into being. The smaller regional physician management companies that currently run single-specialty practices in multiple hospitals will need to expand to managing hospitalists too if they are to avoid diminished leverage. They will have to grow to include the other hospital-based physician specialties, or they themselves will be acquired by even larger national and regional multispecialty physician management groups able to leverage advantage in terms of contracting with risk bearing entities.
I believe that in single hospital practices, hospital-based physician specialists will survive for the foreseeable future, but they will diminish in numbers over the long term. Where there are manpower shortages, compensation will remain relatively high. But in those locations where physician specialists are plentiful, doctors will feel the pinch as fee-for-service contracts become less prevalent.
In the future all 5 hospital-based specialties (emergency, inpatient, anesthesiology, radiology, and pathology) will need to be interdependent and aligned, no longer practicing in their own specialty “silo.” While physicians within a particular hospital will not necessarily have to give up their solo practices to be aligned, they will need to find ways to integrate their practices so that they can achieve the same advantages that the larger physician practice management companies are able to offer.
Specialists who are unaligned within the hospital ecosystem will find it increasingly difficult to negotiate incomes at historical compensation levels. They will simply lack the leverage to do so. Even long-term physician practices at “carriage trade” hospitals with the best demographics and payer mix will be at risk, especially if their hospital has to financial subsidize any other specialist that are necessary for the hospital to meet its obligations for inpatient hospital care.
The bottom line is that bundled payments will accomplish what the fee for service system has not been able to do: force physicians to integrate their care to achieve better outcomes and patient safety at a lower cost. In the future, the relative leverage of each hospital-based physician specialty will determine their compensation based on the value they can demonstrate to acute care hospitals — that is, across the Acute Care Continuum. Some say “the strong survive,” but those physician specialties that adapt and establish leverage within their respective hospitals, will be less likely to wind up on the menu of what gets cut out as unnecessary, when bundled payments become widely adopted.