Asking the wrong question about physician consolidation

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A paper out this week from Rice University healthcare economist Vivian Ho is the latest analysis to posit that vertical integration of doctors and hospitals does little to improve care quality. Researchers evaluated 29 primarily hospital-focused quality and patient satisfaction measures and found that higher levels of vertical integration were associated with improved performance on just a small number of metrics—and increased market concentration was associated with lower scores on all patient satisfaction measures.

Before concluding that vertical integration generates little improvement in quality, it’s worth looking a little deeper at the methodology of this study, as well as the larger drivers of hospital-physician integration. Researchers used a blunt measure of vertical integration, combining health systems’ self-reported physician alignment model with a standard index of hospital market concentration (on the theory that lower hospital-to-hospital competition indicates greater vertical integration). The performance measures examined are hospital-focused, ignoring outpatient care quality, as well as the nuance of whether the “integrated” physicians in any market are responsible for the outcomes measured (employing primary care doctors and orthopedic surgeons would have little impact on measures of hospital treatment of heart attacks).

In a press release, the author notes: “If patient welfare doesn’t improve after integration, there may be other reasons why physicians and hospitals are forming closer relationships—perhaps to raise profits.” That’s right: there are many motives for vertical integration. Surely profitability has been a driver, as well as the rising complexity and deteriorating economics of running an independent practice. In the real world, physician alignment strategies are rarely driven by the primary goal of improved quality. However, many health systems have begun to recognize that closer financial alignment is a necessary (but far from sufficient) requirement to enable real progress on quality improvement. Regardless of alignment approach, though, quality improvement results from the hard work of care process redesign and cultural change, not as the inevitable result of vertical integration. Success stories are still too few and far between, but we believe there is value in leveraging vertical integration to make this work easier. Condemning vertical integration seems a harsh verdict; a more appropriate criticism would be that much of the heavy lifting of care redesign is yet to begin.



Top 10 Takeaways from the HealthLeaders Media CFO Exchange

Compass and Dollars

More than three dozen top healthcare finance executives share insight and strategies for tackling their toughest business challenges.

Participants at the 2017 HealthLeaders Media CFO Exchangein Coeur d’Alene, Idaho last week said they are generally optimistic about weathering the storm of regulatory changes, new payment models, and shifting market forces buffeting their organizations.

The finance executives at the invitation-only event also shared many mutual concerns such as offsetting traditional revenue-stream declines at hospitals and assessing the appetite to adopt value-based care models in their markets.

Here are 10 of the most insightful comments from the gathered finance leaders:

The top 8 takeaways from HFMA’s 2016 National Institute


When close to 5,000 healthcare professionals get together to talk numbers, it’s worth paying attention. The Healthcare Finance Management Association Annual National Institute took place in Las Vegas this week. Given the seismic changes in motion relative to the business model of hospitals and healthcare delivery networks, this is likely (and perhaps surprisingly) one of the more important and interesting conferences that will take place in healthcare this year.

In the $3 trillion market which is healthcare, roughly $1 trillion flows directly through hospitals. But the story isn’t what you think it is, as average operating margins are only 2 percent and inpatient volumes have been declining at a rate of close to 2 percent annually for the last few years. With margins that small, volume declining, and this much at stake, clearly the game is going to change in a big way. The bottom line is there is a truly stunning shift in focus taking place in finance, and that was evident at the HMFA conference this year.

This is a landscape view of some of the hot topics, but I think the bottom line is there has never been a better time for new ideas and true collaboration relative to solving healthcare’s most fundamental puzzle — figuring out how to deliver the best and most cost effective care possible to everyone, every day, in every community.

There is a line in a song from the musical Hamilton that says “Look around, look around, how lucky we are to be alive right now.” I think that captures the mindset we need from every stakeholder at the table right now. This is a great time to be in healthcare, perhaps the best.

Make a Wholesale Shift to Value

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Many health systems create divisions charged with value-based care, but if they are to succeed, the other parts of the organization must also see transformation as part of the overall mission.