Capital views: highlights of Perspectives in Medical Management 1994.

Medicine is undergoing the largest reorganization since the turn of the century, David J. Ottensmeyer, MD, FACPE, told attendees. "Hospitals have been integrating for 20 years," Ottensmeyer, President and CEO, Lovelace Initiatives, Albuquerque, N.M., said. "Integration is accelerating very rapidly because integrated health systems, when up and running, will enjoy irresistible competitive advantages: cost and quality of health care."

A successful integrated health system, according to Al Herman, CPA, a Partner and Director of Healthcare Industry Services in the Dallas office of Arthur Andersen, must:

* Be primary-care driven.

* Be vertically integrated.

* Aggressively seek capitation.

* Maintain adequate geographic

coverage.

* Significantly reduce costs.

Tom Zirkle, President of Zirkle and Carpenter, Ltd., Boulder, Colo., defined an integrated health system as "an organization in which hospitals and physicians combine their assets, revenues, efforts, risks, and rewards and through which they deliver comprehensive health services to a community." An integrated system is not to be confused with a management services organization (MSO) or a physician/hospital organization (PHO), Zirkle added. Before selecting a partner for an integrated health system, Zirkle recommends, ask two questions: Am I about to do business with a high-quality partner? Is there management competent to make this work?

Herman predicts that, over the next decade, integrated health organizations (IHOs) will consolidate and merge until there are only about three per large community, a total of about 250 such organizations nationwide. Zirkle believes that, by the end of this century, there will be about 500 IHOs.

Zirkle pointed out that "it's hard to get a divorce from an integrated system." He said there's a big tax barrier involved, and questions arise over who owns payer contracts. There are some IHOs surviving today that Zirkle considers failures because they haven't achieved market share, yet they remain united because, as the song goes, "breaking up is hard to do."

Subspecialists don't have to join an IHO to be involved in the partnership, according to Zirkle. Family practice groups can subcontract to subspecialists. "If you add big groups of subspecialists to an IHO, you could run into antitrust problems," he warned.

Ottensmeyer stressed that "physician executives must carry a very strong message that clinical autonomy is nonnegotiable; the system can't work unless physicians have authority. The scarcest commodity that exists is physician leaders. There need to be more physician executives in the executive suite, and they must be ready to accept that the next CEO may very well be a physician executive."

Accountable Health Plans

Jacque J. Sokolov, MD, who founded and heads Advanced Health Plans Inc., Los Angeles, Calif., predicted that accountable health plans (AHPs) will be mandated this year and implemented in 1996. AHPs are insurance purchasing pools that bid on coverage. Hospitals will compete through AHPs to manage the health of specific populations. Hospitals can organize a health plan, become a capitated vendor to another health plan, or become a combination of the two, Sokolov said. Compensation will be based on a fixed budget for managing the health of a population, versus volume of services, and he believes that patient volume will be increased as the hospital enrolls new members. Members will be more sophisticated and will make choices based on guidance fro employers, consumer reports insurance agents, and others. But Sokolov also believes that market pressures will eventually force most hospitals to align with fewer plans, and he predicts they will ultimately restrict their dealings to one health plan.

Meanwhile, physicians will also be affected by AHPs. Sokolov said they must:

* Become part of integrated health systems that compete successfully for contracts.

* Bear financial risk.

* Join medical groups and accept salaried positions.

Primary care physicians must assume gatekeeper roles and be rewarded for effective patient care and prevention, while specialty physicians will have to reevaluate their career options and possibly retrain in primary care. Physicians will make clinical judgments based on outcomes and clinical data and guidelines.

"There will be an explosion of physician executives required to manage in provider-sponsored alliances," Sokolov said. "Many specialists are going into management. There are so many opportunities for physicians to make money."

Building a Community-Based IDS

Selecting the right partners in building an integrated delivery system (IDS) is crucial, said Joseph L. Braun, MD, JD, MPH, CEO, One Medic Lane Physicians, Alvin, Tex. "If you pick the wrong HMO and its market share drops, what are you going to do," Braun asked. "Partners need to be long-term players."

Physicians will see their world change in an IDS, and one of the nastier effects will be diminished income, Braun pointed out. "You will still have a job and you will still practice medicine, but if I tell you you're going to make more money, I'm lying. Those days are over."

Braun sees the following elements as necessary to building an IDS: practitioners, clinics, hospitals, pharmacies, long-term care facilities, community prevention, and physician extenders. He warned that "health care plans of the future will not be hospital-driven."

Evaluating Your Health Alliance Partners

"It's less expensive to acquire an existing practice than to grow your own," Richard C. Holdren, President, RH Medical Group, Inc., Houston, Tex., told attendees. "It's risk-free if you know insider tips. Mismatched strategies are the reason why practices fail."

The markets for medical practices include hospitals, other practices, corporate entities, and buy-ins and buy-outs, Holdren said. There are four steps in acquiring a medical practice, according to Holdren:

* Find a prospect.

* Negotiate.

* Get someone to orchestrate the transaction.

* Close the sale.

Although this may sound simple, it's actually a very complex procedure that involves a lot of leg work and knowledge that most physicians don't possess, Holdren said. Holdren predicts that, in five years, "more and more specialists are going to be circuit-riding -- flying to other cities."

Innovation in Utilization Management 

U.S. Healthcare, Blue Bell, Pa., has come up with some innovative programs to reduce costs and improve efficiency and quality, and Raymond J. Fabius, MD, and Jay Krakovitz, MD, who work for the managed care company, described some of them.

As part of U.S. Healthcare's immunization program, there are rewards for physicians who do a good job. "We give partial percentages of capitated credit to physicians who follow the 10-point guide for asthma management," said Fabius, adding that, by doing so, $1,000 to $2,000 per patient per year can be saved.

Another way the company cuts costs is to house patients the night before surgery at a hotel near the hospital. This can save a hospital room charge of $1,000.

To help it reach the population its physicians serve, the company sends physicians newsletters with updates on various immunization programs. One issue might offer indicators for influenza vaccine. The physicians are encouraged to write to people who may need immunizations and to document afterwards.

Health Care Reform: The impact on CME 

K. M. Tan, MD, Assistant Physician-in-Chief and Chairman of Radiology at Kaiser Permanente, Richmond, Calif., pointed out that "physicians are going to be much more selective" about what courses they attend as health care reform shakes out. Gone, he said, are the days of meetings that offer cruises and golfing vacations and here to stay are courses tailored to improve physician skills and ultimately improve patient satisfaction, because success in medicine will be predicated on performance. "The CME has to assume its appropriate role," Tan said. "There will be a very distinct connection between the CME and quality."

Tan predicts health care organizations will reduce the number of CME courses they fund from three or four to only one. He also sees more joint education efforts because of all the mergers, acquisitions, and consolidations that have occurred.

More and more organizations are expanding their in-house CME programs, and Tan described some of the innovations at Kaiser that are a mix of clinical and nonclinical courses. They are designed and delivered by physicians, he said.

New on the horizon are teleconferences. Kaiser currently spends about $4,000 for a 1 1/2 hour teleconference, but it justifies the expense by offering these programs to 1,500 physicians in three states simultaneously and then broadcasting to another 8,000 physicians on a delayed basis.

Guerilla Marketing

As health care organizations merge and grow through acquisitions, the "little guys" are being left in the dust. But there are ways to fight back, according to Eric Berkowitz, PhD, Chairman of the Department of Marketing, School of Management, University of Massachusetts, Amherst. "Having benefits that users can appreciate is crucial," Berkowitz said. "You can go after a large competitor, but you have to have a clear advantage."

Price determination is a critical factor. "The price can be higher when it's harder to judge the quality," Berkowitz said. "Charge high but don't talk about price, just attributes. The price can be lower, and you don't have to talk about why or you can tell people why."

"Medicine is becoming a commodity good," he said. "You can't compete against a large competitor, so service, service, service; don't pretend to be Kaiser."

"Try to think about why your competitors are successful," he said. "Do the ones you choose have a history of being aggressive marketers? I want to design a strategy to steal incremental business from the dummies." Berkowitz advised attendees to contrast the strategy of competitors with their own organizations and show how they're different. But "redesign around the customer, not the product," he said.

* Attack market leaders.

* Attack firms your own size if they're not doing the job or they're underfinanced.

* Attack smaller, less well-financed firms. They're easier. Go after them now, or they'll be subsumed by a larger player.

Managing Group Practice Development and Growth

Russell J. Ricci, MD, CEO of Winchester Healthcare Enterprises, Inc., Winchester, Mass., said the term physician employee is an oxymoron. "The problem begins with medical school admission criteria, and the dilemma increases with residency training." He believes those are the breeding grounds of "people who are overconfident or overanalytical, are overly competitive, and expect to be on top of the economic food chain. Those who think more is better, who never give up, who intubate and ventilate." When these personality types are brought together with those who think differently as group practices grow, there are bound to be fireworks.

There is no question that the practice environment is changing, Ricci said. Utilization of physician services is decreasing and changing, which means doctors will retire early, retrain, or change their practice organization. Because there are too many specialists, primary care physicians need to organize and find ways to share risks with specialists. Specialists, hospitals, and managed care companies need ties to primary care doctors to ensure lasting integration, he said.

Ricci said that although group practice offers many attractive benefits to physicians, there are some aspects to consider before joining one: physician life cycle, medical practice environment, practice setting, perceived threats, managed care activities, and business community posture. Further problems can arise from associating with the wrong people, the wrong model, or the wrong market position.

Physicians and the Stresses of Change

When physicians have personal problems, they're not likely to seek help from an employee assistance program, according to Gigi Hirsh, MD, who heads the Center for Physician Development, Brookline, Mass.

And, according to surveys conducted by the American Medical Association and the Robert Wood Johnson Foundation, today's physicians have plenty of problems. In fact, between 35 and 50 percent of physicians questioned indicated that they would not elect to attend medical school if they could decide again.

"With the changes in health care, physicians feel they're losing control over their professional lives," Hirsh said. "There are massive amounts of paperwork, interference in clinical work, and decreasing income. While they are losing control, their accountability is fixed. It is as though physicians in some way are like line workers, but they have an executive degree."

Hirsh said today's physicians must decide "which stones to leave unturned without compromising cost or quality." Stress can be good, she pointed out, but it must be kept within a manageable range.

"The medical model is to treat the individual," Hirsh said. "It's a valuable model. The problem with using only the medical model is that it will have a limited effect. The wrong patient's on the couch; should be the system on the couch."

Stewardship

Peter Block, author of the best-selling book, The Empowered Manager, began his keynote talk with a question: "Is it possible to create an organization that's as healing for the professional as for the patient?" Block said it's been a "supplier-dominated" world, but that's changing now. It's time, he said, to "confront people's need for safety and to create structures to meet those needs."

It's time, Block said, to create a governance strategy that uses the power we have to build ownership. Redistribute power and purpose and put choice in the hands of the people, he advocated. "Get rid of the notion that you at the top are going to change things," Block said. "Give others the capacity to manage themselves."

The solution is stewardship, which Block defined as giving "order to the dispersion of power. Stewardship is about being accountable and placing ownership and control close to the core work."

Health Care Policy Institute Remembered

A group of 55 physician executives boarded the Capitol Express and got the ride of our lives through the world of health care reform and policy making in May at the Health Policy Institute, a new offering this year at the ACPE's Perspectives in Medical Management.

The Institute was held in Washington, D.C., and we had our own personal professional lobbyist, Nancy Sharp, who acted as our group moderator and course director. Nancy introduced us to a vast array of prominent Washington speakers, who gave us an "eye-opening" view of what is going on in health care reform in our nation's capital. She also gave us access to an assortment of speakers who demonstrated the "process" of putting forth health policy, from the discussion stage, through the legislative and executive branches, all the way to implementation.

Field trips to Capitol Hill, along with visits to individual lawmakers' offices, were the capstones of the Institute for me. It felt as though we were really in on the "nitty-gritty" of health care reform and policy-making. The downside of the Institute was trying to understand the large amount of information and complicated processes in so short a period. Nevertheless, the Institute was fun, and the experience was unique. In the future, we will work out some of the difficulties in attracting and scheduling some of the more notable health care figures. Also, it would probably be best to clearly divide the time between the process of forming policy and comprehension and possible discussion of an individual proposal.

All in all, the Health Care Policy Institute was a great beginning in offering physician executives a first-hand experience with the process and the people involved in health care and health policy-making. It was an opportunity to be part of history in the making and to learn about one of the most discussed topics in our country today.--by Robert J. Aquino, MD, Director, Department of Emergency Medical Services, Capitol Health Care Associates, Bayside, N.Y.

Donna Vavala is Contributing Editor of Physician Executive and Managing Editor of College Digest, the College's bimonthly newsletter, and of PRICE, the Newsletter for Physicians Concerned About Medical Costs.