Health Care Policy, Performance and Finance

Strategic Issues in Health Care Management

Manouche Tavakoli

• Publisher: Routledge
• Year: 2017
• Print ISBN:
  9780815389453
• eBook ISBN:
  9781351156585
• Topic: Social Sciences
• Subtopic: Social Work
• Index: Social Sciences

Policy, performance and finance are the issues currently headlining the healthcare agenda and are likely to remain so for the foreseeable future. Drawing on experiences from around the world, this essential collection examines the key strategic issues facing health services and analyzes the policy implications of leading new research. The volume brings together 16 newly-commissioned studies from leading experts in health studies, in particular: policy, economics, health care management and health services research. International in perspective and scope, it draws on empirical evidence from East and West Europe, Canada, New Zealand and the Middle East. Themes covered include: health policy and technology assessment, policy and performance, international policy innovation, and organizational innovation. This ground-breaking collection will prove a valuable guide for policy makers, managers, practitioners, researchers and students.

Section II
Policy and Performance

Chapter 4
Hospital–Physician Relationships: Comparing Administrators' and Physicians' Perceptions

Thomas G. Rundall

Introduction

The growth of managed care in the United States has had, and continues to have, a profound impact on hospitals and physicians. Managed care organisations attempt to reduce both the unnecessary use and cost of hospital and physician services. Additionally, managed care plans collect performance data from medical care providers and monitor their quality of care. Negotiating with managed care plans and competing with other hospitals and physicians on the basis of documented performance and cost-effectiveness has been a new and formidable challenge to most hospitals and physicians. Hospitals responded to these pressures in a variety of ways, depending on the penetration of managed care plans in their market and the constraints and opportunities available to them. Some common responses were to merge with other hospitals in order to gain power in negotiations with health plans; to reduce expenditures on in-patient services, including downsizing the number of hospital-employed personnel; and to implement patient care protocols and other techniques to control utilisation of hospital resources. Physician responses also varied. But common physician responses were to merge into group practices or independent practice associations in order to gain power in contractual negotiations with health plans, and to seek ways of capturing more revenue by setting up clinics and even specialty hospitals to compete for patients with community hospitals (Rundall et al., 1998; Robinson, 1999; Shortell et al., 2000; Scott et al., 2000; Ginsburg and Lesser, 2001).

Although many of the responses of hospitals and physicians were primarily aimed at strengthening their negotiating positions with managed care plans, in some cases hospitals and physicians acted in ways that the other party perceived not to be in their interest. Indeed, a 1991 study of hospital-physician relationships suggested that the organisational and system changes described above may have undermined long-established cooperative relationships between hospitals and physicians (Shortell, 1991). A decade later, it is timely to ask: 'what is the current state of hospital-physician relationships in the United States?' This study addresses that question. We assess the current state of hospital-physician relationships in a sample of hospitals located in the western United States, and identify ways to improve those relationships. The study compares physicians' and administrators' opinions of the hospital-physician relationship overall, and of specific aspects of hospital and physician performance. Two other key features of the study are the identification of important barriers to building effective hospital-physician relationships, and the identification of key facilitators for building more effective relationships between hospitals and physicians.

Background

In the United States' health system, the hospital and the physician are loosely coupled yet interdependent entities. The success of one depends upon the effectiveness of the other. Hospitals rely on general practitioners and specialists to refer patients to ambulatory care departments, admit patients for inpatient care, provide diagnostic services and medical and surgical care, and oversee the nursing and rehabilitative services provided to patients in the hospital. Hospitals are paid for the non-physician services they provide to patients by private and public insurance plans, and to a lesser extent by individuals from their personal funds. If hospital revenues exceed expenses the surplus revenue is used to upgrade facilities, invest in new technologies, expand capacity, and in the case of for-profit hospitals pay dividends to investors. Historically, hospitals have sought to attract the loyalty of physicians by establishing a reputation as a high quality institution and by having the technology and specialised technical staff that would allow physicians to provide advanced, state-of-the-science care to their patients. The reputation of the hospital depended to a significant extent upon the effectiveness of the physicians in treating patients and upon the ability of the hospital to offer highly technical care for complex illnesses and injuries (Burns et al., 1993).

Physicians rely upon hospitals to provide care for their patients that cannot be provided in the physician's office-based practice. Hence, physicians refer their patients to the hospital for diagnostic exams requiring expensive technology, medical or surgical procedures requiring the use of technology and specialised personnel not available in the physician's practice, and intensive medical and nursing care for patients. A physician may admit patients to a hospital after their qualifications have been reviewed and approved by the hospital's credentialing committee. In communities served by several hospitals, physicians are likely to have admitting privileges at more than one hospital, thereby creating a competitive climate among hospitals for the physician's 'business'.

In spite of this interdependence, many non-governmental hospitals, which make up about 75 per cent of all US hospitals, do not employ physicians. Indeed, in many states there are laws prohibiting community hospitals from directly employing physicians (with limited exceptions for some specialties, such as pathology). The constraint against hospital employment is deeply rooted in the institutionalised beliefs that physicians should be solely accountable to their patients and should have unfettered autonomy and authority to make decisions in the best interests of their patients. Hence, physicians and hospitals in the United States evolved a special set of relationships, including business ties based upon hospital admitting privileges, dual hospital administrative and medical staff authority structures, and a shared goal of building the hospital's capacity and technical capabilities (Burns et al., 1993; Eisele et al., 1985; Fifer, 1987). These relationships were in harmony with the environment for medical care services from the 1940s through the 1982. In particular, during this time period fee-for-service reimbursement for both hospitals and physicians provided incentives for physicians to admit patients to hospitals, to order the use of expensive technologies to diagnose and treat patients, and for hospitals to provide intensive in-hospital nursing care and support services. Since 1982, the environment for medical care services has changed dramatically. In 1982 the federal government approved a major change in the way it pays for hospital care for Medicare beneficiaries. The new payment scheme, the prospective payment system (PPS), pays hospitals a fixed amount of money for each patient in a diagnostically related group (DRG). PPS opened the door for the private sector health plans to also develop managed care schemes that placed hospitals (and physicians) at financial risk and demanded greater accountability from both parties. By 2000, 30 per cent of the US population was enrolled in HMOs. In some states the market penetration of HMOs was much higher. For example, 54 per cent of the California population was enrolled in HMOs (Interstudy, 2000).

Five key elements of managed care health plans as they unfolded in the United States from 1982-2000 were:

1. payment from health plans to hospitals and physicians in a manner other than fee-for-service, such as capitation, per diem, or discounted fee-for-service;
2. limitations on the health plan member's choice of hospital and physician (selective contracting);
3. adoption of drug formularies by health plans to constrain expenditures on pharmaceuticals;
4. increased demands for provider accountability for medical service utilisation, resulting in implementation of required prior approval from the patient's health plan for certain expensive referrals, tests, and procedures (gatekeeping).
5. competition among hospitals and among physician groups for covered lives: persons enrolled in managed care plans.

The rise of managed care, and the related increasing demands for greater efficiency in providing hospital care, posed two major challenges for hospital administrators: 1) placing limits on the use of hospital resources in order to achieve financial profitability while 2) not alienating the physicians who refer patients to the hospital. The actions hospital administrators might take to limit the use of hospital resources, such as declining to purchase an expensive piece of new diagnostic technology or refusing to expand the number of operating theatres, could easily threaten the perceived autonomy and authority of attending physicians (Georgopoulos et al., 1987; Burns et al., 1999; Morrisey et al., 1999; Shortell et al., 2001).

Differing Perspectives of Hospital Administrators and Physicians

This study examines the state of hospital-physician relationships during 2000, a year marking the end of a decade of growth in managed care plans throughout the United States. We assume that the state of hospital-physician relationships is at least partly manifested in the opinions of hospital administrators and physicians in leadership positions in the hospital's medical staff. We expect administrators and physician leaders to react differently to managed care pressures and incentives. Their respective cultural beliefs and values, forged by their education, training, and socialisation, are inherently different. Table 4.1 presents the key cultural differences between hospital administrators and physicians.

Given their differing values, beliefs and foci, in managed care environments we expect physicians to express more negative views about the hospital

Table 4.1 Cultural differences between hospital administrators and physicians

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Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Acknowledgements
• Preface
• SECTION I: HEALTH POLICY AND TECHNOLOGY ASSESSMENT
• SECTION II: POLICY AND PERFORMANCE
• SECTION III: INTERNATIONAL POLICY INNOVATION
• SECTION IV: ORGANISING INNOVATION
• Index