Redefining the Model

In the 1990s, many corporate-owned medical clinics around the state closed their doors when profits declined, but the recent re-openings of several of these clinics throughout the state may be an indication that hospital-owned physician practices are once again becoming a part of local medical communities. Gerry Kassouf of Kassouf and Company said that many of the clinics in the 1990s were owned by companies looking to develop a market of medical practices owned by corporate conglomerates. The objective for these companies, such as MedPartners and PhyCor, was to generate savings and profits by centralizing information and billing systems, marketing to health plans and promoting efficient operations. “I don’t know if the concept was good or bad, but at the end of the day, all of these companies got out of the business,” he said. “Because these clinics were never as profitable as everyone thought they would be, they never produced the expected results.” Contributing to the problems of these clinics, Kassouf pointed out, was an increased regulatory environment, spiraling costs for maintaining a business, increased competition and decreased reimbursements for medical care. Many hospital boards would not tolerate the time it took for one of these clinics to become even marginally profitable. It was also during the 1990s that First Lady Hillary Clinton introduced her health care plan, which would have reduced the income of medical providers. “Because of the threat of this plan, physicians left medical school and tried to find an existing practice to associate with instead of starting their own practices. It was a safety net and provided a place to work,” he said. “The longer the time stretched without the plan being implemented, physicians became more comfortable with again owning their own practices.” With today’s renewed development of hospital-owned physician practices, the emerging business model is one of creating and maintaining additional market share, Kassouf said. His company assists these business ventures with financial modeling and demographic assessment. “We want to make sure the financial aspects of these practices are beneficial to both the physician and the hospital,” Kassouf said. “We are currently working with several hospitals to assist them with bringing the physician practices to the operational stage.” Gaining market share is a great benefit to these hospitals, Kassouf pointed out. “Through these clinics, hospitals are providing care in communities that are underserved and are addressing a need by having a physician in a community to help its citizens,” he said. Vince McVittie, chief development officer at Brookwood Medical Center, cites some reasons that hospitals are moving back to employing physicians. A national and local shortage of primary care physicians is one. “This trend doesn’t look like it will improve in the near future,” he said. “There are established primary care physician practices at hospitals, but the practices are full. Brookwood has a lot of these physicians, but patients have trouble getting access to them.” McVittie said that a population explosion outside the immediate Birmingham area is creating the need for physician practices in these outlying areas. “People are moving away from us, so we need to get primary care to those areas. One of the best ways is through this physician employment model,” he said. Decreasing reimbursement to physicians is another reason for the growing popularity of hospital-owned physician practices, according to McVittie, especially when a young doctor is faced with debt from medical school loans. “When the hospital owns the practice, it assumes a lot of the financial risk and takes administrative headaches away from the physician,” McVittie pointed out. “That allows the doctor to do what he or she is trained to do — practice medicine.” Dr. Doug Lipperd with Brookwood Primary Care in Cahaba Heights agreed. “Since I am new to the community, having the resources and name recognition that Brookwood Medical Center brings to the table is a tremendous benefit to my practice. It’s also a real plus not having to worry about running the business side of my practice. Letting go of that worry frees me up to do what I enjoy doing and what I’m trained to do — taking care of my patients.” So are these hospital-owned physician practices here to stay? Kassouf said given the number of clinics that are opening, hospitals are realizing the need for services in outlying areas and the desire for convenience in more populated areas. He pointed out that for these practices to be successful there must be a balance between the physician’s work structure and the practice’s ability to be profitable. “These practices could be around for many years as long as the anticipated working model provides a financial arrangement where both the employer and the doctors benefit,” he stated. October 2007