For decades, doctors in picturesque Boise were part of a tight-knit community, freely referring patients to the specialists or hospitals of their choice and exchanging information about the latest medical treatments.
But that began to change a few years ago, when the citys largest hospital, St. Lukes Regional Medical Center, began rapidly buying physician practices all over town, from general practitioners to cardiologists to orthopedic surgeons.
Today, Boise is a medical battleground.
A little more than half of the 1,400 doctors in southwestern Idaho are employed by St. Lukes or its smaller competitor, Saint Alphonsus Regional Medical Center.
Many of the independent doctors complain that both hospitals, but especially St. Lukes, have too much power over every aspect of the medical pipeline, dictating which tests and procedures to perform, how much to charge and which patients to admit. In interviews, they said their referrals from doctors now employed by St. Lukes had dropped sharply, while patients, in many cases, were paying more there for the same level of treatment.
Across the country, doctors who sold their practices and signed on as employees have similar criticisms. In lawsuits and interviews, they describe growing pressure to meet the financial goals of their new employers often by performing unnecessary tests and procedures or by admitting patients who do not need a hospital stay.
Saint Alphonsus has gone to court seeking an injunction to stop St. Lukes from buying another physician practice group, arguing that the hospitals dominance in the market was enabling it to drive up prices and to demand exclusive or preferential agreements with insurers.
Federal and state officials have also joined the fray. In one of a handful of similar cases, the Federal Trade Commission and the Idaho attorney general are investigating whether St. Lukes has become too powerful in Boise, using its newfound leverage to stifle competition.
Dr. David Pate, chief executive of St. Lukes, denied the assertions by Saint Alphonsus that the hospitals acquisitions had limited patient choice or always resulted in higher prices. In some cases, Pate said, services that had been underpriced were raised to reflect market value. St. Lukes, he argued, is simply embracing the new model of health care, which he predicted would lead over the long term to lower overall costs as fewer unnecessary tests and procedures were performed.
Regulators expressed some skepticism about the results, for patients, of rapid consolidation, although the trend is still too new to know for sure.
Were seeing a lot more consolidation than we did 10 years ago, said Jeffrey Perry, an assistant director in the FTCs Bureau of Competition. Historically, what weve seen with the consolidation in the health care industry is that prices go up, but quality does not improve.
A DRIVE TO CONSOLIDATE
An array of new economic realities, from reduced Medicare reimbursements to higher technology costs, is driving consolidation in health care and transforming the practice of medicine in Boise and other communities large and small. In one manifestation of the trend, hospitals, private equity firms and even health insurance companies are acquiring physician practices at a rapid rate.
Today, about 39 percent of doctors nationwide are independent, down from 57 percent in 2000, according to estimates by Accenture, a consulting firm.
Many policy experts praise the shift away from independent practices as a way of making health care less fragmented and expensive. Systems that employ doctors, modeled after well-known organizations like Kaiser Permanente, are better able to coordinate patient care and to find ways to deliver improved services at lower costs, these advocates say. Indeed, consolidation is encouraged by some aspects of the Obama administrations health care law.
If youre going to be paid for value, for performance, youve got to perform together, said Dr. Ricardo Martinez, chief medical officer for North Highland, an Atlanta-based consultant that works with hospitals.
The recent trend is reminiscent of the consolidation that swept the industry in the 1990s in response to the creation of health maintenance organizations, or HMOs but there is one major difference. Then, hospitals had difficulty managing the practices, contending that doctors did not work as hard when they were employees as they had as private operators. Now, hospitals are writing contracts more in their own favor.
Hospitals are constructing compensation in ways that are based on productivity and performance, said Steve Messinger, president of ECG Management Consultants, which advises on physician acquisitions.
But the consolidation of health care may be coming at a hefty price. By one estimate, under its current reimbursement system, Medicare is paying in excess of a billion dollars a year more for the same services because hospitals, citing higher overall costs, can charge more when the doctors work for them. Laser eye surgery, for example, can cost $738 when performed by a hospital-employed doctor, compared with $389 when done by an unaffiliated doctor, according to national estimates by the independent congressional panel that oversees Medicare. An echocardiogram can cost about twice as much in a hospital $319, versus $143 in a doctors office.
Federal regulators are also examining the higher numbers of physician contracts being created, searching for violations of laws that prevent hospitals from rewarding doctors for admitting patients or for ordering lucrative tests and procedures.
PUMPING UP ADMISSIONS
According to two emergency room doctors who worked at Carlisle Regional Medical Center in Pennsylvania, the message could not have been clearer: More patients needed to be admitted.
The doctors were employed by EmCare, whose parent company was later acquired by the private equity firm Clayton, Dubilier & Rice in 2011 as part of a $3.2 billion deal. EmCare, in turn, was under contract to provide emergency room doctors for the hospital, which is owned by Health Management Associates. In interviews, doctors said that hospital administrators created targets for how many patients they should admit. More admissions translated into more dollars for the hospital.
Dr. Jean-Paul Romes, one of the physicians, recalled getting phone calls in the middle of the night questioning why he had not admitted an older patient whose hospitalization he could easily have justified.
The pressure to admit was so high, he said. Romes left the hospital last year.
Other physicians say they are pushed to ignore what is best for patients by referring them to doctors working for the same hospital. Dr. Victoria Rentel, a family practice doctor near Columbus, Ohio, recalled feeling pressured when she was employed by a local hospital to send her patients to doctors there for tests and procedures.
I routinely got reports about the money I kept in the system, Rentel said, detailing how much revenue she was generating for the hospital through in-house referrals.
I tended to refer to specialists I knew who would deliver better care, she said. The hospital eventually closed the clinic where she worked.
Some physicians also complain about quotas. Dr. Patricia F. White, an emergency room physician who worked at Baptist Health in Jacksonville, Fla., said that starting in 2010, her compensation was partly calculated based on the number of patients she saw an hour, according to a lawsuit she filed in August against the hospital and Emergency Resources Group, which provided emergency room staffing to Baptist.
The staffing group said it had no choice but to agree to the hospitals demands.
If we dont comply with their wishes as good partners, there is a termination notice in our contract, wrote Paul Davidson, administrator for the group, in a series of emails that were included with Whites lawsuit.
In an emailed statement, Baptist Health said that patients expected timely access to quality care and that an emergency room physicians productivity and efficiency are vital components to delivering good patient care as well as ensuring patient safety and satisfaction. A lawyer for Emergency Resources Group echoed those sentiments in an emailed statement, adding that efficiency was only one component of physician compensation.
RISING MEDICAL COSTS
It was about three years ago that Dr. Julie A. Foote, who has been an endocrinologist in Boise for 18 years, began noticing the ads in the local newspaper.
Each week, another advertisement appeared, heralding the hire of a physician or a practice group by either St. Lukes or St. Alphonsus, which is part of Michigans Trinity Health, one of the nations largest hospital systems.
The playing field wound up being divvied up pretty aggressively, Foote said.
In Boise, doctors are pressured to refer only within their own system, according to Saint Alphonsus in its complaint. Pate, the St. Lukes chief executive, disputed the notion that physicians employed by St. Lukes were prohibited from referring patients to outside doctors.
My own wife was referred by a St. Lukes physician to a Saint Als physician for her particular condition because he felt the Saint Als physician was the best for this problem, he said. If the wife of the CEO is being referred to a physician at another hospital, that should prove that our physicians send many referrals over there.
Pate acknowledged that prices for some services had risen, but he said this was only because they had been severely underpriced. In the long run, he argued, overall costs will decline as St. Lukes is better able to coordinate care, avoiding expensive emergency room visits and redundant tests.
But some people remain skeptical that patients will be better served.
Im not certain what all this means is that patients are getting cost-effective care, which is how the nation is painting this evolution, Foote said. If this is better quality for less price, I want to see the less price.