By William B. McMillan, M.D.

William B. McMillan, M.D., is vice president of Medical Affairs at St. Clair Memorial Hospital.

Published November 1996

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Providers of health care have begun to react to the likelihood that Pennsylvania will see the same health care delivery changes experienced in California, Arizona and Minneapolis. Hospitals and physicians are recognizing that access to patients is becoming as much a business concern as referral patterns and professional relationships. A good reputation among patients and colleagues may be insufficient to sustain business prosperity in the health care arena of the future. More and more citizens of our communities are selecting health care plans which limit a patient’s ability to select among all providers traditionally available to them. Not all hospitals contract with all major insurance companies. Payment for a subscriber’s hospitalization can not be assumed, authorization for recommended consultations, procedures, or tests is not automatic, and financial coverage for medical care from a competent and respected professional can not be taken for granted. As patient choice diminishes, so does provider access to the patient marketplace. A hospital’s ability to negotiate a contract, or a physician’s ability to be or remain "selected" as a health plan provider can be critical to business success. A physician’s knowledge, competency, reputation, location and availability may no longer be a patient’s first consideration but, rather, the presence of the doctor’s name on a list of approved practitioners. Neither a patient’s desire to consult a specific doctor, nor a personal physician’s wish to refer, can overcome the economic realities of provider panel selection, non-selection or "deselection." No longer can a young physician start a private practice assured that competence, hard work, a professional and pleasing manner and ready availability to patients and colleagues will result in success. Control by insurance companies of access to patients will increasingly restrict the options of newly trained physicians. Employed physicians, moreover, weighing independent practice as an alternative to the negotiation of new contracts, face not only the customary competitive and capitalization risks associated with starting a business, but also the potential revocation by an insurer of existing provider status.

As the economics of health care shift from "payment for services performed" to "pre-payment for taking the risk of having to perform services," the dynamics of the doctor-patient relationship change as well. New expectations have been created and old ones need reemphasis. Physicians need to discuss such issues as patient compliance with a plan of care, unrealistic demands for immediate attention and inappropriate requests for unnecessary testing. Patients need to inquire about restrictions of patient choice, the financial incentives associated with fee-for-service and pre-paid systems, and processes such as pre-certification, authorization and adjudication. Providers and subscribers alike need to be comfortable with the concepts of rights and responsibilities, expectations and limitations, which these new relationships engender.

Some health care providers have reacted to their perceptions of the future by forming provider networks. The first such enterprise, initially dubbed the Southwest Integrated Delivery Network (SIDN) and recently renamed Pyramid Health, is a joint venture of ten entities seeking to accept the risk of providing necessary medical services for the enrollees of HMO insurance products in return for a significant portion of the premiums paid. Sewickley Valley Hospital, Allegheny General Hospital, Forbes Health System, Allegheny Valley Hospital and St. Clair Hospital, along with their associated physician organizations, have embarked upon a strategy to serve the enrollees of any insurer willing to delegate health care risk and share quality assurance responsibility. Pyramid Health has already begun providing care for substantial numbers of HealthAmerica and U.S. Healthcare subscribers. Other western Pennsylvania institutions working to create viable integrated networks include St. Francis Hospital, Mercy and West Penn Hospitals, and UPMC and its partners in the Tri-State Network. Each of these initiatives appears to be impelled by a different vision or driven by a different strategy. Some involve the consolidation of institutions by merger and/or acquisition. Some entities are actively purchasing medical practice assets, establishing management services organizations and employing physicians, while at least one is actually purchasing an HMO. This scenario is dynamic and unpredictable. No strategy is static, no plan set in stone. Pyramid Health, founded as the joint venture of ten entities, now faces questions prompted by both the merger discussions between Sewickley Valley Hospital and the Medical Center of Beaver County and recent news of the possible purchase of Forbes Health System by Allegheny Health Education and Research Foundation (AHERF), the Philadelphia and Pittsburgh based parent corporation of Allegheny General Hospital. Many Pyramid Health physician owners are wondering how the outcomes of these institutional discussions might affect both the governance structure of the balanced network and the long-term effectiveness of the joint venture.

Hospitals and their associated medical staffs are by no means the only players in this market positioning themselves for a future of change. Physicians are banding together into larger and larger group practices, both single and multi-specialty, in an attempt to enhance efficiency and attract or preserve contracts with insurance companies. Multi-specialty independent practice associations are organizing, slowly increasing membership and beginning early discussions with payers regarding opportunities to take on significant financial risk for the care of covered lives. In other areas of the country, physician entities have been seriously exploring the possibility of direct contracting with large purchasers of health care to take total financial risk for the care of those individuals covered. Recent changes in state and federal law suggest a legislative sentiment favoring such assumption of full risk by large provider groups or networks.

It should come as no surprise that all this talk of provider-borne risk has sparked much discussion regarding the proper function of health insurance companies of the future. If provider organizations assume the tasks of compensating care-givers, assuring quality and managing the consumption of resources, will the responsibilities of actuarial analysis and marketing be sufficient justification for the persistence of high visibility, low value added, entities which provide no patient care? It is not coincidence that insurance companies are in various stages of testing the concept of building clinics and employing professionals with whom they have traditionally contracted. For the present time, a relatively small number of insurers are perceived as the doctor’s conduit to the health care marketplace. The need to embrace physician leadership in the process of managing and prioritizing the consumption of scarce resources will, over time, either change the face of insurers as we know them, or result in the advent of new, forward-thinking entities cognizant of the limitations of current "managed care" models of apportioning medical care.

Physician commitment is the key to successful health care ventures of the future. Common to all physician strategies for surviving tumultuous change is the basic business principle of enhancing and demonstrating, value. Modifying, reassessing and reinventing complex processes of care is the means of providing better illness treatment and health preservation while, at the same time, holding the line on cost escalation. Because patient care processes require the coordinated efforts of many, those ultimately responsible for health outcomes must develop and exercise the skills of team leadership and consensus building. The least replaceable parts of the health care engine are the physicians who have dedicated their youth to academic excellence and rigorous professional training. Such inherent value notwithstanding, the doctors of greatest value in the future will be those who become expert in the re-engineering of patterns of practice. It is my belief that physicians who are willing to take the time to reassess rationales for long-observed traditions, confident enough to confront complacent colleagues bound by convention, and skillful enough to shepherd a vision past the hazards of self-satisfaction can and will lead their practices, associations, or networks to a new level of professional success.