International medical graduates valuable source of primary care

The U.S. increasingly outsourced its primary care because of poor income prospects. Primary-care physicians’ income essentially has stayed the same since the 1990s, while their practice expenses have steadily increased. After accounting for inflation, their average income fell 7 percent from 1995 to 2003. This obviously is an unsustainable business model.

Primary-care physicians’ share of the U.S. health-care dollar is only 7 cents. Even if payers cut reimbursement for physician services by 25 percent – certainly a doomsday scenario for doctors – the average rate of medical inflation would decrease from 6.2 percent to 5.7 percent.

However, primary-care doctors control 80 cents of the health-care dollar by sending their patients to hospitals, referring them to specialists and handing out prescriptions. This is a key paradox: Primary-care physicians arguably are the most powerful players in the health-care system but are underappreciated and comparatively undercompensated. In a 2006 survey, nearly 8 out of 10 characterized themselves as “junior partners” or “second-class citizens” in the health-care galaxy. Medical students, including those who plan to become primary-care physicians, view the work more negatively than that of other physicians.

First-year guaranteed compensation for specialty physicians is $240,000 to $260,000, compared with about $180,000 for primary-care physicians. There is a perception that surgeons endure greater mental challenges and stress than primary-care physicians, which some believe accounts for the income disparity. However, a group of University of Cincinnati scientists used work-intensity measurement tools to determine that the mental burden was similar.

About 1 out of 4 physicians practicing in the U.S. and 10 to 15 percent of those in residency programs are international medical graduates (IMGs).

IMGs play a significant role in treating vulnerable populations. They have an oversized presence in counties with high infant mortality and lower socioeconomic status, and in those designated as rural. They tend to work more in the public sector and labor for longer hours. They are twice as likely to work in medically underserved areas as U.S. medical graduates are. They account for more than 1 out of 3 physicians in shortage areas, and 1 out of 10 U.S. hospitals are highly dependent on them.

The AMA House of Delegates urged the expansion of the J-1 visa waiver program. It allocates 30 positions for international medical school graduates who complete graduate medical education and agree to work in federally designated shortage areas in exchange for waivers from the return-home visa requirement.

Med schools expanding, residencies are not

The nation’s medical schools are on track to increase enrollment by 30 percent in 2016 compared with 2005, a goal called for by the Association of American Medical Colleges (AAMC). However, association president Darrell Kirch noted, “This won’t amount to a single new doctor in practice without an expansion of residency positions.”

In 2013, the number of first-year medical students exceeded 20,000 for the first time.

Despite the fact that most physicians said they would not recommend the profession to their children, applicants flooded medical school admissions offices in record numbers in 2012, according to the AAMC. The applicant pool has grown nearly every year for the past decade.

However, the number of residency positions has not expanded and, in fact, may contract because of decreases in GME funding.

The battle is on to defend and expand the nation’s GME slots. Teaching hospitals quadrupled their lobbying budget in 2011, to $2.8 million, according to the Center for Responsive Politics. They are pushing legislation that would add 3,000 residencies annually through 2017. The price tag: $9 billion.

Nearly half of medical school deans expressed “major concern” about nationwide enrollment growing faster than graduate medical education, and 33 percent reported it as a “major concern” in their state.

The other problem: Those in the pipeline will not help in dealing with the 2014 wave of new patients.

With at least 12 new schools opening and existing ones growing, enrollment is expected to create 5,000 more graduates a year by 2019.

Medicare-funded GME spots essentially have remained frozen since the Balanced Budget Act of 1997.

There currently are more residency openings than U.S. allopathic medical school graduates. The gap traditionally has been filled by graduates of U.S. osteopathic schools and foreign medical schools.

At the current expansion rate, graduates from U.S. medical and osteopathic schools alone will exceed the number of expected residencies by the end of the decade, according to AAMC. The U.S. is expected to graduate more than 27,000 medical students in 2020, which is 50 percent more than in 2000. If residency programs had not been capped in 1997 and GME slots had been allowed to grow at their historical rate, there would be no physician shortage today.

Residency applicants from foreign schools are likely to be squeezed out. Graduates of foreign medical schools now make up more than 25 percent of the U.S. physician workforce—and about half of primary-care doctors—because U.S. graduates gravitate toward specialties that are more lucrative. Foreign doctors also make up a disproportionate share of those in rural communities and public clinics, and they treat a higher share of minority patients.

Despite this, there have been multiple proposals to slash GME funding because of ongoing federal budget deficit-reduction efforts. GME reductions as high as 50 percent have been recommended by the Medicare Payment Advisory Commission and the National Commission on Fiscal Responsibility and Reform, as well as President Obama’s 2013 budget proposal.

The AAMC estimated in 2011 that a 50 percent reduction in Medicare GME funding would result in the closing of 2,551 residency and fellowship programs and the loss of 33,023 GME positions.

About 9 out of 10 allopathic and osteopathic medicine graduates had educational debt in 2011. The average debt is $205,674 for osteopathic students and $162,000 for allopathic students.

A medical school graduate with $162,000 of debt would have monthly payments ranging from $1,500 to $2,100 after residency training, depending on the repayment plan, according to the AAMC.


Physicians eager to be acquired

According to a survey of hospital administrators, 52 percent of hospitals planned to acquire physician practices in 2013, compared with 44 percent that made such purchases in 2012.

The survey found that opportunity, rather than strategy, was the overwhelming reason hospitals are acquiring physician practices. Seventy percent of acquisitions in 2012 began with physicians approaching hospitals to sell their practices.

Even though Moody’s Investors Service issued a “negative outlook” on nonprofit hospital finances in early 2013 for the sixth year in a row, it noted that the sector had improved its bottom line in recent years and credited physician-practice acquisition.

Hospitals especially covet increasingly scarce primary-care physicians. Dr. Guy Culpepper, president and chief executive officer of Jefferson Physician Group in Dallas has quietly guided his group of about 200 primary-care physicians from the managed-care era of the 1990s to the current wave of consolidation. With primary care in such demand, he and his group constantly fend off suitors.

“They (hospitals) want to buy us, steal us, have us go away and break us up. When hospitals tell our doctors, ‘You can make 180 percent of Medicare rates instead of 125 percent,’ that is hard to turn down,” he said, acknowledging the market power of health systems in negotiating with insurers.

In 2012, for the first time since physician recruiter Merritt Hawkins began its survey in 2002, primary-care physicians generated more annual revenue for their hospitals than did specialists. Primary-care physicians generated an average of more than $1.56 million for their affiliated hospitals, compared with an average of less than $1.43 million for specialists.

 “A seismic shift is taking place in medicine, away from specialists and toward primary-care physicians,” said Mark Smith, president of Merritt Hawkins. “Primary-care physicians are increasingly employed by hospitals and in new delivery models, such as accountable care organizations. They are taking a greater role in driving both the delivery of care and the flow of health-care dollars.”

 According to Smith, the volume of services performed by physicians is still the key economic determinant for hospitals, rather than quality of care.

 “Hospitals still get higher rewards the more that physicians do for patients within

their walls,” Smith said. “Volume may not be paramount in the value-based system of the future, but it remains the name of the game today.”


The question is whether increased hospital employment of physicians is a structural workforce change or a passing fad. Hospitals acquired physician practices in droves in the 1990s, only to let them go when it became clear there was a cultural mismatch and the anticipated financial windfall failed to materialize.

Health policy analysts say the current hospital-physician integration will be different. They point out that the ACA is driving delivery transformation, younger physicians are more amenable to employment for work-life balance, and many physicians are feeling the effects of reimbursement cuts. Hospitals need physicians to deliver care and patient referrals. Physicians yearn for income and employment security.

More than half of physicians are now employed by a hospital or integrated delivery system. Over the past decade, there has been a nearly 75 percent increase in the number of physicians employed by hospitals. And hospitals say they plan to continue to step up the pace.

Physicians believe hospital employment should translate into a greater voice in management. More than 9 out of 10 believe they should be more involved in executive leadership, serve on boards of directors and have input on performance-improvement initiatives.

There is a history of mistrust between hospital executives and physicians. The former often see the latter as obstacles—rather than partners—in cost-cutting and quality initiatives. The latter frequently see the former as more concerned with the bottom line and their bonuses than patient welfare and physician concerns.

Hospital executives say physician relationships are critical to successful accountable care. Most understand that they will not see a return on investment in physician employment for years, but the improved coordination of care, greater patient satisfaction and larger market share ultimately will pay off.

Acquiring and integrating physician practices are expensive. According to an American College of Physician Executives poll, 32 percent said costs went up after their hospital or health system bought a medical group or practice, compared with 5 percent who said costs decreased.

A Healthcare Financial Management Association (HFMA) survey found physician compensation by hospitals increasingly based on value rather than production. Cost-of-care and efficiency-related incentives are expected to grow from 16 to 67 percent of physician contracts, and quality-related incentives will rise from 65 percent to 86 percent. Care-volume incentives are expected to drop from 77 percent to 59 percent.

Hospitals are just as eager to pursue relationships with independent physicians. Nearly 1 out of 3 are pursuing clinical relationships, directorships and co-management opportunities with independent physicians.

Hospitals buying physician practices at a furious pace

Grant Thornton says hospitals are acquiring physician practices at a more rapid rate because they need a secure physician base amid impending doctor shortages, the need to create new delivery models to meet payer-driven cost and quality initiatives, and general market uncertainty.

After initially knocking the trend, analysts began applauding hospital employment of physicians. According to Fitch Ratings and Moody’s Investors Service, physician employment has allowed hospitals to overcome flat inpatient revenue with greater outpatient care. Health reform is driving a shift from inpatient to more cost-effective outpatient sites.

Fitch said the No. 1 health-care sector challenge in 2014 would be to maintain profitability despite weak patient volumes and declining Medicare reimbursement to hospitals.

Moody’s partially attributed the gains to physicians. Closer relationships with physicians have helped hospitals stabilize their market shares and cut costs, Moody’s said. The relationships have translated into more physician input through joint ventures and hospital board memberships, aided by accelerating physician-practice acquisition. The rating service credited such steps, which ensure a steady flow of patient referrals, as an antidote to hospital reimbursement cuts stemming from the ACA.

According to Moody’s, inpatient admissions have been flat or declined since 2009, compared with physician office-visit growth of nearly 5 percent. Hospital profit margins stabilized in 2011 at about 2.5 percent.

A Wall Street Journal report noted the effect of physician employment on the cost of care. It pointed out that a 15-minute physician visit might cost about $70 at an independent practice, compared with $124 at a hospital outpatient clinic. Hospitals are able to use their market power to negotiate higher reimbursement rates with commercial payers, and Medicare pays “substantially” more when procedures are performed at a hospital-owned facility.

For Merritt Hawkins, 63 percent of physician searches between April 2011 and March 2012 were for hospitals, compared with 56 percent the year before.

One reason for greater physician demand is that physicians are working fewer hours. Compared with 2008, doctors now are working about 6 percent fewer hours and are seeing nearly 17 percent fewer patients per day, according to the Physicians Foundation.

Looming retirement for aging and frustrated physicians also is a factor. Nearly 1 out of 4 physicians are past the age of 60, and many delayed retirement because of the recent recession. Many others want nothing to do with the ACA. The Physicians Foundation survey estimated that 80,000 to 100,000 doctors might retire between 2012 and 2018.

Hospitals are recruiting physicians even when they do not have openings. More than half were recruiting for expected openings and nearly an equal number said they stockpiled candidates.

The percentage of cardiologists who were employed by hospitals tripled from 8 percent in 2007 to 24 percent in 2012, according to an American College of Cardiology survey.

Physicians who become employees increasingly consider themselves free agents, often open to the best opportunity. More than half working for hospital-owned or large independent groups were seeking to change practices for financial security, and a nearly equal number generally were dissatisfied with their current work circumstances.

More than half of practicing physicians get at least three employment solicitations a week. Almost 29 percent receive three to five weekly. Twenty-three percent get 6 to 10 notices, according to the Medicus Firm, a physician recruiter. Medicus also found that signing bonuses, once considered optional, are now an expectation.

According to a survey by QuantiaMD, an online physician community, about half of employed primary-care physicians had not had a raise in 1 to 2 years.  Nearly 1 out of 5 had experienced a cut in salary.


‘Death by a thousand pinpricks’

Travis Singleton, senior vice president at physician recruiting firm Merritt Hawkins, said it is hard to finger one or two culprits for the declining number of physician practices.

“It’s death by a thousand pinpricks. It’s the movement to accountable care organizations and patient-centered medical homes. It’s the changes in the delivery of care. It’s compliance pressures. You have to hire consultants for electronic medical records (implementation). That costs money,” he said.

Singleton said the pressures and difficult economics of solo physician practices foreclose that option for medical students, most of whom face large student-loan debts when they are looking for jobs.

“It’s easy to say they (medical students) don’t want to be a solo practitioner. That’s not reality. They may like the autonomy and generational medicine. But they will never have the chance to do it. There are so many challenges facing that delivery model. And that’s a shame,” he said.


  • The percentage of U.S. physicians who practice outside a hospital, clinic or large group fell to 39 percent in 2012, down from 57 percent in 2000. Of those who abandoned their independent practice, 87 percent cited the cost of doing business, 61 percent blamed managed care and more than half mentioned electronic health records. Of those who expect to remain independent, 1 out of 3 said they plan to turn to a subscription-based care model, such as concierge and direct-pay practices. Accenture, which conducted the survey, predicted that subscription-based models would double annually for the next three years.
  • According to a poll by Sermo, a website for physicians, more than 1 out of 4 physicians admitted they had been forced to close, or were considering closing, their solo practices. They cited high overhead costs, high malpractice-insurance costs and low reimbursement rates.
  • According to QuantiaMD, another website for physicians, more than 1 out of 4 primary-care physicians reported poor financial health. Among those feeling financial pressure, 81 percent saw profits fall in 2011 and nearly half had trouble covering costs. Like Jordan, most cited falling reimbursement and the rising costs of practice.
  • One out of 3 physicians say they plan to quit their practice in the next decade, according to a survey by Atlanta-based physician recruiter Jackson Healthcare. Of those who said they plan to quit, a majority cited economic factors and health reform as major reasons.
  • More than 75 percent of newly hired physicians will be hospital employees within two years, compared with 11 percent eight years ago, according to Merritt Hawkins. Of its 2,700 searches in 2011 and early 2012, only 2 percent were to fill positions in solo practices, compared with 42 percent in 2004.
  • The share of physicians who own their firms dropped from 57 percent in 2000 to 43 percent in 2009, and was expected to fall to 33 percent by 2013, according to Accenture.

Only 1 out of 4 physicians say they plan to continue practicing as they are, while half said they plan to exit the traditional full-time independent private-practice model. One of the demographic imperatives driving this is the fact that 1 out of 4 U.S. physicians are 60 or older.

However, more than half of physicians said they changed their retirement plans since the 2007-09 recession. About 7 out of 10 of that group said they planned to work longer than they had anticipated because of decimated personal savings. Conversely, some said they were leaving full-time practice for other reasons: the uncertainty of health reform, the rising cost of doing business or that they simply no longer enjoyed their life’s work.

The percentage of physicians in independent practice has been declining by 2 percentage points annually, a reduction that was expected to accelerate to 5 percentage points annually by 2013, according to the AMA. In a 2011 survey of health-care organization executives, 2 out of 3 said they were receiving more employment requests from physicians and they planned to increase their physician hiring over the next three years.

Moreover, third-year medical residents increasingly are bypassing independent physician practices to work as salaried employees in hospitals and larger medical organizations. About half said they were ill prepared to handle the business side of medicine because they received no formal instruction in medical school on how to negotiate contracts or manage reimbursement. It is especially disheartening that 3 out of 10 third-year medical residents said they would choose another career if they had the opportunity – compared with about 1 out of 10 in 2008.

Insurance reimbursements are inadequate to cover rising practice expenses. According to the Medical Group Management Association (MGMA), practice expenses per physician have risen more than 50 percent in the past decade, compared with a 28 percent rise in the Consumer Price Index and a 3 percent increase in Medicare reimbursement.

Physicians’ search for safe harbor is not the only factor driving consolidation in health care. A weak U.S. economy, capital investment needs and the desire for more market power fueled and acquisitions (M&A).

There were more than 1,000 M&A deals in health care in 2012. That year was one of the most active in the past decade. On the other hand, the aggregate dollar value of those transactions was nearly the lowest in a decade, suggesting that smaller organizations were likelier acquisition targets.

Physician practices were among those with the largest growth in mergers from 2011 to 2012, with transactions valued at $4.4 billion in 2012.


Physicians selling their practices

In 1994, when Dr. Louis McIntyre joined Westchester Orthopedic Associates in Westchester County, N.Y., the 3,000-square-foot office had nine employees, including four orthopedic surgeons. The following year, the practice spent $500,000 to move into an office that was twice as big, to accommodate workers newly hired to handle the clerical demands of managed-care insurance plans, such as insurance verification and pre-authorizations.

 In 1995, the practice needed only one employee to verify and authorize treatment. It quickly grew to one employee for every doctor to complete those tasks. The annual cost of malpractice insurance for each doctor rose from $40,000 in 1994 to $110,000 in 2010. The practice unsuccessfully tried to negotiate increased insurance reimbursement rates to offset the rising costs. It formed a network of orthopedic surgeons to attempt to improve the economic power of private practices, but was stymied by antitrust laws.

Westchester Orthopedic decided to meet these challenges head-on with aggressive expansion. It added more physicians and ancillary services to boost revenue. It bought a Magnetic Resonance Imaging (MRI) machine. It spent $500,000 for an electronic medical records (EMR) system. It spent $5 million to build an ambulatory surgery center adjacent to its office.

All told, Westchester Orthopedic spent $6.5 million. It grew revenue from $2 million in 1994 to $5.4 million in 2007, and employed nearly 50 people by that year. The surgeons did this despite the fact that reimbursement rates were falling. The American Academy of Orthopaedic Surgeons (AAOS) estimated that orthopedic surgeons’ Medicare reimbursement decreased 28 percent from 1992 to 2007. Commercial insurance reimbursement fell similarly. Then came the American Recovery and Reinvestment Act of 2009, which required an EMR upgrade to satisfy “meaningful use” criteria. The following year brought the Affordable Care Act (ACA), with its quality-reporting requirements and risk-based reimbursement.

 In 2012, Westchester Orthopedic threw in the towel and sold its practice to White Plains Hospital. According to the AAOS, hospital employment of orthopedic surgeons tripled from 2004 to 2010.

A study by the Medical Society for the State of New York in 2009 showed that the private practice of medicine was the fifth-largest employer in Westchester County, second among business establishments, third in paying personal income tax, and seventh in paying corporate sales taxes. With the acquisition by a nonprofit hospital, the federal and state corporate and sales taxes paid by Westchester Orthopedic vanished.

 McIntyre said, “The combination of decreased reimbursement, increased reporting requirements, the need for huge outlays for technology improvements and uncertainty about future earning potential is driving private-practice physicians to seek employed positions.”

 Dallas family physician Darrel Jordan, who closed his practice in July 2012, wrote a letter to his patients saying, “… the changes by the Affordable Care Act (i.e. Obamacare) are designed to add additional stressors and expenses to small doctor practices. This will make small physician offices unlikely to remain open past 2015.”

Jordan said the economics of a solo physician practice simply do not work anymore. He said his reimbursement had declined 30 to 40 percent from 3 to 5 years ago as practice expenses continued to rise. He said two physicians in neighboring offices were quitting their practices as well.

“I am on the cutting edge of change for all of us (solo physicians),” he said. “We are in one of three stages: those of us who are changing our careers now, those planning to change their careers, or those who are in denial.”


ACOs: Putting health care on a budget

Payers are eager to put health care on a budget.

Accountable care organizations (ACOs) are groups of doctors, hospitals, and other health-care providers that come together voluntarily to give coordinated, high-quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health-care dollars more wisely, it shares in the savings it achieves for the Medicare program.

ACOs spread swiftly. In spring 2013, 52 percent of U.S. patients lived in primary-care service areas served by ACOs, compared with 45 percent just six months earlier. About 30 percent lived in areas served by two or more ACOs, which was double the rate six months earlier.

However, ACO expansion seems to have lost some steam. After the Centers for Medicare and Medicaid Services announced 106 new Medicare ACOs in January 2013 alone, only 35 new commercial ACOs were announced in the subsequent 10 months.

David Muhlestein of Leavitt Partners, which tracks ACO formation, said there were several reasons for the slowdown. He said there is a lack of widespread acceptance of the model by commercial insurers, and there is no clear model for success. He said many organizations are waiting to see if ACOs renew their contracts with commercial payers, which would signal whether they are succeeding.

Nonetheless, ACOs are expected to be the most prevalent value-based model for health plans, according to Availity Health Information Network.

The report surveyed respondents on their strategy for adopting value-based models such as ACOs, PCMHs, payment-for-coordination, pay-for-performance for physicians and hospitals, and bundled payments. Nearly 9 out of 10 health-plan executives said they either had implemented or were planning to implement an ACO in the next 12 to 18 months. They also planned to automate information exchange with physicians in the same time period to implement or expand VBP.

More than half of physicians say they are skittish about entering into Medicare-based ACO agreements with the ever-looming SGR, according to a survey by MGMA. However, most said they would be much more likely-–or somewhat more likely—to consider new payment models if Congress passed legislation that would stabilize Medicare reimbursement for five years.

Nearly 2 out of 3 physicians surveyed by athenahealth and physician social website Sermo said the shift to ACOs would diminish quality of care, and that such quality generally will deteriorate over the next five years.

Physicians who said they were willing to participate preferred a pay-for-performance model to bundled payments and shared savings agreements. Of the specialties, nearly 3 out of 4 anesthesiologists said they were willing to participate, compared with less than half of emergency-medicine physicians. Pay-for-performance is an umbrella term for financial incentives to improve quality and efficiency of care and patient outcomes.

The number of physicians participating in ACOs or planning to do so has tripled between 2012 and 2013, according to Medscape’s 2013 Physician Compensation Report.

In 2012, 8 percent of the nation’s physicians were either in an ACO or planned to be in one within the year, according to the 2012 survey. This year, 24 percent of respondents are in an ACO or plan to join one within the year.

About 4 out of 10 physicians are unwilling to participate in an accountable care arrangement, according to a survey by, a physician-staffing firm.

Paul Ginsburg, president of the Washington-based Center for Studying Health System Change, said physician-led ACOs could have more opportunities to create savings in patient care if health insurers cooperate.

“I think physician-led ACOs inherently make markets more competitive because they have an opportunity to shift patients toward higher-value hospitals,” Ginsburg said. “It means that a hospital market that might not have large competition going, all of a sudden, if there’s a physician-led ACO, those hospitals have to compete on price for the allegiance of those physician-led ACOs.”

Ginsberg pointed out that doctor-led ACOs are not compromised financially by reducing hospital admissions and emergency department visits.

Physician-led ACOs dominate

The number of physician-led ACOs has surpassed the number led by hospitals.

Of those choosing to start ACOs, physicians—and specifically independent practice associations—are increasingly taking the lead. The reason is incentives. Physicians can increase their incomes under shared-savings programs. Hospitals lose money when they strive to keep patients healthy and out of the hospital.

Regardless of whether physicians participate in ACOs, they should prepare for the changes ACOs could bring to practice patterns. According to medical publisher, there are five ways ACOs will affect nonparticipating physicians:

  • Expect a reduction in referrals at specialty practices.
  • Get ready to deal with an ACO if you are a primary-care provider, because many specialists will be part of ACOs.
  • Prepare to compete for patients based on customer service, because ACOs will be motivated to keep patients within their networks.

The end of fee-for-service

Regardless of all the payment reform talk, fee-for-service is not going away soon.

Only 11 percent of commercial health-care payments to doctors and hospitals is tied to performance or designed to cut waste, according to a new National Scorecard on Payment Reform by Catalyst for Payment Reform (CPR). That means 89 percent of payments are made on the traditional fee-for-service basis, without quality or other performance components.

Among payments tied to value, just 60 percent involve providers’ taking on a share of the risk, meaning they stand to lose money if they do not meet certain quality and efficiency measures or if they exceed a budget. The rest are in programs such as pay-for-performance, which offer incentives for providing high-quality care, but do little to discourage overuse or inappropriate care.

CPR, an employer-founded nonprofit focused on creating greater value in health care, is aiming to have at least 20 percent of health-care payments be value-oriented by 2020. However, UnitedHealthcare says as much as 60 percent of its business could be value-based by 2022.

The risk of compensation exposure is tied to what roles physicians occupy in the health-care system. About 50 percent of surveyed medical directors say their compensation are tied to patient stays, safety and satisfaction, according to the MGMA, while only 4 percent of physician pay is linked to quality metrics.

Value-based purchasing (VBP) links information on the quality of health care, including patient outcomes and health status, with financial data. It focuses on managing the use of the health-care system to reduce inappropriate care by rewarding the best-quality providers.

A UnitedHealth Group report estimates payment reform could save anywhere from $200 billion to $600 billion over 10 years. However, physicians clearly are not on board.

According to a Harris Interactive survey, 6 out of 10 physicians believe the fee-for-service system encourages them to deliver “an appropriate amount of care” and that capitation puts too much risk on the provider. Only about 1 out of 3 believe fee-for-service encourages excessive or expensive care.

Physician engagement is critical in the process. However, 9 out of 10 physicians say their greatest financial concerns about VBP are receiving inadequate reimbursement and being penalized for circumstances out of their control.

According to an MGMA survey, physician practice executives said working with payers to implement new payment models was an intense challenge in 2013. That concern ranked only behind rising practice expenses.

Most practices said they wanted to explore new Medicare payment models, but were reluctant to do so because of the ever-present threat of the SGR cuts.

The whole concept of pay-for-performance incentives has been called into question. There is some evidence that such incentives reduce creativity and motivation in tasks as complex as practicing medicine, and that they may redirect attention away from tasks that are not being measured. A Robert Wood Johnson Foundation essay argued that pay-for-performance schemes need to capitalize on the inherent desire by most physicians to provide excellent care while striving for a mastery of skills, professional purpose and autonomy.

A Cochrane Collaboration review of studies found no evidence that pay-for-performance financial incentives improved patient outcomes or quality of primary care.

Remarkably, about 1 out of 4 physicians said they did not know whether they were participating in any pay-for-performance programs.

Health-care executives sense the obvious resistance.

Paul R. Goldberg, CFO of Jersey City, N.J.-based LibertyHealth: “The medical staff is always the hard part of the process. Doctors aren’t seeing anything (economic) on their side related to this (VBP).”

Peter J. Holden, president and CEO of Jordan Hospital in Plymouth, Mass.: “I told (the physicians) front and center that if you don’t learn and you don’t embrace and you don’t exert influence on what’s coming, you could be one class away from painting houses.”

John Hensing, Phoenix-based Banner Health’s executive vice president and chief medical officer, said that a physician’s age often influences his or her reaction to VBP. “If you’re 60 years old, ride it out. If you’re 50 years old, fight it. If you’re in your early 40s, you say, ‘What does the future hold for me, and what am I going to do about it?’ And if you’re just starting out, you may say, ‘That’s the way things have always been.'”

Passing the baton: Will patients take it?

In the public areas and examination rooms of the Southeast Texas Medical Associates (SETMA) offices in Beaumont, there is a poster of a baton being handed off.

The caption reads:Firmly in the provider’s hand, the baton – the care and treatment plan – must be confidently and securely grasped by the patient, if change is to make a difference, 8,760 hours a year.”

SETMA chief executive officer Dr. James Holly points out that the health-care provider carries the baton just 0.68 percent of the time while the patient does so the other 99.22 percent of the time.

“Coordination of care between health-care providers is important, but the coordination of the patient’s care between the health-care provider and the patient is imperative,” he says.

The baton represents the treatment plan. Holly describes the treatment plan as “the engine through which the knowledge and power of the health-care team is transmitted and sustained.”

Holly says the baton must be transferred to the patient by ensuring that she or her caregiver is equipped and empowered to carry out the care plan successfully.

That is the essence of patient engagement.

However, patients are not doing such a great job with that baton.


  • About 7 out of 10 Americans die of chronic disease.
  • Nearly 2 out of 3 personal bankruptcies involve medical costs.
  • More than half of Americans delay medical care because of cost.
  • More than half fail to get an annual flu shot.
  • Nearly 1 out of 4 statin users thought they would be cured after a 30-day prescription.
  • Only 1 out of 8 Americans have proficient health literacy.

According to a 2013 Centers for Disease Control survey on lifestyle choices, 6 out of 10 are overweight; 1 out of 5 smoke and fewer than half of them tried to quit in the past year; and 1 out of 3 get virtually not exercise.

Physicians can improve their patients’ health only if the patients do their part. Physicians need engaged patients to succeed. Too many patients are not holding up their end of the bargain.

Do not smoke. Eat at least five daily servings of fruits and vegetables combined. Drink moderately at most. Exercise at least 30 minutes a day. Sounds easy enough. But only 3 percent of Americans do all four.

Those who fit the American Heart Association’s ideal cardiovascular profile are even rarer. According to University of Pittsburgh researchers, the profile included seven factors: body mass index of less than 25; untreated cholesterol under 200; blood pressure below 120/80; fasting blood sugar level below 100; exceeds the government-recommended physical activity guidelines; does not smoke; and follows a heart-healthy diet. Of 1,933 people between the ages of 45 and 75, only one person met all seven conditions. Fewer than 10 percent met five or more of the criteria.

The federal government’s Healthy People 2010 initiative tracked 733 objectives. Americans had achieved 172 of them – or fewer than 1 out of 4. There was important progress on heart disease since 2000, but obesity and diabetes went in the wrong direction. Rates of smoking and healthy eating rates essentially stayed the same.

Lifestyles of many older Americans have become increasingly unhealthy in the past 20 years. The percentage of those ages 40 to 74 who say they have at least five daily servings of fruits and vegetables combined declined by nearly half. The percentage who worked out 12 times a month was 43 percent, compared with 53 percent in 1988. Even those who had acquired heart disease, high blood pressure or diabetes were no more likely to change their bad habits than those without the conditions.