More doctors flock to hospitals as insurer system daunts small practices

The number of Hawaii doctors employed by hospitals has grown by more than 30 percent in the past three years as health-care providers try to find ways to improve quality — the primary measure for calculating payments.

Thirty percent of Hawaii physicians were employed by hospitals in July 2015, up from 22 percent in July 2012, according to a recent study released by the Physicians Advocacy Institute Inc., a Washington, D.C.-based nonprofit that promotes fair and transparent payment policies.

Even with the increase, Hawaii doctors lag physicians nationwide, where nearly 4 in 10 are employed by a hospital, the study showed.

In Hawaii, 15.6 percent of physician group practices were owned by hospitals in 2015, up from 8.5 percent in 2012. Nationally, about 25 percent of physician group practices are owned by hospitals.

The growing trend, which is reducing the number of independent doctors in private practice, is alarming to the head of the Hawaii Medical Association, the trade group representing 1,900 physicians.

“You cannot serve two masters. The independence of physicians is an important aspect of care, and it is being eroded in today’s environment,” said HMA president Dr. Scott McCaffrey. “Large groups and insurers would like to get doctors contracted so they have an additional level of control over a doctor’s behavior, and can apply pressure and influence over doctors’ decision-making for cost-control purposes. A good physician workforce is one of the best things for a community from a medical standpoint because independent doctors are in a position of truly advocating for a patient.”

Private health insurers, including Hawaii Medical Service Association, Hawaii’s largest, and government insurers, including Medicare, have fundamentally changed the way hospitals and doctors are paid for medical services in recent years.

The payment system has shifted away from paying for the quantity of services performed and now bases reimbursements on quality measures. A major goal of the payment model is to decrease readmission and infection rates, as well as ensure a viable health-care system by rewarding hospitals and physicians for coordinating care to produce positive health outcomes while controlling costs.

“The small physician practice is going to struggle to be financially viable under the new value-based payment methodologies being adopted,” said Kelly Kenney, executive vice president of the Physicians Advocacy Institute. “A value-based system for Medicare is all heavily reliant on reporting quality measures. It’s pretty data-intensive and expensive. … For a small-practice physician, it looks pretty daunting.”

In addition, hospitals are looking at physician practices as a way to secure a patient base, she said.

“These big systems are competing for patients. It’s one way that hospitals can kind of lock in a patient base and ensure a stream of patients into their system,” Kenney said. “Hospital systems are all competing for those dollars.”

For doctors, it’s difficult to keep up with the changing requirements and rules tagged to compensation, McCaffrey said.

“They’re trying to phase out fee for service and individual doctors and small practices simply do not have the staff resources to keep up with onerous new requirements of today’s new payment models,” he said. “Individual and small group practices are at a distinct disadvantage. This is the reason young new doctors are not going into private practice and the reason older doctors are looking to retire early.”

In the past two years, the Queen’s Medical Center has employed about 25 additional physicians.

Dr. Whitney Limm, Queen’s chief physician officer, said there is still a large role for private practice doctors to play in the health-care system. Of the more than 1,200 physicians on Queen’s medical staff, only 165 are employed by the hospital.

“It’s the uniqueness of the Hawaii environment that we have a lot more private practice doctors than employed physicians,” he said. “That has definitely increased in the last 10 years. The benefits to the community is helping to provide access to care.”