Statewide: Docs on the block

In 2009, a group of doctors formed Independent Physicians of the Carolinas, a Charlotte-based nonprofit. During periodic meetings, doctors from about 50 practices, most in the Charlotte region, discuss topics ranging from health-care reform to back-office operations. With more physicians selling their practices to hospital systems, says board member and Charlotte pain specialist Ratko Vujicic, the gatherings can sometimes feel like a support group for beleaguered holdouts.

Half of U.S. doctors will work for hospitals or their physician networks by the end of the year, according to Scott Gottlieb, a fellow at the American Enterprise Institute, a Washington, D.C.-based research group that promotes free markets. The Raleigh-based North Carolina Medical Society doesn’t track how many of the state’s approximately 30,000 licensed doctors work for hospitals, but Charlotte-based Carolinas HealthCare System, the largest health system in the state, has increased its stable of practices 50% to 227 since 2010. The trend also is evident at other large systems, including Winston-Salem-based Novant Health, Durham-based Duke University Health Care, Chapel Hill-based UNC Health Care, Winston-Salem-based Wake Forest Baptist Health and Raleigh-based WakeMed Health and Hospitals. 

Hospitals began buying up independents 15 to 20 years ago, believing they could treat more patients at a lower cost on an outpatient basis, says Duke University professor Chris Conover, a health-policy specialist. The spending spree stalled when practices didn’t prove to be as profitable as predicted, but health-care reform has revived it as systems prepare for a post-Obamacare market. “Hospitals are finding that the easiest way to comply with all the new regulations is simply to employ the physicians,” says Bill Pully, president of the North Carolina Hospital Association. “Is that good or bad? I don’t know, it just is.”

Many predict that Obamacare will morph into a system that resembles accountable-care organizations — provider partnerships that are paid based on patient outcomes instead of by the number of tests and procedures they perform. Medicare uses a formula to calculate savings, giving half to the partnerships. Consolidation, Pully maintains, prepares hospitals for the changes by coordinating treatment among practices.

Independent physicians find selling out attractive because, in part, the Affordable Care Act demands upgraded office technology such as electronic patient records that requires a hefty investment. That was the conclusion of a focus group sponsored by the state medical society. “It was huge,” spokeswoman Elaine Ellis Stone says. “Their reason was that it was nice to have a big organization take that over for them.”

Fewer medical practices flying solo means higher prices, many health-policy analysts say. For example, Vujicic charges $300 for a pain-numbing spinal injection. A similar procedure jumps to nearly $2,000 at a hospital-owned practice, he says. That’s because private insurers usually pay independents according to rates set by the federal Centers for Medicaid and Medicare Services. Large hospital systems, however, negotiate more money for the same procedure from the same insurance company. “It is five to six times higher, and with deductibles going up, I don’t know how patients will be able to handle these higher costs,” Vujicic says. Plus, hospitals often tack a fee to bills to help pay for overhead. Medicare and many private health insurers don’t pick up these charges in full, which means more money out of patients’ pockets.

“But it’s more than just that,” Vujicic says. “It’s about the way I think medicine should be practiced and whether I’ll continue to have the ability to provide better and more personalized care.” A study by Englewood, Colo.-based Medical Group Management Association says productivity drops 25% or more when a doctor becomes salaried. “Once they work for hospitals, physicians change their behavior in two principal ways,” Gottlieb wrote in a The Wall Street Journal op-ed piece in March 2013. “Often they see fewer patients and perform fewer timely procedures. Continuity of care also declines, since a physician’s responsibilities end when his shift is over.” Pully says hospital standards won’t allow wholesale declines in productivity, while a roster of physicians under a single umbrella will wring out savings over time.

The trend favoring hospital-owned practices isn’t likely to slow soon. WakeMed’s primary-care network, which operates almost exclusively in Wake County, has nearly doubled since 2010. “We definitely plan to continue expanding in terms of new physicians,” spokeswoman Kristin Gruman says.

Carolinas HealthCare has added about 15 practices a year since 2009, building a network that employs more than 1,700 doctors in addition to another 1,700 at its 30 hospitals. Spokesman Kevin McCarthy won’t discuss acquisition plans but says, “Our projections here have been pointing up for quite a while.” Though he’s determined to buck the trend, Vujicic seems resigned. “Everything is becoming big, and it’s harder to find an independent.”