In close quarters: when hospitalist groups compete

In close quarters: when hospitalist groups compete

October 2007
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Published in the October 2007 issue of Today’s Hospitalist

When Lancer Gates, DO, left his Missouri hospitalist practice for a family vacation in July, there were three competing hospitalist groups vying for admissions, referrals and consults at North Kansas City Hospital in Kansas City, Mo. When he came back in August, there were two.

“We had a two-front, three-division war, and now we are two,” he says. “The battle is on.”

In Dr. Gates’ mind, however, winning the war doesn’t mean annihilating the opposition. In an ideal world, he says, victory would be figuring out a way to peacefully co-exist, sharing the abundant inpatient business and spurring each other on to continuously improve service for patients and referring physicians.

In fact, Dr. Gates says he prefers not to think of the other hospitalist group as a rival, but as a healthy competitor. “I think competition does drive up quality and innovation,” he explains.

Until now, that’s a view that’s been shared by many hospitalists. While there has been competition among hospitalists working in the same facility, typically for unassigned ED coverage and primary care referrals, there’s also been more than enough business to go around. As a result, competing groups have managed to co-exist more or less peacefully.

In some quarters, however, there are signs that competition among hospitalists is heating up “and that the environment is becoming less collegial. The reason why is hard to pinpoint, but the competitive juices often seem to flow when there’s a change in the status quo.

In some instances, the equilibrium is disturbed when a hospital creates or invites a new group to practice within its walls and effectively compete against other groups that are already there. In other cases, groups that have worked side-by-side for years may start chasing the same new line of business, like preoperative testing for the big orthopedic group in town.

Whatever the cause, the results are often the same. Personalities change, egos get hurt and what may be longstanding alliances are broken.

Collegial competition

There was a time when hospitalist groups, even those that competed at the same hospital, managed to just get along.

At Unity Hospital in Fridley, Minn., for example, the competition is so respectful and friendly that the two hospitalist groups there negotiate together with the hospital for “an equal deal” subsidy to handle the unassigned emergency department business. They have also agreed to share night call with each other, and they pass patients back and forth.

Paul Kettler, MD, medical director of Columbia Park Medical Group’s hospitalist division, which is one of Unity’s two groups, says that both groups have a common goal: making sure patients stay at that hospital and don’t choose to go elsewhere because they are dissatisfied with the service.

“We realized that neither group could function without the other in the sense of handling all of the patients,” Dr. Kettler explains. “We don’t intentionally try to go after each other’s patients. And if we discover that we did, we call the other and ask, ‘Do you want to pick him up or do you want us to keep him?’ ”

Fault lines

But that type of collegiality can fracture when the status quo changes. In Mission Viejo, Calif., Advanced Hospitalist Medical Group (AHMG), a hospitalist group founded and run by Fara Kardan, MD, was selected by Mission Hospital to exclusively cover the ED unassigned pool. In pursuing an exclusive contract, the hospital wanted to reduce variations in several areas of quality and performance, such as ED throughput, the satisfaction of ED physicians and patient continuity.

Seven groups aggressively competed for the contract. After his group walked away the winner, Dr. Kardan had to spend several hours a day dealing with hospital politics.

He recalls that the leaders of one of the other groups wouldn’t talk to him, “even though I knew them for 10 years and the unassigned weren’t even their business. They actually approached my doctors to hire them within the first two months. They were concerned that if another group gradually becomes popular, referrals from other doctors might go to that new group instead of to them.”

That scenario, Dr. Kardan says, is exactly what is happening a year into the contract. For the first year, AHMG’s business consisted of “99% unassigned, but in the last two months, we have had close to 10% private referrals. I have had so many doctors coming to me and asking that we admit their patients.”

A tenuous equilibrium

Martin B. Buser, MPH, a founding partner of Hospitalist Management Resources LLC, a health care consulting firm based in San Diego, estimates that about 20% of his hospitalist clients work in competitive environments. He says that in markets where managed care took hold early on “such as southern California “hospitalists were hired by everyone including large multispecialty groups, IPAs and insurance companies. As a result, many of those communities have multiple groups of hospitalists working side-by-side in a single hospital.

The equilibrium that develops is upset when a hospital gives one group some type of an exclusive or invites a new group to set up shop. The latter was the case when Jewish Hospital in Louisville, Ky., invited Cogent Healthcare to start up a new hospitalist service that would compete head-to-head with existing groups.

Patrick Williams, MD, director of that Cogent program, says that before his group arrived, three privately-owned hospital groups worked at the hospital. The largest and most dominant of the three was headed by a private entrepreneur who had a lot of clout on the medical staff, but who was practicing a style of hospital medicine that hospital administrators felt didn’t meet their needs.

“It was more like a triage service,” Dr. Williams says. “When I first came to Jewish, there was the joke around the hospital that hospitalists’ orders read like this: ‘Admit to hospitalist. If temp greater than 101, consult infectious disease. If creatinine greater than 1.5, consult nephrology. If heart rate greater than 100, consult cardiology.’ ”

“Their length of stay was about nine days,” he adds. While the hospitalists did well under the system “they were paid fee for service “the hospital was losing money.

When competition turns ugly

With his group stepping into such a supercharged environment, Dr. Williams says he has had to work hard to identify systems and approaches that “separate us from the competition.” The group invested in new SpectraLink phones, rather than pagers, for instance, “to make ourselves extremely available,” he says. It’s also committed to being the only group in-house 24/7.

That level of competition, he adds, has definite downsides. The fact that the group has to always think about how to provide more comprehensive service, for example, sometimes makes it harder to recruit new hospitalists.

“People don’t generally want to do nights,” he explains. “We tell people that we are a very service-oriented group, that we respond to things that some physicians would feel are beneath them or are too trivial to deal with.”

And despite his best efforts, Dr. Williams says that problems persist. At one point, he explains, lawyers had to be called in to put an end to an apparent slander campaign by one of the four hospitalist groups on-site.

According to Dr. Williams, one of the groups was accused of spreading rumors through the primary care physician community about the imminent failure of another private group. “There’s been,” he says, “some pretty underhanded stuff going on.”

Driving positive results

Sometimes, however, a hypercompetitive environment can help individual hospitalists. Because his group competes with six or seven major hospitalist groups in Orlando, Fla., Krishan Nagda, MD, has decided to make working conditions the feature that sets his group apart.

“There are plenty of other job opportunities for hospitalists in the area,” explains Dr. Nagda, founder and CEO of the 32-physician Central Florida Inpatient Medicine group, “so we ay attention to lifestyle and burnout to make sure we have very low turnover. If you don’t have the continuous buy-in of the hospitalists, they won’t do more than the minimum. That happens only if they are not stressed all the time.”

While working in a superheated market may spur groups to take advantage of every possible opportunity, he has learned that it’s sometimes better to just say no. Dr. Nagda says that competing for unassigned business isn’t always a good business decision, for example, even if it comes with a hospital subsidy.

“We had to pull out of one hospital because every time the specialists saw a consult was from us, they knew it was somebody who was going to be a self-pay,” he explains. “Financially, it was profitable, but it had become a hostile place to practice, and it was an issue of quality-of-life for the physicians.”

Advantage: hospitals

And when competition among hospitalists heats up, it’s sometimes hard to say just who is winning. In Kansas City, for instance, the competition between Dr. Gates and the remaining hospitalist group is so intense that it has put the hospital in the financial driver’s seat.

“Unassigned is a free-for-all,” Dr. Gates explains. “There is no stipend for it. The hospital has been saying that there is plenty of free market competition, so why should they subsidize anything when it’s working out just fine with competing groups of hospitalists.”

Because Gates Hospitalists, the group that he founded, sees patients in two Kansas City-area hospitals, he has decided to back away from the fight over unassigned business. His goal is to have no more than 20% of the unassigned patients at North Kansas City Hospital.

That doesn’t mean that he’s giving up, however. Dr. Gates says he instead plans to compete by making his group as lean as possible, keeping overhead low, and negotiating better deals with payers, billers and malpractice companies. He also wants to focus on securing other lines of business, such as pre-surgical testing for orthopedic groups.

Taking the high road

While he is in a one-on-one war at one hospital, Dr. Gates says his goal is to take the high road and avoid expending precious time and energy monitoring whether patients are admitted to a referring doctor’s preferred hospitalist group.

He does recall the time, however, that a doctor from his group completed a patient’s pre-surgical evaluation at the request of a local family doctor. Two days later, the patient was admitted to the hospital for the surgery “and a physician from the other group was consulted for postoperative medical management.

Dr. Gates says that when he asked that physician to “kindly redirect any mis-referred patient to us and we’ll do the same for you,” the answer was a clear and resounding no.

“He said that when he is asked to see a patient, he will see the patient,” Dr. Gates recalls. “And then he hung up.”

That’s why even as he talks about remaining cordial, he’s also preparing for battle.

“You have to shore up your base so if something is taken from you, you can stand up and fight for what’s yours,” Dr. Gates says. “And at the same time, you have to diversify. You want to get the nuclear weapon before your competitor does.”

Deborah Gesensway is a freelance writer reporting on U.S. health care from Toronto, Canada.

Strategies to co-exist with the competition

Co-existing peacefully with competitors doesn’t have to be an elusive goal, as long as contenders agree to some general rules of engagement. The following are some ground rules from hospitalists in fiercely competitive situations:

“¢ Define each group’s territory. “Poaching” is the “biggest point of contention” between the two hospitalist groups at North Kansas City Hospital in Kansas City, Mo., says Lancer Gates, DO, founder of Gates Hospitalists LLC. He has worked hard to keep a current ED list, which is updated monthly, on which family doctor refers to which hospitalist. But it’s still a problem, he says, when patients are admitted through surgeons or subspecialists.

“¢ “Keep your friends close and your enemies closer,” recommends Patrick Williams, MD, of Cogent Healthcare in Louisville, Ky. Over time, he says personalities change and even the biggest egos can be soothed. And “try to humanize the enemy,” adds Eric Siegal, MD, a regional medical director for Cogent. “Usually in one group, there may be one person who is particularly hard to get along with, but the rest are good guys.”

“¢ Identify areas of common interest.Work together on something that won’t compromise the group’s competitiveness, but will help patient care or hospitalists’ quality of life. A good example is a quality improvement project or an initiative to share night call. “Look at where your mutual interests outweigh your areas of contention,” Dr. Siegal says.

“¢ Understand hospital politics. Keep in mind that a hospital’s relationship to a hospitalist group is only one issue on administrators’ plate. “The political reality is that they are not just talking to the large primary care medical group about the hospitalist program,” Mr. Buser says. “Administrators are trying to weigh a number of issues when deciding how forceful they need to get to resolve issues between competing hospitalist groups.”

“¢ Think of competition as a plus. Even if you don’t have any head-to-head competition, there could be some tomorrow. “It’s the threat of competition that, if you are smart, should be driving you,” Dr. Siegal says. “Every day I get up and wonder what the other guy is doing.”

Competition as a double-edged sword

When hospitalist groups view each other as competitors, the working environment can suffer. But hospitalists who have been in that situation say that competition can also bring benefits to both physicians and patients.

“Like anything else, competition is a double-edged sword,” says veteran hospitalist Eric Siegal, MD, a regional medical director for Cogent Healthcare and chair of the public policy committee for the Society of Hospital Medicine.

Dr. Siegal recalls that when he worked in a hypercompetitive environment in Denver several years ago, “We were forced to innovate constantly. We spent everyday thinking about how we could do it better,” particularly on things like hand-offs and communicating with primary care providers. It forced their competitors to do the same, raising the quality of care and of the service provided by both groups.

On the other hand, he says, being in such a supercharged battle for market share “where every decision could mean economic life or death for the group “can skew decision-making.

In one case, his group decided to start working at a new hospital despite serious misgivings. “The care frankly wasn’t very good,” Dr. Siegal recalls, “but because of the competitive environment we were in, we didn’t feel we were in a position to decline.” The group ultimately pulled out of that hospital.

He contrasts that experience with a later job in Madison, Wis., where there was virtually no competition from other physicians, a situation that he says can lead to “complacency.” Dr. Siegal says there were times when he thought his group wasn’t aggressive enough pursuing other lines of business, such as adding surgical co-management services.

“The upside is that it makes for a very nice, laid-back environment,” he says. “The downside is there is no pressing need to change.”

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