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Locked out: Why some hospitals are limiting which hospitalists can work on their wards

October 2004

Published in the October 2004 issue of Today’s Hospitalist

A turf battle is brewing in parts of the west, and the way it is settled may help shape the future of hospital medicine. The issue is whether hospitals can give internists staff privileges as outpatient physicians, but deny them the right to work in the same facility as a hospitalist.

A handful of hospitals in Arizona, Texas and Colorado are trying to do just that by allowing only a select group of hospitalists to work in their wards. As these hospitals bar other hospitalists from working in their facilities, they are sparking both controversy and legal challenges.

For hospitalists, the immediate concern centers around their ability to earn a living. They claim that exclusive contracts limit competition and smack of economic credentialing.

Supporters of exclusive contracting, however, argue that because hospitalists work solely in the hospital, they should be treated no differently than other specialist groups. They point out that anesthesiologists, emergency physicians and radiologists all live with exclusive contracts. Why, they ask, should hospitalists be any different?

Hospitalists point to major differences between themselves and other inpatient physicians. They also worry that being lumped together with their hospital-based colleagues could have a long-term impact on their specialty.

Some say that restrictive contracting arrangements could disrupt relationships with outpatient physicians they have spent years cultivating, hurting the specialty’s growth. Others worry that as individual hospitals decide who is and isn’t a hospitalist, hospitalists’ identity could be shaped by forces outside of the specialty.

Shaky ground?

Adam Singer, MD, CEO of IPC-The Hospitalist Company, says hospitals that are creating exclusive contracts for hospitalists are on shaky ground. “The fact is that there is no such thing as a hospitalist yet,” he explains. “These doctors are all internists, and the hospital can’t contract them out of the hospital.”

In Dr. Singer’s view, the argument that inpatient physicians are a hospital-based specialty “and therefore potentially subject to a hospital’s decision to restrict privileges to only those groups it wants “is faulty. He argues that the precedent set in anesthesia, radiology and pathology, which all rely on hospitals to provide equipment, does not apply.

“The term ‘hospital-based specialty’ may in a literal sense depict what a hospitalist is, but it does not depict what a hospitalist is as it applies to medical staff bylaws,” Dr. Singer explains. “It’s not like we need the pathology lab to be hospitalists.”

Ronald Greeno, MD, CEO of Cogent Healthcare Inc. in Irvine, Calif., agrees that the analogy comparing hospitalists to other hospital-based specialties is not correct. He points out that hospitalists are not like physicians in specialties such as cardiac surgery or radiology.

He notes that hospitals have been able to prevail in challenges arising out of exclusive contracting arrangements with those specialties because the hospital in a sense “hosts” the services. It’s also economically and logistically impractical to have competing groups of specialists sharing equipment or laboratories.

Dr. Greeno says that while hospitals can give privileges to a single cardiac surgery group, the decision to limit what hospitalists can work at a given institution is still unusual. “I think it would be hard for a hospital or medical staff to defend that position,” he adds.

Dr. Singer also points out an important distinction in the debate over exclusive contracting. While he says that he understands why a hospital would want to contract with one hospitalist group, those arrangements should focus only on certain groups of patients.

In his mind, for example, it’s fair for a hospital to refer unassigned patients and individuals referred by hospital-owned practices only to a hospitalist group of the hospital’s choosing. It’s fair for the hospital to determine who cares for those patients, he says, because those individuals are under the care of the hospital system.

Dr. Singer adds that when it comes to other patients, however, it’s a different story. “There are many other sources of patients that the hospital does not control,” Dr. Singer explains, “such as patients from unaffiliated primary care physicians and specialists and HMOs.” The care of those patients, he says, should be dictated by the referring physician, not the hospital.

Pressure on hospitals

Dr. Singer is confident that hospitalist groups willing to fight such arrangements have a solid case. His company has been involved in such disputes, and while he declines to discuss the specifics of any cases, he says IPC has typically come out on top.

“Whenever we have challenged a hospital that has attempted to exclude our privileges,” Dr. Singer explains, “we have prevailed.”

That may not keep hospitals from making an issue of exclusive contracting, particularly if they feel they need more control over issues like safety. Dr. Greeno says that in the current regulatory climate, hospitals feel compelled to take control of any patient care activities that directly affect safety.

As groups like the Centers for Medicare and Medicaid Services and the Joint Commission are establishing more stringent safety requirements, hospitals are turning to hospitalists as part of the solution. Some, however, may want things done on their own terms.

“The safety, economic and regulatory pressures hospitals face are tremendous, and they’re only getting worse,” Dr. Greeno says. “I think one of their only ways to deal with that is to have a well-run hospitalist program they can control and support.”

Some hospitals, for example, may not want to coordinate these initiatives with multiple groups of hospitalists, particularly if they think some of those groups don’t share their goals. Hospitals may also not want to work with hospitalist groups they think are more interested in the bottom line than physician-patient ratios and safety issues.

While Sherif Abdou, MD, CEO of Pinnacle Health Systems in Phoenix, has watched the company’s 200-hospitalist group lose business because of exclusive contracting, he urges hospitalists to try to understand why a hospital might want to set up an exclusive contract. A hospital may have data suggesting that one group is performing more efficiently than another, he says, or that one group’s patients have better outcomes in terms of readmission rates or other factors.

“Hospitals are under the gun to control the quality of the delivery of health care,” Dr. Abdou explains. “They’re under pressure to deliver a better, safer product, and all studies have shown that a good hospitalist program will produce better quality.”

Growing pains

Ironically, the growth of the hospitalist movement may be driving the decision by some hospitals to limit who they will allow to work as hospitalists.

As the number of hospitalists and hospital programs grow, hospitals are beginning to recognize that hospitalist programs are not all alike. Where there is a choice of programs, analysts say, a hospital is likely to go with a group that wants to help the hospital achieve its objectives beyond merely covering night time admissions or unassigned patients.

A well-run program can make an entire hospital more efficient, Dr. Greeno contends, but only if the objectives of the hospital and the group are aligned. “If that hospitalist group doesn’t have the hospital’s best interests at heart,” he explains, “it can end up not helping the hospital or even doing damage.”

Dr. Abdou says he views the direct contracting issue as one more sign that hospitalists are being accepted. Hospitals are beginning to realize that hospitalists are “here to stay,” he says. As a result, some administrators are looking for more control over the quality of services those physicians deliver.

Perhaps even more importantly, some hospitals may be adamant about maintaining control because of their experience with hospitalists employed by health plans. Analysts say that managed care organizations have been more aggressive in employing their own hospitalists in the western states. They say that trend in part explains why exclusive contracting of hospitalist services has surfaced in the western part of the country.

Referral patterns

While exclusive contracting has an immediate impact on the hospitalists who are locked out of a hospital, it raises bigger questions that affect not only hospitalists, but outpatient physicians.

Joseph Forrester, MD, president of Critical Care & Pulmonary Consultants in Denver, for example, worries that the widely varying definition of a hospitalist that is being used to support arguments for or against exclusive contracting is laying a foundation for serious problems down the road. Some physicians in his group, which employs 26 hospitalists, were recently denied admitting privileges at a Denver hospital after it decided to grant an exclusive contract to another group.

According to Dr. Forrester, the hospital had initially approached his group about the contract, which would have granted his hospitalists exclusive admitting privileges. The arrangement would have in essence made it the only hospitalist group that could admit patients. Internists who maintain an outside practice can still admit patients to the hospital, but any who practice only hospital medicine cannot.

“The problem is the precedent this sets,” Dr. Forrester says. He worries that exclusive contracts for hospitalists will complicate life for outpatient physicians who already have a relationship with hospitalist groups that no longer have privileges at a certain hospital.

The Society of Hospital Medicine has a policy opposing restraint of trade. Larry Wellikson, MD, executive director of the group, says it’s important to keep hospitalist panels as open as possible. While he’s concerned the impact on hospitalists, he also worries that restrictive contracting practices could disrupt the referral patterns of outpatient physicians.

Outpatient groups that have restructured their practices to allow hospitalists to manage their inpatients, for example, might find themselves facing some difficult decisions if the hospitalist group they work with is shut out of a hospital. They may not want to refer their patients’ hospital care to the group the hospital has contracted with, for example, or they may already have a contract with another hospitalist group.

In an even worse case scenario, outpatient physicians could feel forced to care for their own inpatients, a situation that could hurt everyone “and set back the growth of hospital medicine as a specialty.

Dr. Greeno predicts that these scenarios will force hospitalists to take a hard look at their identity. Do hospitalists want to be considered a subgroup of internists who practice solely in the hospital but aren’t formally recognized as a unique specialty? Or do they want to be considered a distinct specialty that is, in Dr. Greeno’s words, “recognized for what they do that is different?”

Dr. Greeno contends that if hospitalists want the advantages that come with being part of a unique specialty, they must be willing to accept the fallout. In this case, he says, that includes thorny issues like exclusive contracting.

“I would challenge my colleagues by saying that if you want the advantages that come with [being a recognized specialty], you need to accept the disadvantages that come with it,” he says. “That includes the possibility that there will be exclusive contracts. I don’t think we’re going to be able to have it both ways.”

Difficult decisions

The good news is that because exclusive contracting is still a relatively recent trend, hospitalists have time to deal with some of these issues.

At the American Hospital Association (AHA), for example, the issue hasn’t reached the organization’s radar screen, according to Rick Wade, senior vice president of strategic communications. “What’s a minor trend in the west is a nonexistent trend in Nebraska,” Mr. Wade explains.

AHA members aren’t flocking to the organization for advice about hospitalist contracting arrangements, Mr. Wade adds, because many are still trying to figure out how to put any type of program in place.

And even if a hospital decides that it wants to set up an exclusive hospitalist contract, it may find too much resistance from the physician community. With patient referrals hanging in the balance, analysts say, many hospitals will be reluctant to upset their outpatient physicians.

“Most hospital administrators realize that they might have the authority to designate one group,” says Martin Buser, a partner in the consulting firm Hospitalist Management Resources LLC. “But politically, they don’t want to go there.”

For now, industry observers are waiting to see whether exclusive contracting takes hold in markets outside the western states. Both Mr. Buser and Dr. Singer doubt the practice will become widespread, regardless of how the legal challenges resolve.

“It’s not a burning trend, as I see it,” Mr. Buser says.

Other physicians like Dr. Malhotra who have been affected by the trend, however, see a different future. “Eventually, each hospital will have its own dedicated group,” he says. “It’s only a matter of time.”

Dr. Abdou from Pinnacle agrees that exclusive contracting is the next frontier for hospital medicine. That’s why he says that hospitalists, like their counterparts in other fields, must prepare themselves to compete on the quality of the services they provide. “May the best program win,” he says.

Bonnie Darves is a freelance writer specializing in health care. She is based in Lake Oswego, Ore.