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How large groups survive managed care

From the June 1996 ACP Observer, copyright © 1996 by the American College of Physicians.

By Edward Doyle

As they try to grow in mature managed care markets, large medical practices are devising new ways to pay their physicians, track referrals and schedule practitioners' time caring for hospital patients. At a presentation on managed care, physician leaders from three groups—two in southern California and one in Minnesota—discussed how they are managing their practices—and their physicians.

  • Physician pay. The clearest trend among large groups in managed care markets is the move away from paying salaries. Park Nicollet Clinic in Minneapolis, for example, recently switched to a system that combines salaries and incentives for its nearly 400 physicians.

Why the switch? As Park Nicollet began to accept more capitation, its leaders thought that rewarding physicians for the volume of services they provide conflicted with the goals of conserving resources and controlling costs. Under the salary system, however, productivity dropped. Richard B. Freese, FACP, chairman of the department of internal medicine, said the organization is moving to a system where 60% of physician pay will come from salary and the other 40% from elements including types of services performed, patient satisfaction scores, number of patients cared for and reviews from other physicians and health care professionals.

Greater Valley Medical Group in Northridge, Calif., is planning similar changes. While 90% of physician pay currently comes from salary and 10% from incentives, the group is adopting a system in which 60% of physician pay will come from salary and 40% from incentives. Donald Revhun, MD, medical director and president of the group, said that 60% of the incentive portion of physician pay will be based primarily on production, but other elements such as patient satisfaction and use of medications, labs and immunizations will be factored in.

  • Referrals. Another hot topic in large group practices is how to manage referrals to subspecialists and other physicians. At Bristol Park Medical Group in Costa Mesa, Calif., a committee of physicians meets once a week to review requests for referrals to outside physicians. Daniel Cusator, FACP, an internist with the group, said the committee reviews a patient's history, decides whether a referral is necessary and often decides which physician should get the referral. The process generally takes a week.

The committee, however, tries to defer to the primary care physician's wishes, Dr. Cusator said. "If a primary care physician feels strongly about a referral, we bend to him," he said. "He's the one dealing with the patient."

For urgent referrals—angiograms, for example—the medical director at each Bristol Park Medical Group office authorizes referrals on the spot.

A physician committee at Greater Valley Medical Group also reviews most referrals, but typically renders its decisions within 48 hours after physicians submit a request. The most basic referrals need no authorization, Dr. Revhun said. Additionally, any physician who has been with the group more than 18 months can approve a referral immediately.

What about patients who insist on a referral to an out-side physician? When that happens at Park Nicollet—a rarity because the group employs staff physicians from nearly every medical specialty—they are sent to the group's staff subspecialist who decides whether the patient needs to go outside the group for care.

But, in general, patients are becoming more knowledgeable about the rules of managed care and closed physician networks, the speakers said. "We are firm that if it's something we can take care of, it stays in the system," Dr. Freese said. "Patients are sophisticated and realize that they can pay on their own or see our specialists."

  • Capitated patients. When should large groups contact patients for whom they are receiving capitated payments but have not yet seen in the office? Should groups wait until the patient needs care and comes into the office on his own, or should they reach out to such patients to better practice preventive medicine and control costs?

All three groups are trying to identify high-risk capitated patients before they become sick and need costly resources. Dr. Cusator from Bristol Park Medical Group said that his group conducts intake interviews with at-risk patients who have been identified from patient lists. Geriatric nurse practitioners meet high-risk seniors—patients who have multiple diseases and take multiple medications—to explain who to call when they need medical care, and to help these patients choose a primary care physician.

  • Hospital scheduling. Large groups are also beginning to change the way they staff hospitals. Park Nicollet has created an in-hospital medical service to improve patient care and to simplify the schedules of its office-based practitioners. Dr. Freese said that under the old system, physicians working in both the office and hospital environment were stretched too thin. Their duties for patients in the hospital constantly disrupted their office schedules, and continuity of care in the hospital was a problem because the physicians were not always available.

Today, the group employs five physicians responsible only for hospitalized patients. These physicians are available 24 hours a day. Dr. Freese said the results have been impressive: Length of stay has dropped by half a day, the group has witnessed a 25% reduction in the most expensive DRGs, there has been a 10% decrease in subspecialty consults and X-rays ordered by physicians, and patient satisfaction has remained stable.

Greater Valley Medical Group patients admitted to the hospital are assigned to one of four full-time utilization review nurses, and discharge plans are made by the primary care physician, specialist and utilization review nurse. Dr. Revhun said the average length of stay has been reduced, in part because the hospital now functions as a seven-day institution. And because someone is always available for patient care, he said, problems occurring Friday night can be handled immediately—not Monday morning.

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