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Managed Care

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Researchers examine impact of managed care on hospital-physician relationships and types of services offered

Managed care and shifts to more outpatient than inpatient care in the United States have left hospitals scrambling to integrate services and seek partnerships with physicians, as well as to diversify services into potentially profitable care areas. Hospitals seek partnerships with physicians to accept and manage risk, to foster collaboration, and ultimately, to provide more cost-effective care. However, the potential of such partnerships to change the structure and behavior of hospital-physician relationships toward greater integration has been greatly overstated, concludes a study by Michael A. Morrisey, Ph.D., of the University of Alabama at Birmingham, and supported by the Agency for Health Care Policy and Research (HS09183). A second study of his, supported by the same grant, suggests that urban hospitals engage in clinical integration with greater frequency than rural hospitals.

Morrisey, M.A., Alexander, J., Burns, L.R., and Johnson, V. (1999). "The effects of managed care on physician and clinical integration in hospitals." Medical Care 37(4), pp. 350-361.

Many argue that to be successful in garnering managed care contracts, hospitals and physicians must realign their incentives to increase efficiency, attract a larger slice of the shrinking inpatient pie, and substitute effective outpatient care for more costly inpatient services. Yet the relationship between managed care and physician and clinical integration is relatively modest. Much of the realignment under managed care has been limited to certain types of efforts. These range from fairly innocuous efforts, such as providing practice support for physicians, to tighter forms of integration, such as ownership of physician practices, note the study's authors.

They analyzed responses of 1,495 hospitals that completed the 1993 Hospital-Physician Relationship Survey, augmented with data from other sources. They used factor analysis to reduce 23 integration variables into 5 physician and 3 clinical integration factors. The researchers found that, other things being equal, physician involvement in hospital management and governance increased with managed care involvement. This arrangement represents a path of least resistance that is relatively easy to effect and does not require significant capital outlay by the physician or hospital. This approach also implies power sharing and may signal to physicians that hospital management desires a true partnership with affiliated physicians.

To a lesser degree, the use of physician organization arrangements and other joint ventures also increased under managed care. Practice management and support services were actually lower in hospitals with high managed care activity. Other forms of physician and clinical integration appeared to be unrelated to managed care and varied more as a function of hospital size, system affiliation, and selected market characteristics.

Alexander, J.A., Morrisey, M.A., Burns, L.R., and Johnson, V. (1998, Fall). "Physician and clinical integration among rural hospitals." Journal of Rural Health 14(4), pp. 312-326.

From the physician's perspective, managed care and competition from alternative providers have increased the risks of solo practice and forced many physicians into groups. These groups often look to hospitals for capital, practice management expertise, and partnerships for managed care contracting. Interdependencies between hospitals and physicians in rural areas are often greater than in urban markets. Rural physicians typically have fewer hospitals in which to practice, thus creating greater dependence on a single hospital. Similarly, a rural hospital often depends on a handful of key physicians who admit patients to the hospital to sustain its operations. Nevertheless, rural hospitals engage in clinical integration less often than their urban counterparts and emphasize different strategies for physician integration. All three measures of clinical integration—information integration, product line organization, and use of clinical guidelines—were practiced more frequently among urban hospitals than rural hospitals. These strategies are often implemented in response to managed care pressures to standardize treatment and provide more cost-effective care, pressures that are not as palpable in rural areas.

Two physician integration approaches—physician involvement in hospital management and governance, and networking and joint ventures—were practiced with greater frequency among urban hospitals compared with rural hospitals. There were no differences in three measures of physician integration: use of salaried physicians and ownership of group practices, cost information sharing, and provision of support services to physicians. Also, physician integration approaches in rural hospitals were more common among larger rural hospitals and among those close to urban facilities, with system affiliations, and not under public control. These findings are based on data drawn from the 1993 Hospital-Physician Relationship survey, 1993 American Hospital Association Annual Survey of Hospitals, and other data.

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