Detroit Medical Center, Michigan's largest charity care provider, signed a letter of intent to negotiate the eight-hospital system's sale to private Vanguard Health Systems, Inc., according to a joint media release today.
The purchase price will include approximately $417 million to retire all outstanding DMC bonds and other long-term indebtedness, and also requires Nashville, TN-based Vanguard to assume all DMC liabilities. Vanguard has also pledged to invest $850 million in capital improvements over the next five years at every DMC hospitals, which DMC Board Chair Steve D'Arcy called "the single largest private investment in the city's history. It represents great confidence in the future of the city of Detroit."
"For years, DMC has had significantly less cash-on-hand than any of our competitors," D'Arcy said. "Now, we have found the solution to allow us to continue our mission to provide quality care for all, despite state and national economic conditions."
DMC CEO Mike Duggan said the nonprofit health system has been in the black for seven consecutive years, "but each year it has been a struggle."
"We've had to sit by and watch while West Bloomfield and Novi and Ann Arbor make huge investments in new modern hospitals and we've been frustrated we can't do the same in the city of Detroit," Duggan said. "Now we can. Detroit will no longer take a back seat to anyone in the quality of our hospital facilities."
DMC hospitals will keep their historic names, but will be owned and operated by a Vanguard subsidiary known as VHS Michigan, which will establish a regional advisory board consisting of four members appointed by Vanguard and three appointed by the DMC board.
Though DMC is obviously pleased with the move, stakeholders in Michigan expressed concern about the sale of Michigan's largest charity care provider to a private, for-profit company from out-of-state.
"The Detroit Medical Center has been a cornerstone in the healthcare safety net for several years. We are hopeful that Vanguard will work with physicians to continue to provide patients in Detroit with the care they need," said Richard E. Smith, MD, president of the Michigan State Medical Society.
Blue Cross Blue Shield of Michigan President/CEO Daniel J. Loepp welcomed the investment in Detroit and the opportunity to improve DMC facilities with the capital investments, but he wants assurances that "the health system's nonprofit mission to provide charitable access to medical services for the poor is not compromised as a result of this deal."
"Michigan has a strong foundation of 144 nonprofit hospitals that serve the interests of local communities and local people—particularly access to healthcare for the underinsured," Loepp said. "Ownership of the state's largest charitable care provider by a for-profit health system has the potential to permanently alter this safety net. We encourage careful consideration and review of this transaction by stakeholders and regulators."
Vanguard said it has agreed to a 10-year commitment to keep all eight DMC hospitals open and to maintain the health system's charity care policy.
"Vanguard has consistently demonstrated our commitment to working with community boards and resources to ensure the best possible outcomes for patients," said Trip Pilgrim, Vanguard's chief development officer. "We have the opportunity to continue this tradition in Detroit, and believe that with the access to capital Vanguard brings, the existing management team will grow DMC into one of the pre-eminent hospital systems in America."
The capital improvements list earmarks $500 million for specific projects approved by the DMC board, including a new Children's Hospital of Michigan tower, new patient units at Detroit Receiving Hospital, doubling of the Sinai-Grace Hospital emergency department, a major renovation of OR space at Harper University Hospital, and new physician office buildings at Harper and Sinai Grace. The other $350 million will be for ongoing repairs and capital and equipment needs at DMC.
The existing DMC Board chaired by D'Arcy will remain and administer the existing $140 million in charitable funds given to DMC over the years and will make sure all donor funds are spent as intended. The DMC Board will also have the legal right to enforce Vanguard's commitments under the purchase agreement.
The letter of intent is non-binding and extends through June 1, when both parties are required to have completed a mutually acceptable agreement. If they haven't, the letter of intent terminates unless they agree to extend it. The final agreement must be approved by the DMC and Vanguard boards, and will be reviewed by the Attorney General of Michigan, and other state and local government entities.
DMC's eight hospitals include Children's, Detroit Receiving, Harper, Sinai-Grace, Huron Valley-Sinai Hospital, Hutzel Women's Hospital, Rehabilitation Institute of Michigan, and DMC Surgery Hospital, with a combined 1,734 licensed beds and 2008 total revenues of approximately $1.9 billion.
Vanguard operates 15 acute-care hospitals in Rhode Island, Texas, Illinois, and Arizona, with 4,135 licensed beds. The company's total revenues in fiscal 2009 were approximately $3.2 billion.
Huge salary disparities and onerous student loans appear to be dampening the enthusiasm of medical school students for primary care. The 2010 National Resident Matching Program shows that the number of U.S. medical students choosing internal medicine residencies grew slightly from 2009, but not enough to impact the shortage of primary care physicians.
The NRMP data show that 2,722 seniors at U.S. medical schools enrolled in an internal medicine residency program, a 3.4% increase from 2,632 in 2009. Those enrollment numbers are similar to 2008 (2,660), 2007 (2,680), and 2006 (2,668). In comparison, 3,884 U.S. medical school graduates chose internal medicine residency programs in 1985, the American College of Physicians reported.
The 2010 match numbers include students who will ultimately enter a subspecialty of internal medicine, such as cardiology or gastroenterology. About 20% to 25% of internal medicine residents eventually choose to specialize in general internal medicine, compared with 54% in 1998, ACP said.
"Because it takes a minimum of three years of residency after four years of medical school to train an internist, it is critical to begin making careers in internal medicine attractive to young physicians," said Steven Weinberger, MD, an executive with ACP. "As America's aging population increases and more people gain access to affordable coverage, the demand for general internists and other primary care doctors will drastically outpace the primary care physician supply."
The 2009 Review of Physicians Recruiting Incentives from physician recruiters Merritt Hawkins shows that huge salary disparities continue to exist between primary care physicians and subspecialties. The average salary offered to family physicians in the Merritt Hawkins study was $173,000, the lowest of any specialty. By comparison, cardiologists were guaranteed average base salaries of $419,000 a year, and orthopedic surgeons were guaranteed $481,000.
Those compensation figures are consistent with other studies, such as the Medical Group Management Association's recently released Physician Placement Starting Salary Survey: 2009 Report Based on 2008 Data. The MGMA study found that median starting salaries for all primary care physicians grew by 7.4% between 2005-2008, to $150,000, while the median starting salaries for all specialists grew by 25% for the same period, to $275,000.
The ACP has called for increasing primary care physicians' Medicaid and Medicare payments, expanding pilot testing and implementation of patient-centered medical homes, and increasing support for primary care training programs as ways to increase the number of primary care physicians.
Weinberger said the rising cost of medical education and the financial burden on physicians is pushing many young doctors toward more lucrative subspecialties.
Health insurance plans that push patients toward physicians who keep medical costs lower are based on unreliable estimates of physician performance and may not save money, according to a study in the March 18 edition of the New England Journal of Medicine.
Described as the first major assessment of physician cost profiling, the RAND Corp. study found that about one-fourth of the 13,788 Massachusetts physicians they reviewed would be misclassified under the system of cost ranking commonly used by insurance plans.
"One of the ideas that is pretty popular for saving costs is to squeeze the doctors. What we are concluding here is that would be great if you really knew which ones were expensive," John L. Adams, the study's lead author and a senior statistician at RAND, tells HealthLeaders Media.
"Our findings raise questions about the utility of cost profiling tools for high-stakes activities, such as tiered health plans, and the likelihood that wide use of these strategies will reduce healthcare spending. Consumers, physicians, and those who pay for healthcare are all at risk of being misled by the results from these tools," Adams says.
The study examined 28 physician specialties and found that only about 40% of physicians had cost profile scores that were at least 70% reliable. Fewer than 10% of physicians had cost profiles that were at least 90% reliable.
Among physicians in a hypothetical two-tiered insurance plan, for example, nearly 40% of internists and nearly two-thirds of vascular surgeons labeled as lower cost were not, the study found. Physicians in surgical specialties appear to have low reliability cost profile scores, while dermatologists' cost profile scores were the most reliable.
American Medical Association President J. James Rohack, MD, says the RAND study "verifies the AMA's longstanding contention that there are serious flaws in health insurer programs that attempt to rate physicians based on cost-of-care."
"The RAND study shows that physician ratings conducted by insurers can be wrong up to two-thirds of the time for some groups of physicians," Rohack says. "Inaccurate information can erode patient confidence and trust in caring physicians, and disrupt patients' longstanding relationships with physicians who have cared for them for years."
"Given the potential for irreparable damage to the patient-physician relationship, the AMA calls on the health insurance industry to abandon flawed physician evaluation and ranking programs, and join with the AMA to create constructive programs that produce meaningful data for increasing the quality and efficiency of healthcare," Rohack says.
Calls by HealthLeaders Media seeking comment from several health insurance industry trade groups were not immediately returned Wednesday.
Adams says he doesn't think revising the evaluation process has to start from square one. "There are a lot of pieces here that could be useful," Adams said. "There has been a failure on a number of levels. The people that use these tools should have done more physician engagement for two reasons: One, the physicians could have made the tool better; and two, why pick a gratuitous fight?"
The Massachusetts Medical Society (MMS) is involved in litigation against the Massachusetts Group Insurance Commission (GIC), which purchases health insurance for state employees and other public sector employees, because of its requirement that health plans tier physicians. That litigation involves GIC and two participating health plans, according to MMS.
Mario E. Motta, MD, president of MMS, said his organization is not against public reporting as long as it is accurate and fair. "It's critically important that patients and physicians get clear, accurate information about the cost and quality of healthcare. But this report, produced by an independent, renowned research firm, clearly demonstrates that these profiling programs fail to accomplish those goals."
Ranking systems not reliable
The RAND researchers analyzed information from insurance claims for 2004 and 2005 from four health plans in Massachusetts that provide coverage to about 80% of non-elderly adults with private insurance. The study examined the costs of treating common illnesses, such as diabetes and heart attack, assigning each care episode to a physician, and creating a cost profile for each physician based on all similar episodes of care.
The researchers evaluated the reliability of physician cost scores by considering factors, such as the number and types of patients physicians treated. The results show that the reliability of cost-profiling scores was unacceptably low for physicians in most of the specialty groups.
Researchers also examined how reliability scores might change under different scenarios, such as requiring at least 30 episodes of treatment to create a profile and different methods for assigning episodes to physicians. While some scenarios modestly increased reliability, the results still fell short.
"These ranking systems may be useful for some purposes, but they are not reliable enough at this point to make decisions about encouraging patients to see certain providers or excluding some doctors from insurance networks," Adams said. "Much work remains to be done to improve these systems before they are used for high-stakes activities."
He adds that the current systems may be useful for warning physicians that their treatment methods may cost more than those of their peers and urging them to reexamine their practice styles.
Adams says cost profiling "can be made better," but it can't be successful until better tools are developed to use claims data and other information to create reliable cost profiles for physicians.
"One of the things you need to do is get a handle on how difficult the provider's patient mix is. It's an illusion that you have it now," he says. "I have hopes that some of the noise can be taken out of this with better data and particularly the stuff we are going to get out of improved information systems. Even the simplest EHR is going to give us blood pressures and whether or not the person is overweight. That is going to be a big help."
"It will be an evolutionary process. I can see these things on the multiyear scale getting up to an adequate standard," Adams says.
Older women aged 55 and older will become 30% of the nation's direct-care workforce by 2018—up from 22% in 2008, according to a new study by PHI, the long-term care workforce development consultants.
This is not surprising because the nation's workforce is aging and PHI expects that 1.2 million direct-care workers will be women aged 55 and over by 2018.
"Older women are increasingly providing frontline services and supports for frail elders and people with disabilities to live independently and with dignity," said PHI President Steven Dawson, in a media release.
"National and state policymakers must work together to ensure that direct-care jobs, which are primarily funded through public dollars, are quality jobs that attract a stable, compassionate workforce. Without these workers, families will not be able to provide the support elders need to live independently and to continue to enjoy the relationships and activities that give their lives meaning," Dawson said.
In 2008, the median hourly wage for direct-care workers was $10.42, which is more than one-third less than $15.57, the median wage for all U.S. workers. Without competitive wages, the older women who are filling these positions today are likely to look elsewhere for employment, PHI said.
Direct-care workers, who are 90% female, tend to be older than women in the nation's overall workforce—22% of direct-care workers were age 55 and older in 2008 compared to 18% for the overall female workforce. An even larger proportion—28%—of personal and home care aides were aged 55 or older in 2008.
The PHI projections were made using data from the 2009 U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, and applying the information to the Bureau of Labor Statistics Employment Projections Program, 2008-18 National Employment Matrix.
Declining admissions has prompted HCA's Spring Branch Medical Center in Houston to cease inpatient operations by May 1, with nearly 500 employees expected to lose their jobs or transfer.
Outpatient services, including radiation oncology, imaging, and emergency care will continue, the hospital chain announced this week.
"Spring Branch Medical Center has had declining inpatient utilization for several years, but the services we are retaining there are obviously still needed and can be sustained," said Maura Walsh, HCA Gulf Coast Division president, in a media release.
Walsh said inpatient admissions have declined in the past few years and this trend is not expected to change. The vast majority of area residents are going elsewhere for inpatient care. Despite capital improvements to make Spring Branch viable, Walsh said there have been significant operational losses over the last five years. The hospital, built in 1958, is licensed for 299 beds, but is staffed for 160 beds.
"Since there has been significant utilization of these outpatient services by the community, HCA Gulf Coast Division recognizes the importance of maintaining these critical services at the campus for the more than 25,000 patients we expect to continue to serve this year," Walsh said. "By preserving these services, it will enable us to continue to serve over 40% of all of our patients in their own community."
HCA said about 40 of the hospital's 538 employees will be retained when inpatient services are shuttered. Management will work closely with the laid-off employees to find jobs at other HCA-affiliated facilities or with other employers. Job fairs and career transition seminars will also be made available, Walsh said.
Walsh said HCA will also work with Spring Branch's medical staff to ensure continuity of care for patients, and will assist physicians who want to transfer to other HCA-affiliated hospitals.
Physicians are key drivers of hospital revenues, and a single physician averages more than $1.5 million a year in net revenue for his or her affiliated hospital, a new national survey of hospital CFOs reported.
The survey by Irving, TX-based physician recruiters Merritt Hawkins asked CFOs in 114 U.S. hospitals to quantify how much revenue physicians in 17 specialties generated for their hospitals in the last 12 months, including net inpatient and outpatient revenue derived from patient referrals, tests, and procedures performed in the hospital.
Neurosurgeons topped the list. A single, full-time neurosurgeon generates an average of more than $2.8 million a year on behalf of the affiliated hospital. Other high revenue generating specialists include invasive cardiologists ($2.2 million), orthopedic surgeons ($2.1 million), general surgeons ($2.1 million), and hematologists/oncologists ($1.5 million), the survey showed.
Primary care physicians also generate substantial revenues for hospitals. A general internist brings in nearly $1.7 million a year on average for the affiliated hospital, a family physician more than $1.6 million, and a pediatrician more than $856,000, the survey showed.
Merritt Hawkins President Mark Smith said the survey demonstrates the central role that physicians play in the healthcare delivery system.
"The most powerful tool in healthcare remains the physician's pen," Smith said in a media release. "Patients are not admitted to the hospital or discharged, tests ordered, or procedures performed without a physician's signature. Hospitals depend on doctors to drive patient care, which in turns drives revenue."
Merritt Hawkins last conducted the survey in 2007, when the average annual revenue generated per physician across all specialties was nearly $1.5 million, slightly lower than the 2010 average. Smith said the revenue increase during a recession suggests that physicians continue to provide a high level of hospital-based services.
"Both the recession and declining reimbursement have prompted many physicians to seek closer relations with hospitals," Smith said. "More physicians are employed by hospitals today than they have been in the past and the interests of the two parties are more closely aligned."
Alpharma Inc. will pay $42.5 million to resolve whistleblower kickback and False Claims Act allegations for its marketing of the painkiller Kadian, the Justice Department said.
Federal prosecutors alleged that between 2000-2008 Alpharma paid healthcare providers to promote or prescribe Kadian, and made misrepresentations about the safety and efficacy of the morphine-based drug.
Alpharma was sold to Bristol, TN-based King Pharmaceuticals Inc. in November 2008. Calls Tuesday night to King Pharmaceuticals were not immediately returned.
The settlement resolves a lawsuit brought by whistleblower Debra Parks in 2006. Parks will receive $5.33 million out of the federal government's $33.6 million share of the recovery, and several states will share approximately $8.9 million.
"Healthcare decisions must be based solely upon what is best for the individual patient and not on which pharmaceutical company is paying the doctor the biggest kickback," said Rod J. Rosenstein, the US Attorney in Maryland, in a media release.
The Justice Department's total recoveries in False Claims Act cases since January 2009 have topped $3 billion, according to the department.
The American Medical Association today launched the National Managed Care Contract, an online database that the physicians' association said will help its members negotiate better contracts with managed care organizations.
"The concentrated market power of large health insurers gives them an unprecedented advantage in dictating key aspects of healthcare to physicians," said AMA President J. James Rohack, MD, in a media release. "The AMA's new resources will be a welcome guide for negotiating fair contracts with health plans angling for an even greater advantage over physicians."
NMCC is the first managed care contracting resource designed specifically for physicians, and it is expected to provide model contract language that complies with the managed care laws of all 50 states and the District of Columbia, and to cover the range of physician concerns with managed care contracts, AMA said.
The searchable database associated with NMCC provides physicians with access to updated laws and regulations across the nation. It covers the managed care contracting process, the managed care contract itself, and the business relationship between physicians and health plans after an agreement has been signed, AMA said.
The NMCC database also allows physicians to:
Provide alternative language to support contract negotiations with health plans.
Ensure managed care contracts and insurers comply with state legal requirements.
Clarify key contract issues and manage ongoing relationships with health plans.
Assist with legislative, regulatory, and legal efforts to reform unfair managed care business practices.
Monitor emerging state and federal legislative and regulatory trends.
An expert panel convened by the American College of Physicians says that properly designed pay-for-performance programs can strengthen physician-patient relations and improve care.
"Concerns about the conflicts between medical professionalism and pay-for-performance have been based primarily on theories about the tension between external motivation and self-interest and the internal motivation and self-restraint that characterize professional expectations," said panel member Amir Qaseem, MD, a senior medical associate with ACP, in a media release. "We believe that physicians should play a key role in defining and evaluating P4P programs that are compatible with professionalism."
The ACP-led panel's analysis appears in the March 16 issue of Annals of Internal Medicine. The panel, which included experts in clinical medicine, law, management, and health policy, met six times to examine the relationship between medical professionalism and various P4P financial incentive programs.
The panel concluded that:
A P4P incentive should be linked to specified, evidence-based measures because they can drive the delivery of care to conform to scientific evidence. Inadequately risk-adjusted measures that do not recognize the severity or complexity of a patient's condition may lead physicians to cherry pick. The evidence must be protected from inappropriate influence by nonprofessionals or others who have a direct financial interest in a particular definition or performance measure.
Transparency of quality measures and disclosure of payment incentives may enhance patient trust.
P4P programs are unlikely to foster the equitable distribution of care unless they include measures of access to care and adequate case-mix and risk-adjustment strategies. Measuring the allocation of patients among providers enables adjustment of performance rewards based on the complexity of patient socioeconomic and clinical case-mix of a provider group.
P4P programs that pay only on the basis of the top tier of performance put physicians in competition with each other. P4P programs could be designed to encourage the sharing of knowledge, scientific evidence, and information—a principle of professionalism.
Leading provider groups used the last day of a public comment period to urge CMS to scale back the proposed rule establishing meaningful use criteria for electronic health records incentive programs.
The Englewood, CO-based Medical Group Management Association asked CMS to formally request a one-year legislative extension of Stage 1 of the incentive program from Congress.
MGMA President/CEO William F. Jessee, MD, said in a 43-page letter to CMS Acting Administrator Charlene Frizzera that a failure to substantially modify the proposal would risk meeting the goals for health information technology adoption under the $21 billion stimulus package.
"The meaningful use requirements must be achievable and verifiable without creating an undue burden on eligible professionals and their administrative staff. This is especially critical in the first years of the incentive program," Jessee said.
AMA Board Member Steven J. Stack, MD, also called the Stage 1 criteria proposed by CMS "too aggressive."
"It could unreasonably punish physicians who undertake great efforts to achieve meaningful use of EHRs— only to be denied incentive payments due to overly complex and unattainable criteria," Stack said in a media release. "We are committed to EHR adoption that streamlines physician practices and helps them continue providing high-quality care to patients, but successful integration of EHRs into patient care takes time."
AMA is recommending that CMS:
Remove the "all or nothing" approach and require physicians to meet five of the 25 proposed objectives and measures instead of all 25.
Eliminate the objectives and measures that don't directly apply to EHR adoption, such as checking insurance eligibility electronically.
Revise the definition of meaningful use for certain hospital-based physicians to broaden eligibility for the federal incentive programs.
Reduce the number of quality measure reporting requirements and allow physicians to identify only three clinically relevant measures.
"Overall, the proposed reporting criteria require more flexibility," Stack said. "We'd like to see more help for physicians in identifying the data necessary for accurate reporting."
