How internists in one Southern city integrated rather than fade away
From the November 1996 ACP Observer, copyright © 1996 by the American College of Physicians.
CHATTANOOGA, Tenn.—Decisive battles for survival have long been fought in this legendary Tennessee River gorge area. The Confederacy's fate is said to have been sealed by the Union Army's stunning victories at Lookout Mountain and Missionary Ridge, which crown the city's revitalized skyline. For the Cherokees, the area is remembered as a place of great loss—the homeland that was wrenched away and the Trail of Tears that drove them from it.
Chattanooga's history is also awash with examples of business victories won by enterprising executives. Coca Cola was only a local Atlanta fountain drink until a Chattanoogan offered to bottle it. And the Tennessee Valley Authority, headquartered here for more than half a century, pioneered the rural electrification of America.
Today, as the battle over the future of American health care wages on, history undoubtedly will record key clashes fought in the Volunteer State. Just up the river from Chattanooga, the Hospital Corporation of America (HCA, now part of the behemoth Columbia/HCA) advanced the trend of interesting Wall Street in health care. And TennCare, the state's revolutionary Medicaid waiver program, has been credited with accelerating the incursion of managed care into areas that might otherwise have remained HMO-free for years to come.
With these monuments to history all around, some local physicians now find themselves embroiled in their own battle for professional survival. On an 80-degree autumn day, they have gathered for the evening in one of the battlegrounds of today's American health care revolution—a 10th-floor conference room on the downtown campus of Erlanger Medical Center. Their goal: to transform their "group" into a truly integrated organization.
Forty-two internists, pediatricians, family practitioners and obstetrician/gynecologists have combined their 10 profitable but endangered private practices over the last two years to form Beacon Health Alliance, and their independence is at stake. "We worry that we are going to have no autonomy," says Clifton R. Cleaveland, MACP, a former ACP President who is one of Beacon's founding members. "We worry that we will have no way to have a say in our own values and our own fate."
Now, he says, the doctors are learning that the difficult process of merging independent practices was just the opening volley in the group's fight for survival.
Retooling for managed care
Because Chattanooga rates as one of the nation's fastest growing HMO markets, the doctors feel they need to re-engineer operations to weather this current conversion to managed care. "We don't have the luxury of sitting back and getting an overview of the big picture," Dr. Cleaveland says. "We must maintain our hard work and at the same time begin to alter our style of practice."
Meanwhile, their CEO is quick to remind them of the familiar battle cry, "no money, no mission." Although the group so far is profitable, investments in information systems, professional business management and more doctors and offices will cost between $3 million and $5 million over the next couple years. This primary care group does not generate that kind of profit.
Right now, most of its contracts are based on a fee schedule that is about 1.3 times Medicare's; only a year ago, the local plans paid fees that were more like twice Medicare's rates. TennCare, meanwhile, pays about 70% of Medicare.
And the third challenge they're up against is how the group can get bigger—double its current size—to gain the clout it needs to stop health plans from imposing more and more restrictive and low-paying contracts on them. In order to grow, should the Beacon doctors engage in a bidding war already underway among the region's three competing hospitals and a large multispecialty group headquartered nearby? Two of the hospitals are buying physicians; two are talking about merging; two are forming their own health plans; all three are bargaining for exclusive contracts with the HMOs coming to town. Will the doctors have to choose sides? And where are they going to get the millions of dollars to thrust and parry without selling their hearts and souls?
"Already we've talked to more than 16 physician practice management companies, all the biggies," says Kimberly Mashburn, president and CEO of Beacon Health Services Inc., the management services organization (MSO) owned by the Beacon doctors. "They all want 51% of our MSO so they can put us on Wall Street. ... My job is to make sure [the doctors] are not eaten by the sharks out there and that they get to remain physician owned and directed."
Cutting through all the noise of battle is difficult, and advice bombards the group on all fronts. "Join this group. Join that organization. Sell to this person. Merge to that hospital," says Dr. Cleaveland. "And all the implications are that you better do it now, because you will be left behind."
That fear of being left behind—along with the desire to decide the best way to care for patients—was exactly what drove the Beacon doctors about three years ago to take the first tentative step toward integration. Back then, Tennessee was much sleepier; it certainly showed none of the signs of imminent change evident in places like California and Minnesota. But then came the national health reform debate and TennCare. That's when Dr. Cleaveland began to realize that Chattanooga really was not so different after all: its heath care system had become too expensive, was fraught with inefficiency and excess capacity, and was characterized by too few generalists and too many specialists.
So Dr. Cleaveland did what any collegial doctor in a hospitable Southern town might have done: He invited some of the doctors from the other internal medicine groups in town over for a friendly dinner.
Changing times
A native of nearby west Georgia, Dr. Cleaveland originally moved to town in 1971 to join a buddy from medical school and residency in practice. At the time, Chattanooga was the kind of town where a board-certified general internist could build a successful practice quickly and not have to fight for patients or do a lot of unnecessary physical exams to pay the bills.
By 1993, though, things had changed. Erlanger Hospital was promoting its independent practice association, called Assured Care. A new large multispecialty group, called Galen Medical Group, was recruiting physicians. Memorial and Columbia hospitals had begun offering to buy physician practices. One hospital was joint venturing to form a health plan with Blue Cross, and the other was marketing its own HMO. "There was starting to be pressure on the individual groups to sell," Dr. Cleaveland recalls.
The focus of those first dinner meetings was forming a single-specialty group, but an out-of-town consultant suggested that the internists think more broadly about primary care. "When we started having conversations with like-minded practices in ob/gyn and peds, it just began to make sense," Dr. Cleaveland says. (The Chattanooga area has historically had very little family practice.)
The doctors also decided that nothing less than total asset merger would do. "We learned early on that you couldn't do it in a group-without-walls format or some other way of still staying in our own practices because then everybody is still worried about me, not us," explains Collin G. Cherry, ACP Member.
The plan didn't appeal to everyone. One of the internal medicine practices decided to drop out of the group in its planning stages and instead merged with a hospital-sponsored group. And three of the doctors involved in the original merger have since left the group, in part due to an inevitable clash of practice cultures. "To take people who have been in very independent small groups, there's a hurdle that has to be gotten over about how to function in the give and take of a more diverse group," Dr. Cleaveland says.
But the more the remaining doctors talked, "the more we were aware that this was what we needed," he says. "The alternative was either to fade into irrelevance or to sell to one of the behemoths."
As it turned out, the timing was fortuitous. Both Memorial and Erlanger Hospital gladly contributed funds to Beacon's start-up, seeing their support as both a foot in the door and a way to counterbalance the growing dominance of hospital-related groups. Since then, the competition has grown more fierce, and the hospitals are no longer cooperating as they used to.
By staying focused on their goal of becoming the most significant primary care group in town, Dr. Cherry says, Beacon's doctors are poised to finally become players again in determining how health care is provided in their community. But, he cautions, they must remember that even as revenues continue to drop and contributions to the group's administration grow, the doctors are worth more as a group than as individuals.
Three years ago, Dr. Cleaveland explains, "the hospitals were strong. The insurance companies were strong. We were not even players. Now, because of what we and others have done, I think that is in the process of changing."
At the very least, says Jack B. McCallie, ACP Member, one of Beacon's founding internists, "we have positioned ourselves so that anybody who comes into town is going to need to at least talk to us to have a good product."
Choosing a leader
Which brings us back to the 10th-floor downtown conference room. Leaders of Beacon have gathered for their board meeting, and topping today's agenda is a new task: Select someone to assume the role of clinical director.
Whomever they choose will have the potentially thankless job of nudging physicians to practice more efficiently and more productively, with an eye always toward utilization, appropriateness of care and quality of care. For now, because the practice earns all of its income from fee-for-service, the goal is to increase utilization to counter the discounts in the negotiated fee schedules, explains Ms. Mashburn, the group's CEO. Once capitation comes to town—several health plans are talking about 1997 as a target date—the job will be to cut utilization.
According to the group's leaders, Dr. Cleaveland is the obvious choice for the job. As everybody would have guessed—and a consultant examining billing pat-terns earlier this summer proved—Dr. Cleaveland sees nearly twice as many patients per year as some of his colleagues. He credits the difference in practice style to the experience he gained during his military service. Moreover, as one of the oldest members of the practice, he is a large part of the reason why the group is viewed as providing some of the highest quality care in the community.
That reputation is so strong, in fact, that local insurance brokers have said that health plans that do not list the Beacon group in their panels won't succeed in town, Ms. Mashburn said. But the group is hedging its bets, not counting on reputation alone to win future bouts with managed care plans.
Dr. Cleaveland is cautiously pleased with his appointment. "I don't even know what the job description will be," he says, "except clearly you have to have a doctor in authority to handle the professional side of things, including utilization review and quality assessments. Doctors are creatures of enormous egos, and we are much more likely to receive obvious wisdom when it comes through a fellow professional."
The job will be more than simply nudging individual doctors to step up their pace or quit using so many resources for patient care. In his new part-time role, Dr. Cleaveland says, he will also have to brainstorm all sorts of ways the entire group can operate more efficiently. In the works right now, for instance, are efforts to institute and expand weekend and evening office hours and make greater use of nurses and nurse practitioners.
"This is not about greed. We are just trying to preserve our incomes at a time when we will be paying more overhead and seeing more patients per unit of time," Dr. Cleaveland says. "We want to stay profitable and assure a bargaining place at the table. And I'm naive enough to think that the bargaining place is not only for us, but for our patients. That's if we are at our best."
Dr. McCallie, for one, figures the current conversation about productivity and efficiency is, in part, directed at him. "I'd be great under capitation," he says, describing his practice style. "I don't mind taking care of people over the telephone." But caring for patients over the phone doesn't generate revenue in a fee-for-service environment, and Dr. McCallie admits that he'll have to increase his billing to help the group succeed.
"I can see that if Beacon is going to make a go of it, it is going to have to be productive," he acknowledges. "And now I have to change. I realize that. ... And I know that if we had stayed as a small group, we wouldn't have had the ability to negotiate anything."
Some tentative answers
Discussions about productivity already have helped spotlight how being part of a merger means managing different work ethics and different styles of practice. Dr. McCallie, for instance, describes the internal medicine group across the street—Dr. Cleaveland's—as "the big-volume group, while patients chose us (the former McCallie Medical Group) because they had a lot of time with us. They all expected me to call them back myself. ... I had my first request of transfer of records to a family practitioner yesterday. It was from a patient I had had a long time. Maybe it's because the last two times she called, my nurse called her back, not me."
The group's formation has prompted other changes. For the past two months, for instance, Anne Barron, ACP Associate, one of Beacon's newest internists, has been seeing all the patients admitted to Memorial Hospital by 10 of the group's internists. Next month, someone else will take over the inpatient duties.
In addition, several new offices are under construction. In one, an internist and an ob/gyn will team up to provide one-stop shopping for women's health. And starting in December, all patients will receive satisfaction surveys after every visit, giving the practice data to use in contract negotiations, Ms. Mashburn says.
Later this year, doctors and their staff will be able to communicate via e-mail and will share scheduling and financial information across a computer system the group is buying from Erlanger. The group also is looking at ways to make even greater use of its physician office labs. "Thirty primary care physicians generate $140 million in downstream profit from the hospital, lab, pharmacy and specialty care they order," Ms. Mashburn says. "We are going to have to look at some ancillary services to generate the capital we need."
Some change is more mundane. All the doctors in the group this fall must attend a mandatory workshop on how to code accurately. The group's leaders are trying to get the word out that accurate coding and billing is not only important to maximize revenue and keep the group out of hot water with HCFA, but also will help the group collect better data about productivity, particularly in preparation for the coming of capitation.
One change the doctors have decided against is inviting subspecialists to join the group. Although that would be one way to increase revenue, Dr. Cherry explains that Beacon's doctors are committed to maintaining a primary care focus. "You have to ask yourself what are the unintended consequences of bringing in subspecialists? Suddenly you have an ethical dilemma. Do I refer this patient to the best doctor or do I use our doctor? We pride ourselves on being able to use the best doctor for every patient, and that may not be the same doctor every time."
That decision, it turns out, has had its own unintended consequence. Dr. Cherry says he now notices that many of the subspecialists are competing among themselves for Beacon's business, accommodating referrals more quickly, giving better service and charging less. "I think the community is becoming sensitive to the fact that we are watching, that their behavior with this patient may have an impact on future referrals or even if they are picked to be in a health plan's panel," Dr. Cherry says. "I've noticed that when I send a patient to a doctor, say for a colonoscopy, he may be treated entirely differently than if he was self-referred and then I ask for the records and I'm seeing him as a new patient. [The subspecialists] know they will not just be losing Collin Cherry's business, but perhaps all of Beacon's business."
The group's formation has also affected the group's doctors in ways that were not planned. Dr. Cleaveland, for example, notes that for the first time in his long career, he has had the chance to work more closely with other primary care specialists. Working with pediatricians to care for adolescents, for example, led him to organize a monthly medicine/pediatrics conference to help Erlanger residents explore different ways of treating common problems.
Even so, the strategy won't truly be a success until Beacon can assume the financial risk of caring for patients. He says that the demeaning, grueling hassles of "1-800-MOTHER-MAY-I" preauthorizations, formulary disputes, referral regulations and gag rules are slowly killing what he calls "the therapeutic conversation" that is at the heart of the doctor-patient relationship.
"Autonomy means a lot to me," he says. "And by autonomy, I mean maintaining the right or the privilege of doing what's best for your patient, as opposed to having rigorous bureaucratic protocols that a robot can follow. It's the right to use your brain and your heart. ...
"Clearly, we don't have all the answers. But I think we have some tentative answers for this kind of a market. And the principal themes are consolidation and expanding the notion of primary care."
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