Hospitals competing to sign up Triangle's doctors

Competition, hard times and changes in health care drive medical centers to affiliate with physicians' practices.

Staff WriterOctober 17, 2010 

  • Alan M. Wolf joined The N&O Business desk in 1999 to cover the business of health care. Now, as assistant business editor, he continues to report on health care and other business issues.

Triangle hospitals are racing to take over local physicians' practices.

In one of the largest examples, the UNC Health Care System finalized a deal late Friday to affiliate with Wake Heart & Vascular Associates, a huge cardiology practice in Wake County long associated with WakeMed. It's part of UNC's bigger push to expand its heart business.

UNC, WakeMed and the Duke University Health System have formed similar partnerships with dozens of local physicians this year.

The deals are being driven by recession, looming health reform, cuts in Medicare and in other reimbursements, and increasing competition.

The trend will reshape this region's medical landscape. It will give hospitals more control over the health market, a key foundation of the local economy. And it will affect physicians' livelihoods and change how patients receive care for years to come.

Doctors are seeking the safety of hospital systems, which can help manage practices, pay to upgrade technology and negotiate with insurers. Hospital officials want to lock in physicians who can refer patients and increase the use of such important moneymaking services as anesthesiology and heart surgeries.

"This consolidation of practices is a large-scale, national phenomenon that is now coming to the Triangle in earnest," said Bill Roper, CEO of the UNC Health Care System. "The health-care sector has been so fragmented. Bringing all of this together in a constructive and thoughtful way will be good for patients."

For now, patients won't see much change except for new signs at their doctors' offices. "There are a lot of people in North Carolina who have an affection for things in light-colored blue," Roper said.

But as more physicians affiliate with specific hospitals, consumers could face restrictions on where they get procedures done. The larger coalitions of hospitals and physicians will hold more clout with insurers, and could drop health plans that won't cooperate.

"More organization improves the ability to look at the whole picture of care," said Adam Searing, project director of the N.C. Health Access Coalition, a consumer advocacy group in Raleigh.

"The downside is you could end up where you have just a few choices for patients," he added. "The one thing that's clear is that it's preparing for a new health care market. It's really about who's going to get the money from insurers and dole it out to everyone else."

Economy drives change

Affiliations with hospitals allow doctors to focus more time and attention on patients, and less on businessissues such as hiring and collecting bills. But it also means that doctors, who value auto nomy, must answer to new bosses.

"Difficult economic times are driving them into these situations," said Bob Seligson, CEO of the N.C. Medical Society, which represents about 12,000 physicians across the state. "It's a bit early to tell what the impact will be on patients and doctors. In some cases, big medical systems do a real good job, and sometimes they don't."

Hospital ownership of doctors first took hold in the Triangle in the 1990s, as managed care drove economic changes.

But many physicians chafed at the system, and hospitals lost money. Many of the marriages broke up; earlier this decade, doctors reverted to independent practices.

'90s trend reappears

Now the pendulum is swinging back, spurred partly by the federal health overhaul. Nationally, one in six doctors worked for a hospital last year, and the number is increasing rapidly, according to a 2009 report by the American Medical Association.

WakeMed has added more than 50 outside physicians to its network in the past year and now has more than 150. On Oct. 1, WakeMed formed a partnership with Raleigh Cardiology Associates, a practice of eight heart doctors that started in 1979. WakeMed officials are negotiating with more practices.

This month, UNC and Rex Healthcare, a for-profit subsidiary of UNC since 2000, formed the Triangle Physician Network, a Morrisville-based nonprofit arm that's starting with 15 practices and 60 physicians. Others are expected to join.

It's not certain the agreements will work any better this time around, but hospital officials say that the federal health overhaul is forcing permanent changes to the entire system.

"The winning organizations will be the ones that understand how to work carefully and effectively with doctors," Roper said. "Those that try to be dictatorial and autocratic won't be successful.

"Are doctors going to be able to be totally independent and do whatever they want on a whim? Absolutely not."

Millions at stake

UNC's partnership with Wake Heart is a major competitive move. The deal, which is scheduled to go into effect in January, shifts a cardiology practice with 23 physicians and a dozen locations in Raleigh, Wake County and Eastern North Carolina into an affiliation with UNC and Rex.

Wake Heart discussed an affiliation with WakeMed, which runs the state's busiest heart center on its flagship campus in Raleigh; but the two sides couldn't agree on terms.

UNC's Roper and Wake Heart's president, Dr. Michael Zellinger, declined to comment on the financial terms of their deal. They say that UNC is not buying the practice or writing a check to Wake Heart, but Roper added that "their fortunes and ours will be intertwined."

The affiliation will help Wake Heart and UNC collaborate on research and preventive care, Zellinger said, and will allow the practice to expand its scope statewide. Wake Heart patients will have more access to clinical trials and new therapies being studied at UNC.

What affiliation means

UNC and Wake Heart officials say the physicians will continue to do procedures and provide care at WakeMed's heart center, where the group has its largest office. At stake are millions of dollars in patients' care every year. A bypass surgery can easily cost more than $100,000 plus follow-up care, and require a week's stay in the hospital.

"We are not abandoning WakeMed in any way," said Zellinger, who helped form the practice in the mid-1980s. "We thought this would allow us to maintain our independence with what's coming in health care."

But the practice is becoming part of the UNC Health system. In the future, Roper said, it will do some of its work at Rex and at UNC.

Challenge for WakeMed

Some local physicians will choose to remain on their own, as some did during earlier consolidation periods. They may thrive by emphasizing that they can offer more time with patients and a more personal touch in a smaller setting, said Seligson of the medical society.

But rising costs of running a practice, dealing with insurers and government programs, and other economic pressures may force more to sign with hospitals, he said.

Affiliation deals have different financial structures. Some involve sharing the cost of running the practice and revenue. Or a hospital takes over managing the practice and pays the physicians' salaries.

It's safe to assume Wake Heart physicians took the better deal when they chose to affiliate with UNC over WakeMed, Seligson said.

Wake Heart physicians, including Dr. James Tift Mann III, broke the news to friends on WakeMed's board of directors as the deal was wrapped up late last week. Zellinger, the Wake Heart president, met Friday evening with WakeMed CEO Bill Atkinson to tell him.

Atkinson said it's too soon to tell what the UNC deal means, but he downplayed the implications for his hospital's important heart business.

"We've been together for a long time," he said, referring to Wake Heart. "We value their presence from a clinical standpoint," and WakeMed never had a role in running the practice's business anyway.

But he dismissed any notion that UNC's affiliation with Wake Heart isn't part of its bigger strategy to win more heart business in Wake County: "They're not doing this for entertainment."

Although WakeMed, like other area hospitals, is participating in the rush to strike deals with physicians, Atkinson isn't happy with the broader trend.

"We're shifting people from place to place, and that doesn't really do anything more than rearrange the chairs," he added. "A lot of this is brought on by fear of health-care reform and looking for the safest place to be. I'm not sure what that does to help us as a nation make health care better or more cost-effective."

Medical center chess

UNC's latest deal could create new challenges for WakeMed. Rex is planning to build a new heart center on its main Raleigh campus, as part of a $120 million expansion proposed in June. UNC and Rex will want to coordinate patient care at their centers in Raleigh and Chapel Hill.

UNC's recent decision to give its sole heart surgeon in Chapel Hill a big raise to keep him from leaving reinforces the health system's commitment to providing more heart care. In August, Roper gave Dr. Brett Sheridan a raise to $600,000 - the most a heart surgeon has ever earned at UNC.

"We did what we had to do to retain him," said Dr. Cam Patterson, UNC's cardiology chief. "Similarly, we need to expand our footprint for heart and vascular services across the state. [Affiliating with Wake Heart] is a big addition to our footprint in Wake County." or 919-829-4572

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