Physician-hospital joint ventures evolve medical practice

August 1, 2007

For years, surgeons and other specialists working at hospitals were at the financial mercy of administrators. While it was true that these physicians were the ultimate authority on clinical care, the decisions about equipment, more staff and other important aspects of treating patients were often out of their hands. With departments wrestling each other for precious few dollars, their requests were frequently denied.

For years, surgeons and other specialists working at hospitals were at the financial mercy of administrators. While it was true that these physicians were the ultimate authority on clinical care, the decisions about equipment, more staff and other important aspects of treating patients were often out of their hands. With departments wrestling each other for precious few dollars, their requests were frequently denied.

The motivation for creating a joint venture oftentimes comes from physicians who are tired of the bureaucracy of a traditional hospital, says Molly Gutierrez, executive director of Physician Hospitals of America (PHA), the Sioux Falls, S.D.-based national trade association of physician-owned hospitals.

RESPOND TO CHANGE

The most common type of a physician-hospital joint venture is an ambulatory surgical center (ASC), where surgeries that do not require an inpatient admission are performed at a substantially lower cost than at a traditional hospital.

During the past decade, joint ventures have evolved into specialty hospitals, such as a cardiac care or orthopaedic facility. In much the same way as an ASC, these limited-service facilities might offer a lower cost.

The problems associated with large bureaucratic facilities are minimized in smaller, specialty hospitals where it is easier to deliver care and respond to change, Gutierrez says.

A different model of care was the main reason why the Kansas City Orthopaedic Institute (KCOI) was created in 1998. KCOI, which was established as a joint venture between three orthopaedic practices and Saint Luke Hospital in Kansas City, is a specialty facility for the care of musculoskeletal injuries and orthopaedic surgery patients.

"There was an anticipation that a physician-owned and directed facility might be able to provide care in a more efficient and specialty-oriented fashion," says Charles E. Rhoades MD, a surgeon and CEO of KCOI. "The care is better because it is more focused."

Dr. Rhoades says this focus allows KCOI and other joint venture facilities to be more efficient and, consequently, more cost effective.

"We can do two to three times the number of procedures and deliver care to more people with the same resources [as a traditional hospital]," Dr. Rhoades says. "With a focus on musculoskeletal medicine, we have a much higher percentage of doing it right the first time than having a bargain-price procedure on the first go-around and having to repeat that procedure."

Another area where physician-operated facilities can lower costs is in technology, equipment and supplies.

"We [physicians] talk to vendors, and it is a different environment than when hospital administrators talk to vendors," Dr. Rhoades says. "Based on our experience, we can ask why they are charging so much for their products. We have more credibility.

"We espouse the philosophy that everyone in healthcare has to work to keep costs down," he adds. "We work hard to control supply costs and to have consistency in resource consumption, so we can deliver the product much more efficiently than large, bureaucratically heavy traditional hospitals."

At the Siouxland Surgery Center in Dakota Dunes, S.D., there is a $5,000 spending limit on purchasing new equipment. Physicians who want to purchase new equipment costing more than $5,000 must submit a business plan to a board of their peers, which decides whether to approve that request, says Greg Miner, executive director of the Siouxland Surgery Center.