Health providers make cuts, changes and gambles in face-off with economy

News reports this weekend highlight several developments as medical providers respond to changing economic forces, and in some cases, clashes of personality.

A 13-year relationship between University of California San Francisco Medical Center and its medical group partner for 13 years, Brown and Toland Physicians, has ended in a "bitter dispute," the San Francisco Chronicle reports. The bad break-up has "thrust thousands of Bay Area HMO members into a confusing world of contracting arrangements between medical groups." Exacerbating matters, a UCSF television ad warned patients to find doctors at its new partner, Hill Physicians, or risk losing access to care. Brown and Toland fired back by sending patients letters saying the ads were inaccurate and accusing the UC board of regents of "resorting to scare tactics" (Colliver, 10/19).

Meanwhile, more and more doctors are moving from solo practices to larger groups, American Medical News reports. A recent article in the New England Journal of Medicine estimates "the number of doctors who owns at least part of a practice has declined about 2% annually for the past 25 years." Why? As the Medical Group Management Association points out, primary care reimbursement, adjusted for inflation, has risen only 0.6 percent between 2004 and 2008, while specialist pay declined 16.3 percent over that period. "Larger groups have more negotiating power and are better able to counter these trends" (Elliot, 10/19).

On the hospital side, Oregon's "Salem Hospital, the city's biggest private employer, is grappling with a streak of losses for the first time in years and considering significant cuts that could include layoffs, officials said," according to the Statesman Journal. The hospital must eliminate $9 million from its budget and has said its goal is not to let cuts affect patient care. "Demand for hospital services has been greater than ever, but the hospital is receiving less money as more people are insured through government plans such as Medicare and fewer patients come in with commercial insurance, said hospital spokeswoman Julie Howard" (Liao, 10/17).

But, not all hospitals say they are struggling, which leads the Indianapolis Star to ask where Wishard Memorial Hospital expects to get $754 million for a planned hospital complex that would be financed with public bonds, to be repaid by taxpayers if the hospital falters. There are a couple answers: "Wishard has increased its net patients revenue and cut costs," an executive for the hospital's government-owned patent company, Marion County Health and Hospital Corp., said. The other is the nursing home business. Wishard owns 35 facilities, which helped turn a $77 million loss in 2002 to a $39 million surplus in 2008. The nursing home get a Medicaid bonus set aside for publically-owned facilities, however, and critics say that money may be in the crosshairs for future spending cuts (Lee, 10/19).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.