(Circulation. 1997;95:740-744.)
© 1997 American Heart Association, Inc.
Articles |
Academic Cardiology Division in the Era of Managed Care
A Paradigm for Survival
the Division of Cardiology, Department of Medicine, University of Pittsburgh (Pa) Medical Center.
Correspondence to Arthur M. Feldman, MD, PhD, Division of Cardiology, University of Pittsburgh Medical Center, Presbyterian University Hospital, 200 Lothrop St, S572 Scaife Hall, Pittsburgh, PA 15213. E-mail feldma@card2.cath.upmc.edu.
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Abstract |
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 Top Abstract IntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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Abstract The ability of academic divisions of cardiology to pursue educational and research missions in an era of market-driven managed care is being increasingly jeopardized. Indeed, several academic medical centers have been sold to for-profit entities, and many cardiology divisions have been forced to decrease staff and faculty reimbursements. Despite these threats, the academic division has unique strengths: (1) premium quality of care, (2) a single employer, (3) a somewhat uniform practice culture, (4) high-volume operators performing interventional procedures, (5) expertise in highly technical aspects of cardiology, and (6) the availability of physicians for outreach ventures. Therefore, we hypothesized that the cardiology division could be strengthened by collaborating with the medical center in the development of an aggressive and proactive managed care strategy. To this end, we developed a cardiovascular network having the academic center as its central focus but including a group of high-quality and geographically dispersed community-based physicians. These physicians were attracted by an economic package that provided protection from downside risk, participation in our managed care initiatives, and geographic exclusivity in an overcrowded market. In turn, the community-based physicians increasingly used the academic medical center for tertiary care, resulting in increased volumes and incremental profitability. Using this paradigm, we have now recruited
40 community cardiologists. The resulting network provides access to a university cardiologist in most of the surrounding urban and rural counties and will allow us to compete effectively for capitated contracts.
Key Words: managed care • cardiology, academic
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Introduction |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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The advent of managed care has dramatically affected the practice of many physicians in the United States. However, the practice of medicine in academic medical centers has been disproportionately affected, because academic centers must support teaching and research, cutting-edge care, and a large number of specialists in an environment of decreasing reimbursements.1 2 3 4 In response to these changes, medical centers have made rapid changes, including affiliations with or acquisition of community-based primary care physicians, joint ventures with healthcare systems, development of hospital consortiums, and the establishment of integrated healthcare systems5 6 7 8 ; however, none of these strategies have yet been proved successful. While attention has focused on restructuring and redefining the role of the academic medical center in these new managed care environments, selected specialty services and, in particular, academic cardiology programs have been generally ignored. Although cardiology divisions have historically generated substantial profits, many academic cardiology divisions support relatively large faculties and pursue academic missions, including research and teaching. Therefore, it is important to preserve the viability of academic cardiology. In this article, we present strategies that we are using to facilitate the ability of the academic cardiology program to compete in a managed care environment.
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Historic Financial Impact of Cardiology Divisions in the Academic Medical Center |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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With the development of interventional cardiology, academic centers had a partial monopoly on high-cost procedures. These procedures resulted in large reimbursements and therefore supported robust divisions of cardiology as well as many non–revenue-generating sections of departments of medicine. However, recent events have jeopardized the ability of academic cardiology programs to support themselves: (1) the spread of interventional cardiology and open heart surgery programs to community-based "tertiary" hospitals; (2) the failure of cardiology training programs to limit the number of cardiology trainees and, in particular, interventional cardiologists, resulting in excessive competition in the community; (3) the decreasing professional fee reimbursements for interventional procedures; and (4) the high cost of new interventional techniques. Therefore, the historical tertiary care academic medical center has become a "quaternary" care provider, and the academic cardiologists become at risk of providing only those high-cost and high-risk procedures, including cardiac transplantation and high-risk intervention, that are not appropriate for the community-based "tertiary" center. However, because of the potential value of specialists to the overall economics of the academic medical center, several large centers have focused their resource allocation on the development of specialty networks and aggressive specialist-based managed care programs.9 10
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Demographics of Cardiology Practices in Western Pennsylvania |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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The problem facing academic cardiology programs can be illustrated by assessing the demographics of cardiology in Pittsburgh, Pa, a city of
370 000 inhabitants located in Allegheny County. The total metropolitan area, encompassing parts of six counties, has a population of 2.4 million. Within Allegheny County, eight hospitals (excluding one pediatric hospital) have open heart surgery programs, and until recently, six hospitals (now four) had cardiology training programs. These training programs graduate 14 fellows each year. This large number of trainees was responsible in part for the presence of 245 adult cardiologists in the Pittsburgh metropolitan area. By contrast, the city of Los Angeles, Calif, with a population of 3.6 million, has 260 cardiologists. The University of Pittsburgh Medical Center has a full-time faculty composed of 36 clinical cardiologists and 4 PhD research scientists. Within a mature managed care environment, it has been estimated that one cardiologist is needed for each 30 000 indemnity-covered lives.11 Therefore, the present number of cardiologists in Pittsburgh could care for nearly 9 million people. Indeed, the 36 full-time cardiology faculty at the University Hospital would be able to adequately care for more than half of the entire population of metropolitan Pittsburgh if they spent the majority of their time in clinical practice. These demographics are not atypical for states with similar penetration of managed care.12 Thus, without an aggressive strategy to increase market share and to compete for contracts with payers, the viability of the academic cardiology program could be threatened as the managed care market matures. |
Threats to Academic Cardiology Programs |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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Community-based managed care competition has posed a realistic threat to academic medical centers as cardiology practice groups merge and ally with either hospitals or primary care practitioners.13 Although these alliances provide some degree of competition, they are often poorly capitalized and therefore unable to take extensive risks in capitated markets. However, proprietary medical management companies or physician practice management firms are a new but rapidly growing threat.14 Although initially these practice management companies merged primary care or multispecialty group practices, physician practice management firms directed at the management of specialties that are important revenue sources for large healthcare systems have also begun to emerge. Included in this new trend is the emergence of national cardiology management companies including Med Cath, Promedco, and Vivra and oncology management firms including Physician Relations Network and American Oncology Resources. These for-profit corporations are able to take advantage of large capital resources to aggressively drive community market forces.
Managed care competition can also arise from within the academic medical center. For example, many centers have begun to compete in the managed care environment by aggressively acquiring primary care practices. This strategy may pose multiple risks to the academic cardiology practice: (1) Low-risk procedures such as diagnostic cardiac catheterization, nuclear cardiology, and echocardiography are less costly when provided at community-based hospitals; (2) the general practitioners establish the proportion of the managed care dollar that is available for cardiovascular care; (3) efforts to decrease use of and compensation for selected procedures are adjudicated by the gatekeepers; and (4) the ability of an academic cardiology practice to maintain or increase volume becomes dependent on the number of primary care physicians in the network and their referral practices.
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Academic Cardiology as a Challenger in Managed Care |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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Although threatened by managed care, the academic cardiology division has intrinsic advantages in a managed care environment. These unique advantages provide opportunities to compete with community-based hospitals or private practices in the development of successful managed care strategies. One advantage is exceptional quality of care. Indeed, in 1990, the Health Care Advisory Board noted that the single most powerful tool for attracting cardiac admissions and building program volume was a reputation for premium quality of care and that preeminent programs could be distinguished by the presence of (1) world-class physicians; (2) a commitment to maintaining a top-notch physical plant with state-of-the-art facilities; and (3) a massive commitment to research, ensuring patients access to cutting-edge technologies, treatment programs, and novel investigational agents.15 However, the academic medical center has other less obvious advantages for developing managed care strategies. Foremost among these is the fact that all of the cardiologists in the academic division are fully employed by the university. This provides a large amount of flexibility in terms of establishing relationships with other cardiologists or hospitals, because consistent policies can more easily be established. Furthermore, it precludes the necessity to acquire the cooperation of multiple groups of independent hospital-based physicians and facilitates the development and uniform implementation of protocols and practice policies as well as cost management procedures.16 More importantly, these large divisions usually represent a somewhat uniform practice culture. In addition, most academic medical centers have a limited number of physicians providing interventional cardiology procedures. Therefore, only a small number of high-volume operators perform specialized procedures. This results in better outcomes17 and potentially lower costs. Furthermore, academic divisions often have adequate manpower to allow reassignment of practitioners to provide care at rural clinics or community-based satellites. Because academic cardiologists are salaried,18 there is no incentive for overutilization. Finally, academic divisions often have expertise in specific areas of heart disease, such as congestive heart failure, electrophysiology, and high-technology interventional procedures. Recent studies and reports have suggested that care of cardiac patients by subspecialists in specially designed clinics with trained clinical teams results in substantial decreases in hospitalizations and in overall costs as well as improved outcomes.18 19 20
Another important advantage for an academic cardiology program occurs when there is a close relationship between the hospital and the division of cardiology. Indeed, such a relationship is of great importance in being able to develop a successful managed care strategy. Financial resources available from the hospital can be used for practice acquisitions and to support risk pools for managed care ventures. This type of capitalization is often not available to community-based practitioners. Therefore, a sharing of hospital and university resources provides a competitive edge against local mergers and acquisitions by small hospitals while also being the best hedge against the incursion of for-profit medical management companies. Alternatively, hospital profits can provide revenues to support the academic mission of the cardiology division.5 21 22
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Developing a Managed Care Paradigm for Academic Cardiology |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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Approximately 1 year ago, we hypothesized that we could successfully maintain the academic mission of the division of cardiology by collaborating with the medical center in development of an aggressive and proactive managed care strategy. By taking advantage of the unique opportunities afforded by the academic cardiology division, we developed a paradigm for solidifying our position in a progressively maturing managed care environment. Our short-term goals were to develop a geographically dispersed cardiology network that could increase tertiary referrals to the academic medical center and in so doing, increase revenues in the current fee-for-service or discounted-fee-for-service environment. However, our long-term goal was to develop a carve-out product that could take the risk for the cardiovascular care of a large number of covered lives under a global or capitated contract. The development of a cardiovascular network having the academic medical center as its central focus required a substantive change in the culture of the academic center at both the divisional and departmental levels: (1) development of a collaborative relationship between academic and community-based cardiologists, (2) recognition of the fact that levels of compensation are different for academy-based and community-based physicians, (3) development of a change in the compensation levels and clinical responsibilities of the academic cardiologists to provide reimbursements predicated on productivity,23 and (4) decreased cost-shifting as a mechanism for supporting non–revenue-generating academic programs.
Before we could develop a network, it was imperative to evaluate the financial implications of network development—specifically, the financial implications of selected referrals. That is, would an increase in selected procedures increase or decrease profits? Incremental profit analysis provides an assessment of the top-loaded value for each additional referral or each additional procedure. For example, in many academic cardiology divisions, there is a large incremental profit from performance of interventional procedures. In many catheterization laboratories, the equipment has been paid for from capital revenues and is being depreciated, laboratory time is readily available, and economies of scale allow for increased volume without need for increased personnel. Therefore, each additional catheterization with resulting ancillary referrals results in an incremental profit that is greater than the actual technical fee reimbursement. By contrast, some procedures might have minimal incremental profitability and in fact might be more economically performed at community-based facilities. Therefore, incremental profit analysis provides an objective evaluation of the "relative value" of a practice acquisition.
A second preliminary evaluation is assessment of the demographics of the referral region, ie, how many physicians and practice locations are required to provide adequate care to the population base while taking into consideration the geography of the region? Finally, it is important to identify practices providing high-quality care.
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The Cardiology Network: A Working Hypothesis |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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We established several fundamental goals for the development of the cardiology network: (1) to establish wide geographic distribution, (2) to include only high-quality (and high-volume) practitioners, (3) to structure the network such that physicians or physician groups could not be co-opted by competing networks, and (4) to develop financial incentives that would attract successful and independent groups of practitioners.
Several paradigms were constructed for economically linking community-based cardiologists with the academic center. One paradigm has been to acquire community-based cardiology practices in a method analogous to strategies used by both for-profit companies and private hospitals. Each practice received network exclusivity within their given referral area and full membership in any network products; contracts were long-term, making it problematic for competing networks to co-opt the participating groups; and acquisitions did not include good will but did provide the practitioner with long-term downside protection, assuming continued productivity. To maintain the independence of each group, practices are managed with a great deal of autonomy, while the overall management of the practice groups comes from a steering committee consisting of a member from each practice group and chaired by the chief of the division of cardiology. This network corporation provides the opportunity to use bulk purchasing, common billing and collections, overall quality assurance, and establishment of clinical pathways. Importantly, the corporate structure obviates many of the limitations associated with the traditional academic structure and provides a hierarchical structure more consistent with efficient business practices.
An alternative strategy was designed to allow participation of physicians who were not amenable to practice acquisition. In this strategy, full-time interventional cardiologists were leased to community-based practitioners. The community-based practitioner supports a portion of the academic physician's salary commensurate with the amount of time that the physician spends in the community physician's practice. The community cardiologist then bills for any services, including interventional services, that are provided by the academic cardiologist during the periods of time covered by the leasing arrangement, and the practitioner receives membership in the cardiology network. The academic center profits because the invasive cardiologist brings additional interventional cases, guarantees a substantial portion of his or her salary, and therefore can be provided with protected research time.
In those areas in which we were unable to acquire existing practices, we have established practices using cardiologists recently graduated from our program or a group of our full-time cardiologists in space provided in existing satellite facilities or, in some cases, in office space rented from medical office facilities adjacent to community hospitals. With these paradigms, we have established economic relationships with 40 practicing cardiologists in western Pennsylvania. In conjunction with our full-time faculty, we are now able to provide access to a University of Pittsburgh cardiologist over a large area of western Pennsylvania and are now ready to move on to the next step in the evolution of managed care: providing a capitated carve-out product. Although academic medical centers are often viewed as being more costly, we hypothesize that we will be highly competitive in a capitated environment because of the high quality of our practitioners, the wide geographic distribution of the network, excellent success rates in procedurally oriented services, extensive cost-saving measures, and our ability to sustain risk.
It is important to note that different geographic areas of the country have varying penetration of managed care and different demographics, and therefore we do not imply that the paradigm we have developed will work for all academic cardiology programs. However, we propose that all academic cardiology programs should be aggressive, proactive, imaginative, and collaborative with the medical center. Furthermore, it is important to attempt to establish relationships at the hospital level with the primary hospital affiliates of the community-based specialists.
With the community hospital serving as a partner, many services can be shifted out of the academic center to take advantage of lower costs in the community. Although network physicians cannot be mandated to refer or bring their patients to the academic medical center for tertiary care, the active relationship between the two groups will certainly have an influence on referral patterns.
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Reinventing the Academic Cardiology Division |
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TopAbstractIntroductionHistoric Financial Impact of...Demographics of Cardiology...Threats to Academic Cardiology...Academic Cardiology as a...Developing a Managed Care...The Cardiology Network: A...Reinventing the Academic...References |
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If our hypothesis is correct, the development of an integrated cardiology network consisting of geographically dispersed high-quality providers, allied community hospitals, and the academic cardiology division should result in enhanced clinical volumes at the academic center, high-quality care, lower costs, and incremental profits in either a fee-for-service or capitated environment. Indeed, in our present discounted-fee-for-service environment, we have tripled interventional volumes and substantially increased clinical productivity of the full-time academic faculty. Using clinical revenues, we have also been able to support new research initiatives in clinical, basic, and outcomes research.
Importantly, our clinical restructuring should result in improvements in patient outcomes. Since an integral part of our strategy has been that cardiologists manage both care and risk, we assessed the effectiveness of cardiologists in providing cardiac care. In an initial study, we evaluated outcomes for patients with a primary diagnosis of congestive heart failure who were managed by either a primary care physician or a cardiologist. The risk of readmission was almost double in the group of patients cared for by generalists, even though they had substantially less severe disease.24 Our computer-linked network will facilitate accumulation of additional outcome data that will allow comparisons with other practice strategies.
Unlike a decade ago, cardiology divisions must now borrow the tools of business and strive to achieve economic, albeit not-for-profit, goals. To achieve these goals, the historical animosities between academic departments and their affiliated hospitals must be eliminated and the two must become partners to integrate the goals of the hospital with those of the academic cardiology division. Importantly, academic physicians must understand that although community-based practitioners may not directly increase revenues to the division of cardiology, they will substantially increase hospital revenues.25 Similarly, historical relationships between departments of medicine and divisions of cardiology must be modified and new economic balances established within the department of medicine. These new relationships will allow the academic medical centers to use their resources in novel and aggressive ways to support the development of community-based academic networks to compete with the for-profit entities. Furthermore, the academic cardiology division must modify its culture to incorporate community-based physicians into the milieu of the academic division, as well as their inclusion in the catheterization and noninvasive laboratories. Inclusion of these community-based physician groups can provide a wealth of information for outcome research and patients for clinical trials. In addition, the academic physician must provide community outreach and clinical practice at satellite facilities as an integral part of the academic practice. Only through novel strategies for university/hospital collaborations and aggressive strategies to optimally position the division in the managed care environment will we be able to maintain the academic mission.
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Acknowledgments |
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The authors thank Phillip D. Green, Esq, and Stephen S. Boochever, Esq, for their helpful advice.
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References |
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