Physicians
Docs Cut Loose
By Richard Haugh
Tired of losing money on employed physicians, some hospitals are converting their medical groups to federally qualified health centers (FQHCs). Not only does the move cut losses, it can also improve the community’s overall health status.
Spinning off a money-losing medical practice into an FQHC can save a hospital millions of dollars, says David Honig, a New York City consultant with RSM McGladrey, which specializes in FQHC conversions. “We used to say 10 years ago that owning physician practices was providing a community service and feeding the acute care side of the business,” he says. “But now those losses have become so large, a lot of hospitals are looking at this idea.”
FQHCs are medical clinics that receive grants and higher reimbursement levels from Medicare and Medicaid in exchange for serving low-income patients or those who face economic, cultural or other barriers to care. No single agency tracks the number of FQHCs, but the National Association of Community Health Centers, Bethesda, Md., estimates that in 2004 there were 914.
Last summer, Regions Hospital and West Side Community Health Services, both in St. Paul, Minn., formed a partnership under which the hospital transferred its Regions Family Physicians Clinic to West Side. The hospital and Minneapolis-based insurer HealthPartners continue to sponsor a family practice residency program at the clinic, which, they found, can pose challenges.
Teaching clinics, like teaching hospitals, are inherently more expensive to run and face a tension between teaching goals and patient service needs. But with this arrangement, Regions Hospital continues to meet its teaching requirements and maintains its federal graduate medical education subsidy, says Brock Nelson, president and CEO of Regions Hospital. In return, the hospital helps out the clinic financially.
“The partnership is modeled after other successful partnerships between hospital-based residency programs and community health centers nationally,” Nelson says.
While the idea of shedding a cash-draining doctor practice is appealing, some hospitals may first face a cultural hurdle: letting go. Because the program is tightly regulated by the federal government, hospitals must keep a hands-off relationship and can’t manage the clinic, although they can form strong nonfinancial relationships. In many cases, the hospital and clinic have referral arrangements, and the hospital may even become the clinic’s landlord if it keeps its offices on the hospital campus.
However, the health center’s board is in charge of the clinic, Honig says. “The trade-off from the hospital’s perspective is the loss of control,” he says. “What hospitals have to weigh is, is the financial benefit worth the loss of control?”
Hospital leaders also need to manage physician expectations. In some cases, doctors may feel they are being kicked to the curb. It’s up to administrators and trustees to explain the rationale for spinning the practice off.
Because they can be paid for primary care visits, FQHCs can expand outpatient care delivered in the community.
One risk hospitals usually don’t face when spinning off an FQHC is competition from their former doctors for outpatient business, says Mavis Brehm, West Side’s executive director. “Usually, competing for poor people isn’t too popular,” she says.
Richard Haugh is a senior writer for Hospitals & Health Networks where this article appeared originally in May.
This article 1st appeared in the December 2099 issue of Trustee Magazine.
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