Calif. Hospitals Weighing Creation of Foundations To Employ Physicians

The Hospital Association of Southern California has proposed a plan to create a single foundation of multiple facilities to contract with physician groups, the Wall Street Journal reports. The move has sparked concern that such consolidation will amplify health systems' market clout and escalate health care costs.

HASC's proposal reflects a growing push toward hospital-physician alignment, which has accelerated since the passage of the new health reform law. Hospitals in California are barred from employing physicians directly, requiring them to create affiliated foundations that contract with physicians.

Details of Foundation Plan

Under the proposal, a joint medical foundation would contract with physician groups that each would be affiliated with and retain privileges at an individual hospital. The foundation also would operate clinics and centralize billing and electronic health records.

HASC says the partnership between hospitals and physicians would increase care coordination, reduce costs, and improve quality and outcomes. The association also said the foundation could help recruit health care providers at smaller hospitals, which might lack the resources to form their own physician pools.

Although HASC has not yet voted on the plan, it expects that about 20 of the association' 160 member hospitals and about 60 physicians initially would participate in the foundation. Eventually, HASC expects the foundation to expand and include hundreds of providers.

Concerns Over Integrated Model

Questions remain about how HASC's integrated system would affect pricing. Some critics have expressed concern that the proposal would amplify the group's leverage during insurer negotiations and ramp up costs.

In addition, Dustin Corcoran, CEO of the California Medical Association, contends that the foundation would allow hospital systems to dictate competition and shut out unaffiliated medical groups.

However, HASC claims that the proposal does not call for one centralized contracting structure and that hospitals and physicians would negotiate deals individually (Wilde Mathews, Wall Street Journal, 5/14).

City of Hope Medical Center

In related news, officials at City of Hope Medical Center in Duarte are considering a similar model in which physicians would work for a not-for-profit foundation partly controlled by the hospital, the Los Angeles Daily Journal reports.

According to industry experts, a growing number of California hospitals are contemplating such changes as the new health reform law starts to take effect. The law encourages so-called "integrated health care" models, which encourage physicians and facilities to work together to reduce unnecessary tests and admissions.

However, some physicians have criticized such models over concerns that they could lead to financial decisions overriding medical assessments.

CMA's Corcoran said the group is wary of hospitals creating not-for-profit foundations to replace medical groups. However, he added that some organizations -- such as Palo Alto Medical Foundation -- provide physicians with sufficient authority (George, Los Angeles Daily Journal, 5/14).