How Good Is Multi-Specialty Group Practice?

How Good Is Multi-Specialty Group Practice?

Debating Alain Enthoven

Philip R. Alper, MD, FACP

My neighbor, a professor in the Stanford Graduate School of Business, agreed to let me audit his course, “Innovation and Management in Health Care.” In turn, I offered to contribute what I know to the class.

“We’ll pair you with Alain Enthoven,” the professor said. “You can debate managed competition and the role of multi-specialty group practice, particularly Kaiser Permanente.”

Of course, managed competition is Dr Enthoven’s creation, and it served as the basis for Hilary Clinton’s unrealized 1992 redesign of American health care. It’s a subject about which he knows a lot and I know a lot less. Dr Enthoven is also an enormous fan of the prepaid staff-group practice model, of which Kaiser Permanente, with its 11,000 physicians, is the nation’s preeminent example. He has long envisioned all American medicine organized into 3 mega-group practices, offering branded care and competing with one another like the “big 3” automakers.

Not only Enthoven, but most thought leaders in the guideline, quality, and managed care movements believe that large multispecialty group practice is the only way to achieve their goals. Their belief is so strong that evidence to the contrary is routinely ignored. Indeed, the word “pluralism,” long used to approvingly describe a diversity of practice modes, has disappeared from the lexicon of health policy. Instead, there is an expectation that physicians will be obliged to join groups of ever-increasing size to carry out the data and compliance-heavy mandates of managed care.

I won’t repeat my debating partner’s arguments, because they are familiar and are based on the shortcomings of the present system. It was also clear that this debate, which took place not only in Dr Enthoven’s school but also in his department, was one that I was expected to lose. This wasn’t unjust, because 12 years ago I had debated him at a county medical association meeting, where the audience was more sympathetic to my position. But rather than debate, I jokingly agreed with everything my “adversary” said and added the following observations.

Kaiser Permanente is an anomaly. It was founded because Henry Kaiser wanted to make cement and build dams in remote places that lacked medical care for his workers. Dr Sidney Garfield joined him, and together they invented their model of prepaid group practice. Kaiser demanded total control, but Garfield threatened to quit unless he could keep the medical group independent, that is, as independent as any group working for only one employer can be. In the 75 years of Kaiser Permanente’s existence, no real competitor has ever emerged. The mystery of why the economies of scale, centralization of management, and bottom-line thinking haven’t provided an appealing business model to others has never been explained; to my knowledge, it hasn’t even seriously been investigated.

When I was a resident in medicine in the 1960s, I moonlighted as head of the evening pediatric drop-in clinic 2 days a week. I was assisted by 2 other residents, one in urology, the other in psychiatry. At the time I thought that Kaiser Permanente’s care at the margins (after hours and in some specialties) wasn’t as good as at the center. This was reinforced when parents would drive their sick children from the next county to see us.

It was also at this time that Richard Bailey, of the University of California School of Public Health, conducted studies showing that the most efficient mode of practice was solo, with a 2-person, single-specialty practice close behind. And as late as 1995, Donald Barr wrote in the Annals of Internal Medicine (1995;122:353-359) about the inherent difficulty of providing high-quality primary care in large organizations.

Despite some setbacks in recent years, Kaiser Permanente now attracts some of the best young physicians and has done a lot to improve amenities and user-friendliness. During the many years that I actively competed with Kaiser Permanente for patients, I always felt I could hold my own. Now I am not so sure. The double whammy of lower fees and compulsory inefficiency foisted upon community physicians like me by managed care has made traditional practice an ordeal. In addition, Kaiser Permanente has recently announced it would be spending $3 billion for an electronic medical record system. That works out to about $275,000 per physician. Whether an investment of this magnitude is wise, I don’t know. I do know that I can’t match it.

The increasing demand for data by pay-for-performance programs and the bonuses that go with compliance give an advantage to competitors with deep pockets.

In business parlance, doing so “raises the barrier to entry.” Henry Miller, at the Hoover Institution, writes how Monsanto Corporation counter-intuitively favors stricter regulation of its own genetically modified foods, which Monsanto can afford, but smaller competitors cannot. Litton Industries did much the same thing with microwave ovens, according to Dr Enthoven. Freezing out less well-heeled challengers is not necessarily in the consumer’s best interest in the long run. Yet it’s hard to combat, because the practice of raising the barrier is always couched in terms of higher quality and greater safety.

I became rather impassioned when telling the students that not all privately practicing physicians fit the mold of profligate spenders and careless clinicians. I was part of a small physician group that created a cost-effective coronary care unit in our local hospital, possibly the first in the country. The accounting department hijacked our savings, converted the unit into a cash cow, and effectively told us that we were no longer to be involved.

Likewise, bulk purchasing of lab services, which enabled me to pass on very large savings to my patients, was outlawed by the Nixon administration. We could no longer bill for services we didn’t personally provide, even if doing so was cost-effective. I could only stew when Medicare began paying labs up to 4 times what I was charging (including the modest handling fee that represented my “profit”) for the same tests. Instead of strengthening the hand of physicians who wanted to do the right thing, catching crooks and transferring control to nonphysicians became the goal.

Kaiser Permanente does have an enormous patient database that is already proving helpful in clinical research. But the organization is not among the innovators in medicine nor does it seek preeminence. Given its mission of providing care at discounted prices, Kaiser Permanente has long shunned the limelight and wherever possible tried to avoid being the only game in town, lest it attract criticism from patients who are forced rather than desire to use its services. Expansion has been cautious, both geographically and clinically, depending on the rest of the medical community for a share of after-hours coverage in emergencies and for new procedures. Thus, Kaiser Permanente in San Francisco was slow to adopt coronary bypass surgery. A community cardiac surgeon and hospital were hired to ultimately do 2600 cases, allowing Kaiser Permanente to ascend the learning curve at its convenience before making the investment to take over the surgery itself.

The professor explained to the class that managed competition deliberately escalates the level of competition from among providers to between plans, where it is more practical to manage. I find the idea of plans rather than physicians competing directly especially pernicious and demoralizing to physicians. The impact of widespread managed care negatively affects Kaiser Permanente physicians too, especially those in primary care (Arch Intern Med. 2001;161:202-211).

If managed competition were to become the only game in town and prepaid group practice the only delivery modality, it would be a vast experiment founded far more in theory than in practice. Currently, only about 20% of American physicians are in groups larger than 8. And the growth of large group practice has been surprisingly modest considering all the hoopla it has received.

At the end of the session, a student came up to thank me for presenting “a point of view we never hear in the business school.” He made my day.