Wednesday, April 14, 2010

Guess Who's Coming to Dinner?

No its not the 1967 drama starring Sidney Poitier, Katherine Hepburn and Spencer Tracy. TSB had a controversial dinner with one of his surgeons discussing Physician Owned Distributorships and Hospitals. "Dr. Famous," by the way, picked up the tab. TSB hopes we didn't break any of those AdvaMed rules. As we discussed these topics, unexpectedly, he looked at me and said, "we/doctors are a peculiar group of people, we think just because we were smart enough to graduate from medical school and become a surgeon, we believe we can be good at everything we do outside of medicine. It's an inherent arrogance."

Mentioning the recent ruling that was reported on OTW, even Dr. Famous felt that its self-aggrandizing to preach how bright of a businessman one is when physicians can selectively choose the patient that they operate on. He equated it to running an insurance company, using the former US Healthcare as an example, where they were willing only to underwrite policies that were not over a specific age, and, had minimal health risk. The argument that I posed was that this country was built on a free market economy and physicians should be able to own a hospital if they choose to. His response was, "if they're willing to take care of everyone, including medicare patients and the destitute, he has absolutely no qualms about physicians owning their own hospital." Obviously, Dr. Famous has some integrity and a code of ethics.

The most interesting aspect of our conversation was his observation that if physicians had the right to own facilities without restrictions, most companies would find out how quick the pricing of implants would come down, and, that there probably would not be a need for physician owned distributorships, nor would there be all of these fictitious consulting agreements. Yet, even he questioned the legality of such a business model asking whether there is a difference between state and federal laws that are applicable to POD's. So TSB wants to know what our readers think? Would the delivery of healthcare be more efficient both medically and financially if physicians were allowed to continue to build and own hospitals without restrictions, or, would it become a reflection of how poorly they run their business, magnifying the current climate in healthcare?

"I know you deceived me but here's a surprise, I know that you have because there's magic in your eyes, I can see for miles and miles and miles and miles, oh yeah"


  1. Any chance this was a fake conversation you had with yourself?

  2. It is interesting to think about what affect health insurance reform will have on physician owned hospitals. Your doc is quite correct in that physician owned hospitals should take care of all patients, regardless of ability to pay. Docs shifting the "good" patients to their own facilities is something established hospitals despise. It is certainly unethical and potentially illegal.

    If and when reform actually happens, this may no longer be an issue and could potentially open the door for more physician-owned facilities. It is certainly something I would consider - if only I could get my fellow surgeons in the same room to talk about it and they actually had the money to invest in it.

  3. TSB - let's get the entertaining blog posts going again! Gossip and rumors about companies, products, execs, pricing discrepacies, technologies etc. We gotta get the contentious ingrates out from their caves again.

  4. one example comes to mind.....century city doctors hospital......what a fiasco......some of the biggest hitters, i mean spine surgeons, doing 5-8 cases a day........didn't last very long......stick to practicing medicine......

  5. I've posted this before, so forgive me for restating it. If a hospital being physician-owned inherently reduces costs, then either of these two unfortunate propositions is true.

    Without physician ownership, physicians are wasting our collective money by incurring unnecessary resources and treatment expenses.


    With physician ownership, physicians are compromising patient care for the sake of their personal bottom line.

    (Any argument that non-owning physicians are powerless to save money for their institition is utter hogwash. I never met an institution that disregarded physician's ideas or collaboration to save them money.)

    I do believe that physician ownership does reduce costs by increasing price sensitivity for treatments and technologies, but I'm very disappointed about either reason why.

  6. look to the ASC model and the sports med important is price in their product decisions? now compare that with spine docs and implant use at a hospital they don't have a financial interest in....the low price product in the ASC doesn't always win, but the balance of features/benefits AND price does.

    If the spine doc ever gets on the same side of the table as the hospital whether it be through ownership/gainsharing/department benefits,etc prices will go down and efficencies will be had. Industry has benfited by playing the Industry-Physician-Hospital triangle to their benefit for a long time. The solution to better care/lower costs is not making the physician into industry (SOD), rather allowing physicians to benefit on the hospital side...

  7. It is a fact that physician ownership in hospitals can lead to lower implant prices to the hospital. It is a fact that my local physician owned hospital gets spinal implants at a much lower price than the local non-profit/academic hospitals. The reason is the surgeons are involved and have skin in the game. The implants used are the exact same implants used at the other hospitals, not some cheap knockoff crap. I speak from first-hand knowledge. Anon 12:30 PM is correct. Now the next thing that needs to happen but never will (because medicine will never be an open market) is for the physician-owned hospital to be able to pass on the savings directly to the patient in some way. That is impossible in this system (it would be interesting to see what happens if spine or any implant-using surgeon could participate in ophthamology's system curently allowed by medicare where lenses are paid at a flat rate by medicare for the honda and the patient has to pay over and above if they want to buy the mercedes). Why would anyone pass on the saving to the carrier?

  8. The sad truth is in the current electronic age, we all have access to research prior to any surgery. Hospitals & Surgery Centers (physician owned or not) market their state of the art products & procedures. Generally, the finance department dictates the implants they use based on cost. Surgeons donot always dictate the implant systems available in the facilities. Additionally, some facilities can dictate what is used during a procedure based on the patient's insurance differing from Workers comp, medicare, & medical patients dependent on the reimbursement.

    Physician owned distributorships should ultimately provide the surgeon preferred implants(considering the patient's best outcomes) to the facilities at a cost savings.

    Thus, providing reduced implant costs in all facilities that opt to purchase from the Physician owned distributorship. The savings results from cutting out distribor marketing and middlement. why? Because the Physicians are choosing the best implants to use & eliminating the middle man (the other Medical Distributors), thus reducing prices.

    No, the general consumer or patient won't see a reduction in their medical bills, but they may recieve better outcomes on their surgeries.

    Ironically, for those of us who put off their surgery waiting years for the newest- procedures to be available, we may actually receive those new state-of-the-art procedures as a result of Physician owned distributorships (PODs) choices regardless of our insurance coverage.