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ED Outsourcing: Is It Good for Patient Care?



Wednesday, April 7, 2004

The emergency department (ED) is often called the front door of the hospital, giving many patients their first impression and opinion of a hospital, its physicians and its quality of care. George Molzen, M.D., immediate past president of the American College of Emergency Physicians (ACEP comprises more than 23,000 members) estimates that over 50 percent of a hospital's admissions originate from the ED.

A patient's experience in the ED--from the staff's efficiency to the adequacy of physician staffing to quality of care--can all influence whether he or she returns to your hospital. At the same time, the ED can be one of the most difficult hospital departments to manage, especially when it comes to patient flow, overcrowding, reimbursement, billing and collection, and staffing. And it's one of the most difficult areas of the hospital for boards to understand and appreciate in its full financial and quality-of-care ramifications. Yet the board's decisions regarding the ED can have a significant long-term impact on the financial stability of the hospital.

That's why a growing number of hospital administrators--with the board's blessing--are choosing to handle this complicated and crucial area by outsourcing their ED management, i.e., hiring contract management groups or CMGs, also known as hospital-based physician outsourcing groups. CMGs are usually bound by a contractual agreement to recruit physicians, manage and staff the ED, and bill and collect payment for ED services. The American Academy of Emergency Medicine (AAEM) estimates that approximately half of all emergency departments are now staffed by large or national CMGs that are majority-owned by nonphysicians, although the numbers vary depending on one's definition of large or small CMGs and whether one is grouping them together.

As the presence of these large CMGs have become a more significant part of the ED landscape, controversy over their viability has been brewing. A growing grassroots group of physicians, many of whom speak from experience, contend that large outsourcing groups rob physicians of their autonomy and ability to practice quality care while profiting from their hard work. In fact, one of the primary goals of AAEM, with about 5,000 members, is to eliminate the practice of emergency department outsourcing to large CMGs.

The Wave of the Future?

Molzen says there is a place for both CMGs and "democratic" (i.e., traditional physician-owned) groups. "CMGs can take the pressure off physicians in terms of billing and management-related issues," he says. "There are a group of physicians out there who just want to see patients and don't want to deal with the business aspect of medicine. For those doctors, this may be a good fit. It allows them to do what they do best, and that is to see patients and practice medicine."

Emergency department outsourcing started in the 1980s during a time when hospitals were having difficulty finding qualified physicians to staff their EDs. In response, a growing number of physician staffing groups began cropping up around the country, promising to keep the emergency department staffed around the clock.

With hospital administrators happy to relinquish this burden, ED staffing agencies quickly became popular and profitable. Their success led to further growth, increased profits and expanded services, including comprehensive coding and billing services.

Team Health, based in Knoxville, Tenn., the nation's largest such group, provides outsourcing services to 232 hospitals nationwide. Other major players include EmCare, PhyAmerica Physician Group and EDS. These groups tout their ability to bring national expertise and experience to EDs, billing and collection, physician education, risk management, and programs to improve patient care and satisfaction.

Still Not Sold

Despite their claims to improve patient care and ED efficiency, however, negative perceptions about CMGs persist among some physicians.

Robert McNamara, M.D., past president of AAEM, says they are neither good for doctors or patient care. "Hospitals should have learned their lesson years ago when they started buying physician practices, and it didn't work," he says. "They saw drops in productivity and commitment because the doctors no longer had an ownership stake."

McNamara lists a variety of issues related to CMGs that he believes threaten both the integrity of the emergency specialty as well as quality care:

  • The CMG model superimposes the profit imperative of a business onto the patient-physician encounter in the emergency department
  • CMGs do not necessarily hire the most qualified ED professionals as this may affect profit margins
  • Doctors are denied due process and can be terminated on the spot--and often are
  • Noncompete clauses are the glue that keeps physicians and hospitals tied to CMGs, making it difficult for them to terminate the relationship
  • CMGs create poor physician relations, often resulting in a group of doctors who feel no ownership or pride in their hospital or their work.

Two Sides of the Coin

First, let's take a closer look at the issue of profits. Physicians who have worked for CMGs say that profits often drive their policies and decision-making, with some CMGs taking as much as 40 percent off the top for their own gain.

But are CMGs really making such big profits? When MedPartners, the parent of Team Health, ran into financial difficulties in the late 1990s, it sold the Team Health component to three private Chicago equity firms that now own 95 percent of the business. At the time, one of these firms published targeted profits of 40 percent a year from the venture. In addition, according to earnings stated in EmCare's 1996 annual report, AAEM estimates that the group profited as much as $50,000 per physician contract.

However, Team Health president Lynn Massingale, M.D., says the overall profit margin for his company is less than 2 percent. The company also covers expenses for continuing medical education, risk management, medical director training, customer relations and client service training. "These efforts are of great value to our affiliated physicians, client hospitals and their patients," says Massingale.

"I think big profits, for the most part, are a thing of the past," says ACEP's Molzen. "What you are paying for when you hire a CMG is their management expertise. With larger groups, the profit margin for their management services may be greater because they have larger economies of scale. What upsets many physicians is that they don't know how much is being spent on management services. ACEP agrees that this type of information should be provided to doctors if requested."

Robert Broida, M.D., an emergency physician and president of ED Quality Solutions Inc., a consulting firm in Cleveland, says that a typical profit margin is probably about 3 percent. Broida also worked for ECI (formerly Emergency Consultants Inc.) for approximately 20 years.

Even so, Broida says he has seen profits of 30 percent at some hospitals. "This is where the problem lies," he says. "Obscene profits such as this are what give CMGs a bad name. These profits should be plowed back into the hospital via increased staffing to decrease patient waiting times and to improve patient and staff satisfaction. Acting responsibly in this manner makes the CMG a true partner with the hospital and the community, rather than a predator."

Physician Staffing

CMGs such as Team Health and EmCare say they provide a valuable service to hospitals that lack the ability to staff or manage their own ED. Using their national reach and reputation, they are able to recruit and staff EDs in some of the more isolated rural locations.

The presence of CMGs in rural communities provides a much-needed service, agrees Molzen. "Many small communities would not be able to staff their EDs without the assistance of large CMGs, which have a much larger pool of doctors from which to recruit."

St. Rita's Medical Center in Lima, Ohio, is a case in point. For some time, it had been recruiting ED doctors unsuccessfully on their own, and patient satisfaction was declining. St. Rita's hired Premier Health Care Services, a regional contract group based in Dayton, Ohio. After Premier came on board, things started looking up, says CEO Jim Reber. Staffing is now up to 15 ED doctors compared with four in 1990. ED visits have almost doubled, and overall customer satisfaction has risen from 75 percent to 93 percent.

While CMGs may be successful at filling emergency departments, it's the quality of the physicians that concerns some doctors. "The goal of ACEP is to see all EDs staffed by board-certified, emergency-trained emergency medicine doctors," says Molzen. "Emergency medicine takes specialized training. You're going to get better care from a physician who is trained for that particular task."

Molzen says that most hospitals today demand board-certified ED doctors. If a hospital chooses to hire a CMG, it's up to the hospital administration to make sure its physicians are board certified for emergency medicine, he says.

After searching Team Health's own Web site, Tom Scaletta, M.D., secretary/treasurer of AAEM, says that in 2001 he found that nearly half of the 2,100 Team Health emergency physicians listed were not certified by the two primary certification boards in this country--the allopathic and osteopathic boards of emergency medicine. They were not accredited by the Accreditation Council for Graduation Medical Education, and more than 100 of their doctors were neither board certified nor board eligible. "They may have made changes since then," he says. "I hope that is the case."

A Kentucky ED doctor, Gregory West, M.D., who has worked for several CMGs, including Sterling, EmCare and National Emergency Services says, "CMGs are notorious for using 'startup doctors' who are board-certified, residency-trained and experienced when they first take over a contract. The startup doctors are then moved to the newest hospitals and replaced with physicians without board certification. I was the only board-certified ED doctor of more than 15 doctors at two of the hospitals where I worked for one CMG. They would showcase me when competing for new contracts."

Massingale refutes this claim. "Ninety percent of our physicians across the network are board certified ... and have over five years of experience, and a full 65 percent have more than 10 years of experience practicing emergency medicine. Despite a reduction of total emergency departments in the U.S. over the past several years ... emergency medicine is still far from being able to offer 100 percent staffing by residency-trained emergency physicians. Frankly, not every community can afford to subsidize, nor do their hospitals have the patient volume or geographic setting to attract residency-trained emergency physicians."

Physician Relations and Commitment

Because CMGs often recruit physicians from outside the community, opponents of CMGs contend that this creates a revolving door of doctors that hurts patient care and physician commitment. "CMGs recruit physicians constantly for full or part time, and most of the doctors have no loyalty to the hospital, the patients, or to the CMG, for that matter," says an emergency physician who has worked for a number of CMGs and private groups. "This amounts to a situation where the physician in the ED has little reason to work to his full potential, satisfy the patients, or get involved in hospital affairs, committees or with consulting physicians."

When it comes to physician commitment and loyalty to an organization, Molzen agrees that in most cases, a local group will prevail. "A local group is more likely to have a vested interest in the community and therefore in the hospital they work for," he says. "Local physicians will tend to care more about the quality of care they provide, are apt to be more responsive, and more active in hospital affairs and nonpatient care issues. In the long run, the administration is going to have fewer problems with doctors who are local and own a piece of the company."

The importance of job satisfaction and physician ownership cannot be underestimated, says emergency physician Frank Contursi, M.D., whose group recently extricated itself from its corporate employer.

In a letter to the editor in the October 2003 issue of Emergency Physicians' Monthly, Contursi writes, "Equity ownership in a group has huge benefits and rewards for the physicians, hospital administrators and patients. We have become leaders in the areas of quality assurance, risk management, continuing medical education, patient satisfaction and process development ... our members now have a vested interest in the success of the group. Under our prior corporate ownership, we worked for a paycheck."

However, organizations like Team Health and EmCare contend that their physicians are content and tout physician retention rates of more than 90 percent. "A good retention rate says a lot about the organization," says Ravir Mattes, M.D., medical director at an EmCare-run ED. "It's a positive reflection on their corporation. I've worked for EmCare for 10 years, and I know a lot of people who have worked for them for many years as well. We wouldn't still be here if it wasn't a good company to work for."

In fact, over the last few years, many CMGs have taken steps to improve physician relations by putting physicians in leadership roles within the company. At Premier, many physicians hold leadership positions and drive decisions to ensure quality patient care. After one year, physicians can become partners and owners in the company.

Incentives reward physicians who provide exemplary patient care. "If they own a piece of it, they tend to try harder and they can share in the benefits of the organization," notes William Cole, M.D., Premier's CEO.

Similarly, several years ago, EmCare began making changes to ensure the company was both led and governed by physicians. They removed all nonphysician executives from the regional offices and replaced them with physician CEOs, who have full responsibility for hospital contracts. Physicians now handle all medical issues. At Team Health, most of its regional affiliates are managed by physicians, and physicians hold many other management positions throughout the organization.

"The groups that weren't doing right by their physicians are gone," says Mattes. "It takes quality physicians to run an ED successfully. If you don't treat your physicians right, you're not going to succeed."

Quality Care

The quality of care also often suffers when doctors believe they have no control over their practice or their future. However, improved quality of care is often the reason many hospitals hire CMGs, says Steven Dresnick, M.D., founder of Sterling Healthcare, a large CMG formed in 1987 that went bankrupt in 1999 and came back to recently purchase another CMG, PhyAmerica Physician Group. "[Hospitals] want the expertise and broad perspective of a contract management group to help them deal with operations issues like overcrowding, patient flow, disease management programs, malpractice insurance and reimbursement," he explains.

But hospitals also need to have realistic expectations about what CMGs can do, he warns, and they should not expect to see immediate and drastic changes. But do CMGs really deliver?

Leesburg (Fla.) Regional Medical Center, believes they do. When its ED could not handle the volume of patients it was receiving, Team Health helped solve the problem. "Our ED was generating a vast amount of complaints from both patients and physicians," says Tim Sullivan, Leesburg's board chair. "Using their national perspective, they developed protocols to help deal with the volume more efficiently. They helped us build a new infrastructure to improve patient flow, and they provided better staffing. Our reimbursement is up, complaints from doctors have gone down substantially, and customer satisfaction is up 20 percent or more."

Opponents of CMGs say these companies are experts at impressing hospital administrators with their glossy brochures and promises to implement quality improvement programs, but too often, these are empty promises.

"Any type of capitalist group is not good for the emergency room," says AAEM's Scaletta. "The principles of good patient care are inconsistent with entrepreneurialism. These groups are not looking out for the common good of the patient. They are paying, staffing and hiring less-quality physicians--all in the name of increasing their profits. Little is being put back into the system to improve patient care."

What it boils down to, says Molzen, is that administrators need to check in occasionally and make sure they are getting what they asked for.

"In many cases, contract groups can provide value-added services that a small democratic group simply can't provide," agrees Broida. "However, it's up to the administrators to follow up on these promises and make sure they are performing."

Are there abuses in the system? "Wherever there are profits, there is potential for abuse, whether by a CMG, a single physician and even some democratic groups," says Molzen. "You need to look at the practice of emergency medicine as a whole, rather than going after CMGs. Physicians and hospitals need to understand what they're potentially gaining and giving up when contracting with a CMG. They need to weigh the pros and cons and be comfortable with their decision."

Susan Meyers is a writer based in Omaha, Neb.




TRUSTEE Magazine, April 2004



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