Physician Hospital Conflicts
of Interest

In 2003, I wrote an article on the problems between physicians and hospitals as it related to specialty hospitals versus community hospitals.  Since that time, the feds had stopped for a short time the building of specialty hospitals but those are being built again.  There does not seem to be a push for deleting the whole hospital exception to the Stark law.

What is happening now is even more divisive than specialty hospitals.  Now physicians are partnering with for profit specialists and taking away patients from the community hospitals for many lucrative procedures.  It is absolutely legal, but is it ethical.  Several examples have come to light recently in various periodicals.  One is the urologist putting in their own radiation therapy to treat cancer of the prostate and the other is the medical oncologist putting in their own radiation units usually in partnership with for profit companies like US Oncology.

First, I would like to look at the area of why this is happening.  The road toward physician entrepreneurial behavior started with the increase of the era of managed care.  The physician, who had always just wanted to practice medicine and not be bothered by the business side of medicine, now became a businessman.  They saw the decrease in their income combined with the continued increase in their expenses and began looking for other means to raise money.  

Initially, the physician did this by attempting to increase productivity.  This led to the spiraling decrease in their family time and practice burnout with less physician interaction and less conviviality between the physicians.  It also led to greater competition between the physicians and they became carnivorous, eating each other via the area of sham peer review. 

Later, after the low hanging fruit was gone, they still needed more money.  Those that were in urban settings and were specialists started specialty hospitals to increase their efficiency over the lumbering hospital bureaucracy.  Others have started to become concierge physicians.  

Now, as the above continues, a fresh crop of physicians are becoming businesspeople.  The impetus for the latest rush is the lack of any feeling toward the community hospital.  In the days past there was a symbiotic relationship between the two.  This no longer exists.  The new physician looks at the hospital as a place where the patient goes to get more intense treatment than they can give in their office.  However, as opposed to the past, when the physician would care for their patient in the hospital, the new types of reimbursement leads the physician to stay in his office and turn the patient over to a new type of physician called a hospitalist.  The outside physician no longer has to make rounds and can devote his day to seeing more office patients to continue his cash flow.  This leads to the breakdown of the past collegial interplay between the physicians who met and socialized at the common hospital.

With the lack of any further relationships between the hospital and the physician, the physician began to ask the next question, "Why do I need the hospital?"  The answer was a resounding "I don't!"  Since the physician no longer needs the hospital and they need more money due to the clamps of the insurers, the physicians now say that if you, the hospital, want me to serve on committees, join the political structure of the hospital or take call then I want to be paid for these services to you.  The hospitals are stuck.  They are mandated by law to provide on call physicians and to do quality oversight.  Hospitals can not do these things, only physicians can and they are not legally required to do the work.  Hospitals therefore are now paying up to $1500 per day for taking call plus giving the physician Medicare plus 20% for caring for the uninsured or Medicaid patient.  This has now become the number one problem for hospital administrators.  Many physicians are now also being paid for committee work and taking medical staff leadership roles.

A new and potentially greater problem for the hospital CEO is the physician taking away from their bottom line.  The most promising new venue for physician money making is now the technical fee the hospital gets for outpatient services.  Even with Medicare starting to pay less for outpatient services than for the same service at the hospital, it is still money above the line.  Let's look first at the medical oncologist.  Traditionally, the oncologist had his patient come into the hospital for chemotherapy treatments.  The hospital would make money on the admission and the drugs.  The drugs changed and became safer and easier to give.  The medical oncologists said we will give the drugs in our offices and they set up their own infusion centers.  This became a major money maker for the medical oncologist but the government and insurers saw what was happening.  They said we will reduce the reimbursement for the drugs and giving the drugs.  The oncologists threatened to stop giving the drugs in their comfortable outpatient centers and bring those patients back to the cold hospital.  The insurers backed partially down. 

Now the oncologists had to look for some area to make up the loss of reimbursement.  They didn't have to look far.  By partnering with for profit companies like US Oncology, they could build out a full service outpatient cancer therapy unit.  This included the ability to do radiation therapy.  The radiation therapist could see the handwriting and see their hospital outpatient business will go under since the oncologist is the caretaker for the cancer patient.  The radiation oncologist then became partnered with the medical oncologist and the for profit company.  Who is left out in the cold?  It's the hospital.  

Other physicians have seen this occurring and wanted in on the action.  Urologists are probably the best businessmen in the medical field.  They saw the improvements in radiation therapy for prostate cancer with either seeds or IMRT.  They said that they also could provide one stop shopping to the patient and began setting up their own radiation therapy units within their offices and again hiring the radiation therapist. These are the same physicians that believed that surgery was the best way to treat localized prostatic cancer.  

Let's now look at the above.  At first blush a physician owned hospital, medical oncologists owning their own radiation units and urologists going against their prior beliefs regarding radiation for prostate cancer are not ethical.  What does ethics entail?  Right and wrong based on reason or social custom?  Best for the individual or the community?  What is the moral duty? With regard to professions, a code of professional standards, containing aspects of fairness and duty to the profession and the general public.

Are the above actions right based on reason?  I believe they are as long as the physicians give patients the choice as to what to do and where to go.  The physician also must disclose his financial interest in the referred site or process.  The reason it is being done is twofold.  The first is the obvious money but the second is having control over the quality of the entire process.  In the area of social custom, it is probably not moral since it does take resources away from the community hospital.  It is possible that without those resources the hospital may have to condense its role in the community.  The other side is maybe the hospital should have condensed its role on its own and partnered for the good of the community with the physicians.

When one looks at the AMA principles of medical ethics, it is evident that that the new paradigm does not go against the AMA guide as long as the action is transparent.  The major canon for the physician is to make responsibility to the patient paramount.  Does having control over the process break this canon?  No, unless the physician does not give choices and does not tell the patient all the material facts. 

The above arguments are also valid for the individual physician versus the community and the professional standards.  In other words, as one would expect in philosophy, there is no right answer, only that worth pondering.


DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.