New Alliances

INDUSTRY OUTLOOK: HEALTH CARE

To glimpse the future of health care, visit Stephen Zellner.

Zellner, who has been practicing internal medicine and treating infectious diseases in Fort Myers since 1974, heads a 30-doctor practice called Internal Medicine Associates.

Entrepreneurial doctors like Zellner have had to adapt to declining reimbursements and increased government mandates. “Medicine is becoming like any other commodity,” Zellner says. “You've got to produce a better product.”

For example, Zellner and partner Richard Weiss, an endocrinologist, recently formed the Diabetic Center of Excellence Program. It combines many of the specialists they already have on staff to treat people with diabetes more comprehensively.

In the past, a diabetic patient might have visited IMA twice to visit with an endocrinologist in a three-month period. Now, through the newly created diabetes program, that patient might make as many as a dozen visits to the practice's specialists for a range of services, from physical therapy and neurologic exams.

“Those are billable services,” Zellner says.

In addition to receiving nutrition training and personal exercise advice, the diabetic patient in IMA's 12-week program also might visit outside podiatrists and ophthalmologists through a referral program. Such alliances among doctors will be the key to managing a successful practice, they say. Government and private insurance companies are urging this kind of comprehensive care because it ends up costing them less than hospital emergency care.

The diabetic program at IMA will boost the practice's revenues by $500,000 a year, Zellner estimates. IMA's revenues were $30 million in 2009 and Zellner says 2010 revenues are up 2%.

Fact is, lower reimbursements mean physicians have to see more patients to make up for the lost income. “There's only so many patients you can see effectively,” says Zellner, past president of the Lee County Medical Society.

Efficiently using existing staff to boost revenues with programs such as the diabetic center is one way to do that. It's a model that has been successfully used by the Mayo Clinic, which provides a soup-to-nuts approach to treating patients in a single location by providing a broad range of services from routine physicals to eye exams and cancer treatment.

This concept of a “medical home,” where a patient's entire treatment plan is coordinated using electronic medical records, is one of the ideas the government and private insurers are pushing to encourage a more efficient system.

Zellner is also considering opening a pharmacy for his patients so they don't have to wait for their prescriptions at the drug store. He estimates that will bring an additional $50,000 in revenues per doctor annually. It's an added service to his patients and it doesn't require a big investment up front or a doctor's time.

The practices that aren't as successful as IMA will likely consolidate with others or hospitals will acquire them. Indeed hospitals are also looking for ways to provide comprehensive care because of the government's push toward the creation of “accountable care organizations,” which will financially reward such groups for patient outcomes rather than volumes.

For example, NCH Healthcare System in Naples recently acquired Anchor Health Centers, a network of 70 physicians in 16 locations in the Naples area. “Health care reform is going to drive physicians and hospitals to be partners and that's exactly what we're doing,” says Allen Weiss, president and CEO of NCH.

The relationship between entrepreneurial physicians and hospitals had become adversarial over the last decade, as doctors built their own outpatient centers and skimmed the best-paying patients from hospitals. Now that both groups face challenging financial conditions of lower reimbursements and growing numbers of indigent patients, they have to cooperate more closely.

“Closer collaboration among physicians and hospitals is critical,” Weiss says. “They need to lay aside their previous trust issues.”

Like entrepreneurial doctors, hospitals are seeking new ways to boost revenues. “We want to focus on patients who can pay,” says Robert Meade, the CEO of Doctors Hospital of Sarasota.

For example, Doctors Hospital recently spent $2.8 million to renovate a floor to create a behavioral health center for patients over age 55. “We continue to look for ways to be more efficient and take more market share,” Meade says.

But uncertainty over the future of health-care legislation and reform is giving pause to many industry executives.

“A lot of people think that health-care reform is a done deal,” says John Wiest, chief operating officer for business and strategic services at Lee Memorial Health System. “What we're going to do has been decided, but how it's implemented is far from decided.”

It could take as long as three to five years for a clear picture to emerge, so Wiest says he's focused on costs, quality and access at Lee Memorial hospitals. “That's why I focus on getting the fundamentals right. In my mind, if we do those things, we'll be ready for anything,” he says.

Wiest says he is certain about one thing, however: “Whatever happens, the sum total of payment is going to be less than what it is today and we're going to have to figure out how to manage that.”

This uncertainty is holding back entrepreneurial physicians.

“You're not going to see a lot of physician-owned ancillary facilities because CMS [Centers for Medicare & Medicaid Services] has scaled back reimbursements on physician-owned facilities dramatically,” says Alan Bomstein, president and CEO of Creative Contractors in Clearwater, a firm that specializes in building medical facilities. Bomstein also is on the board of BayCare Health System, which operates 10 hospitals in the Tampa Bay region.

“Banks are more than willing to lend to physicians, but appraisals are the problem,” says Mark Stevens, president of Stevens Construction in Fort Myers who specializes in health-care facilities. Lower appraisals means physicians have to put in extra cash into new facilities, money that is tight because of lower reimbursements.

“When you look at the health-care bill coming up, where is there clarity?” says Jay Crandall, a commercial real estate broker in Bonita Springs whose firm, Crandall Commercial Group, helps doctors buy or lease medical space. “The bottom line is a lot of people are nervous,” he says. “They've discounted next year completely.”