News in brief - Dec. 6, 2004

Mich. Blues introduce bonus program - One-third of hospitals in the red - For-profit hospital company expands - Physician buys Tenet hospital - Retainer practice organizations merge

Mich. Blues introduce bonus program

BlueCross BlueShield of Michigan has introduced a quality-pay initiative for physicians.

The program, for doctors treating PPO and fee-for-service patients, is being launched in cooperation with 10 medical groups comprising about 2,900 doctors. More groups are expected to be allowed into the program in the fourth quarter of 2005.

The incentive plan earmarks one-half of 1% of the Blues plan's professional fees to physicians, diverting the money to a special fund and paying it on a quarterly bonus to medical groups that work toward achieving best-practices standards for treating several chronic illnesses.

About $10 million to $12 million in incentive pay is expected to be awarded in the first year, said Thomas Simmer, MD, senior vice president and chief medical officer of BlueCross BlueShield of Michigan. Payments will begin in March 2005.

The incentive pay will be given out to practices as a whole, not to individual doctors. The program will allow practices to create patient registries, measure doctors' performance compared with evidence-based guidelines, and provide feedback to physicians on how well they're doing, said John E. Billi, MD, chair of the medical economics committee of the Michigan State Medical Society.

Dr. Billi is an internist with the University of Michigan Health System, which is slated to get incentives through the new plan.

One-third of hospitals in the red

Hospitals have lost financially as costs have risen while payments have dropped, says the latest survey by the American Hospital Assn.

In an overview of health care trends in 2003, the survey found that payments overall failed to keep pace with the costs of caring for patients, causing operating margins to decline. Accordingly, the financial health of hospitals was so fragile that many of them were operating in the red.

"We still are showing about a third of hospitals with negative total margin, which is steady from [the previous] year but significantly higher than in the 1990s," said Caroline Steinberg, vice president for trends analysis for the AHA.

Steinberg cited two primary reasons for the trend: "Payment rates have not kept pace with cost, and there is a growing burden of uninsured patients."

The latest AHA Hospital Statistics report was released on Oct. 25. It included data gathered from more than 5,000 hospitals and health systems nationwide. The survey found decreasing payments involving government programs, with Medicare reimbursing 95 cents for every dollar hospitals spent on Medicare patients in 2003, down from about 98 cents per dollar spent a year earlier.

At the same time, Steinberg said costs were climbing due to work-force shortages, advancements in technology and soaring medical liability premiums. She said the cost per patient for an adjusted admission was up 6% in 2003 to $7,796.

For-profit hospital company expands

Health Management Associates, the for-profit hospital chain based in Naples, Fla., has reached a deal to buy three hospitals from a nonprofit Catholic health system.

Under the agreement, HMA will acquire the 312-bed Bon Secours Venice Hospital in Venice, Fla., the 212-bed Bon Secours St. Joseph Hospital in Port Charlotte, Fla., and the 133-bed Bon Secours St. Mary's Hospital in Norton, Va., from Bon Secours Health System. Financial terms of the deal were not disclosed.

HMA said the hospitals are located in areas where it is working to develop networks. The deal, which is subject to regulatory approval, was expected to be completed by April 2005.

With the acquisitions, HMA would operate 56 hospitals in 15 states. Bon Secours, of Marriottsville, Md., owns or manages 24 acute care hospitals and several other facilities, primarily on the East Coast.

Physician buys Tenet hospital

Tenet Healthcare Corp. has agreed to sell a 434-bed hospital in Los Angeles to a group led by a physician.

The hospital chain announced Nov. 10 that it had reached an agreement to sell Hollywood Presbyterian Medical Center to the CHA Medical Group, which owns and operates four acute care hospitals and several other facilities in Korea as well as an infertility medical center in Los Angeles. The group is led by Kwang Yul Cha, MD, a fertility specialist.

Tenet, which said net proceeds from the deal should be about $69 million, said the sale was subject to regulatory approval and was expected to be completed the end of the year.

Retainer practice organizations merge

The American Society of Concierge Physicians, based in Grand Rapids, Mich., and the National Organization of Retail Medicine, based in Charleston, S.C., have merged to form the Society for Innovative Medical Practice Design. The new society, based in Grand Rapids, will represent the interests of physicians who run retainer- or boutique-style practices.