California Hospitals Fight for Right to Hire Doctors

Cheryl Clark, for HealthLeaders Media , April 13, 2009

In one corner stands the powerful California Hospital Association, poised for a knockdown fight to pass a law allowing medical centers to employ physicians, specifically in rural areas where doctors are in short supply. Three recently introduced state bills would permit this practice to varying extents.

In the opposing corner stands the influential California Medical Association which is resolved to block any such change.

"These are some of our highest priority bills to oppose this year," said Brett Michelin, CMA lobbyist. California needs to "ensure that a physician's loyalty is to the patient first and foremost," not to hospital administrators, he said. "We're fully expecting to kill (these bills) if we can."

But CHA spokeswoman Jan Emerson remarked: "California is the only state in the country that has a flat out ban" on hospital employment of doctors. While four other states—Ohio, Iowa, Texas, and Colorado—have similar prohibitions, they are not as well enforced as California's, she said. "There's no question that getting this legislation passed is a top priority for us this year. The current policy is a relic from decades past."

The CMA says it is flexing its political muscle to resist this change out of fear that if hospital administrators can hire physicians, they also will tell them which patients to admit and what tests to order based on the need to fill beds and payment expectations rather than medical need. Even though the bills restrict such influence, underinsured and Medicaid patients could get poorer care, says the CMA. The CMA also believes that those same hospitals will refer well-insured patients to their own doctor employees rather than to competitors in the community. "The hospital will dominate the market," Michelin said.

James Rohack, MD, president-elect of the American Medical Association, said: "The physician would be put into a very difficult situation of being forced to admit a patient who doesn't need to be, or to not admit a patient who does because the hospital would lose money." Asked whether his physician association has tried to fight policies in other states that allow hospitals to hire physicians, Rohack said the AMA only jumps in if requested by a state's medical association. That hasn't happened in recent memory, he said.

Currently in California, institutional hiring of doctors is limited mainly to teaching and county hospitals and prisons. Other hospitals contract with physician groups, according to state requirements.

But Tom Petersen a director with the Association of California Healthcare Districts, says such a law is desperately needed to stop the rapidly declining supply of doctors willing to practice in inner city, rural, or district hospitals—from Fall River near the Oregon state line to El Centro near the Mexican border. "Doctors can't make a living seeing only Medi-Cal (Medicaid) patients and still save for the kid's college tuition," he said.

"When the CMA says you can't have doctors working for non-doctors because it's not safe, the question comes up: What does that say about our teaching and county hospitals (which can hire physicians)?" he asked. "If this is a quality issue in California, then it ought to be a quality issue in Florida, Mississippi, and New York. But it isn't."

Besides, he said, today's younger doctors have different life expectations than older practitioners.

"Younger doctors want to make a good living, with a defined number of hours, minimal stress, with benefits and a pension. They don't want to have to hire, fire, or counsel their staffs," Petersen said.

Areas defined as "rural" make up 75% of the California's geography, have high numbers of underinsured, but have 30% fewer physicians and surgeons than metropolitan Los Angeles or the San Francisco Bay Area, hospital officials argued.

In 2003, a narrow pilot program attempted to address the issue by allowing 69 rural hospitals with significant numbers of uninsured, Medicare or Medicaid patients to hire up to two physicians, but no more than 20 statewide.

But only five hospitals took advantage of that pilot, hiring only six physicians, according to a report last fall by the Medical Board of California. Raymond Hino, CEO of 25-bed Mendocino Coast District Hospital, was able to hire a needed oncologist, but the candidates for another position for a hospitalist preferred other states where they would get employment benefits. Mendocino draws from an 80-mile, winding stretch of the North Coast, from Westport to Sea Ranch, and it badly needs more physicians, Hino said.

That cancer specialist, John Rochat, MD, now operates his clinic within the hospital, providing care such as infusions to hundreds of coastal patients who otherwise would have to drive two or three hours each way to Santa Rosa or the Bay Area to get their treatments.

Rochat's contract expires next year. Without legislative remedy, he said, he will have to move to another state where he can be hired by a hospital. He can't afford to set up his own office and front the cost of expensive chemotherapy. "We could also use a cardiologist or pulmonologist here, but that's not going to happen" unless the law is changed, Rochat said.

Rochat said it's ridiculous for the CMA to suggest his hospital's administrators tell him how to practice. Insurance companies "all tell you how to practice medicine in one form or another. Do our CEOs tell us how to practice? Not at all. They wouldn't know how to begin."

For sure, CMA and CHA are poised for battle in an ugly legislative contest. But there is one way to soften the blows. Both sides acknowledge severe doctor shortages. If the pilot is revived and expanded, perhaps with subsidies, inner city and rural hospitals and their patients may get a solution satisfying for all.

With a serious expanded pilot, agencies such as the Medical Board of California can act on its recommendation last fall to really examine whether the practice improves patient access without compromising anyone's medical practice integrity.

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