Provider networks: Too big to succeed?

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Tim Mullaney
Tim Mullaney

At this point, you're well aware that the Affordable Care Act is putting pressure on post-acute providers to partner with hospitals and physician groups. A recent whistleblower case in California highlights just how important this systemic transformation is — but another legal battle making headlines underscores how difficult it might be to “right size” the U.S. healthcare system.

The California case involves Prime Healthcare Services Inc., a company that owns and operates 14 Golden State hospitals. It was founded in 2001 and has executed a strategy of “educating doctors in the financial aspects of medicine” in order to turn around financially distressed hospitals it has acquired, according to the legal complaint.

This doctor education allegedly included an order to do away with observation status to get the higher reimbursements associated with inpatient admissions. The complaint quotes Prime Healthcare founder Prem Reddy, M.D., as saying, “We don't do observation. All patients should be inpatient. You can always find a reason to make the patient an inpatient.”

As I read the complaint, I thought that if the alleged fraud occurred, it might actually have helped out some seniors. By not putting them into observation status, the hospital might have enabled them to meet the three-midnight requirement for getting Medicare coverage of their needed post-acute care, I surmised.

But there's another charge being leveled by the whistleblower — a registered nurse — in this case. She says that the hospital refused to transfer patients to post-acute facilities, in order to avoid splitting Medicare dollars with the post-acute providers. Obviously, this type of practice not only endangers seniors, who are at increased risk of acquiring an infection or experiencing a fall each day they remain in the hospital, but it also harms skilled nursing and rehabilitation facilities by drying up referrals.

The case is ongoing, and Prime Healthcare has characterized the allegations as “speculative nonsense.” The system has been under “heightened and aggressive regulatory scrutiny” for years, so it “defies common sense” that these practices could have been carried out under the noses of watchdogs, Prime's general counsel said in a statement.

Still, the charges illustrate how the current payment system skews incentives so that acute and post-acute providers are not rewarded for working together toward the best patient outcomes. After reading it, I thought: This is why we need a more integrated system built on partnerships across the continuum of care.

Then I read about the whistleblower lawsuits against Florida-based hospital chain Health Management Associates.

The charges are similar to those in the Prime suit. But whereas reading the Prime complaint reinforced my belief that we need to have larger provider networks, the situation with HMA reads like a cautionary tale about the dangers of mega-networks.

The HMA whistleblowers allege that corporate leaders pressured doctors to unnecessarily admit patients to inflate Medicare and Medicaid reimbursements. HMA even instituted daily “scorecards” that were displayed in emergency departments, showing which physicians had met admissions targets and who was failing to do so, according to the suits.

While Prime is a modestly sized hospital system in a single state, HMA is a different animal: The government now has joined eight separate whistleblower actions against HMA in six states. And through a $4 billion acquisition completed yesterday, HMA became part of Community Health Systems. The combined company will be the nation's second-largest for-profit hospital chain by revenue, according to The New York Times.


“The practice of medicine is moving more rapidly than ever from decision-making by individual doctors toward control by corporate interests,” Times reporters Julie Creswell and Reed Abelson wrote last week, in an article about the HMA cases.

They argued that “the emergence of large hospital systems that include groups of physicians employed by hospitals and others” might be benefiting patients by increasing care coordination, but the bean counters in these mammoth businesses increasingly can pressure caregivers to make decisions that benefit the bottom line more than patients' health.

What's more, like “too big to fail” banks, these huge systems are difficult to regulate and can shrug off all but the most extreme financial penalties, according to the Times.

“Investors seem to think that DOJ investigations, qui tam suits and allegations of serious Medicare fraud are simply a cost of doing business,” a prominent financial analyst wrote in an investor note quoted by the Times.

These legal documents and media reports characterize caregivers themselves as pawns in an ever-more complex battle pitting large, corporate healthcare providers against government regulators and law enforcement agencies. As corporate chieftains seek regulatory loopholes or even perpetrate out-and-out fraud to maximize billings, agencies like the Centers for Medicare & Medicaid Services respond by revising regulations, even as medical professionals protest that their ability to make decisions based on clinical best practices is being compromised.

Currently, caregivers face a host a bad options when caught in a corrupt system. They can keep quiet, knowing that patients may be harmed. They can speak up internally and risk being fired or otherwise punished. Or they can become whistleblowers, electing to go through a drawn-out and uncertain legal process pitting them against some of the most powerful organizations in healthcare.

Right now, much of the discussion in long-term care is about how to join developing networks by buddying up to executives and demonstrating how they can help reduce readmissions and otherwise defray costs. But it seems that the physicians, nurses, pharmacists and other frontline caregivers who increasingly will be working in this more corporate healthcare system should be giving serious thought to how they can best make their voices heard once they're in these networks. Whether it's through unions, trade associations or other alliances, caregivers need to be able to push back against questionable C-suite directives.

In the end, caregiver activism may play the crucial role in ensuring that, when it comes to putting patients before profits, networks don't become too big to succeed.

Tim Mullaney is Staff Writer at McKnight's. Follow him @TimMullaneyLTC.


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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Marty Stempniak.