Medical Cooperatives are powerful affiliation models capable of improving our current medical care situation -- a situation where the well-being of patients is subjugated to the well-being of the system providing care.
So, what is a Medical Cooperative?
In our last post (Hospital-Doctor Affiliation: What Doctors are where? ), we discussed how the headwinds pushing doctors to hospital employment (the “A Doctor” model) are shifting. While hospital employment is still the most prevalent practice arrangement (60%-75% of doctors now work for hospitals), challenges are beginning to surface. First, hospital employment places doctors in settings where they work for non-clinician administrators (instead of for their patients). When this happens, the well-being of the hospital eventually takes priority over that of the patient. Even though administrators will say that they never interfere with doctors in matters of patient care, the evidence to the contrary is ample, even if it is unintentional. Doctors are commonly told by non-clinician administrators and policymakers how to document their patient encounters; when they can treat their patients; where they can treat their patients; how to bill for their services; what quality standards must be measured; and how they must communicate with patients. In this environment, doctors have lost their autonomy, and consequently their sense of meaning. One survey reports that only 30% of doctors consider of their work as meaningful 1. Loss of meaning always leads to clinical burnout (clinical burnout rates of 60% are commonly reported among physicians). Clinical burnout leads to decreased productivity, which leads to lack of availability for patients, which is a major feature of our current situation.
The desire to employ doctors from the perspective of the hospitals is also changing. As the number of disgruntled doctors—now considered part of the hospital labor force— increases, so does the interest in labor unions. MDLinx in December 2023 reported that while only 8% of doctors in 2022 belonged to labor unions (a 26% increase since 2014), 74% of those polled said they were either very interested or somewhat interested in unionizing. The limiting step being the lack of a union in their place of employment 2. Also, the amount of physician subsidy --the funds paid to employed doctors by hospitals beyond what can be collected for professional services and efficiently expensed -- is increasing every year. Kaufman Hall’s Physician Flash Report: January 2024 reported that the average subsidy per employed doctor for 2023 was $292,030, up 6% since 2021 3. More and more hospitals realize that doctor employment is not sustainable long term and are open to exploring alternatives.
The Medical Cooperative is one of those alternatives. It is the “B Doctor” model presented previously and is shown below:
It is important to remember the market pressures that drove hospital employment of doctors in the first place. Those pressures rewarded integration. Highly integrated delivery systems (doctors and hospitals) are more coordinated and theoretically deliver better care. There is plenty of evidence to back this up. In our book, Unbalanced—The Evolving Medical Care Crisis, we explore how balanced integration benefits care. It is unbalanced integration -- where one component of the care delivery system subjugates another and therefore medical care becomes compromised. As it turns out, hospital employment of doctors is an example of unbalanced integration. The problem is not integration. It is the imbalance. Medical Cooperatives create highly integrated healthcare delivery systems without employment of doctors. As seen above, groups of autonomous doctors are aligned contractually (usually by a third party) where they can collectively offer services to hospitals and other interested stakeholders like medical schools, vendors and insurance companies as shown below:
In the Medical Cooperative, the doctors bill and collect for their clinical activity independently. However, they provide negotiated services with stakeholders collectively. The Medical Cooperative creates a management board of its members to oversee the provision of services transactionally negotiated with hospitals, vendors, universities, payors and other stakeholders. The Medical Cooperative then takes on financial risk for providing those services. This is a radically different dynamic than hospital employment where a “subsidy” (that increases annually) is paid the doctor for just being employed.
Notice the relationships associated with hospital employment compared to the Medical Cooperative. In the hospital employed— “A Doctor” model—there is a labor/management relationship between doctors and hospitals. Neither function autonomously from each other. Hospitals tolerate physician behaviors—good or bad, productive or not productive—because they are the source of patients that keep the hospital afloat. Physicians tolerate the bureaucracy, inefficiencies and administrative intrusions of the hospital because they are well paid (i.e., subsidized). Notice the points of leverage. The hospital (management) can cut the pay or terminate the employment of the doctor if performance crosses the line. And the doctors (labor) can unionize and go on strike if the hospital crosses the line. Patient well-being is completely lost in this dynamic.
Contrast this with the relationships associated with the Medical Cooperative model. In this model, both the doctors and the hospitals are completely autonomous. There is an agreement that says the two parties will work together, but the arrangement is not exclusive. For instance, when a hospital needs physicians for some service, they come to the Cooperative. The Cooperative is contracted to provide those services (even if it has to recruit new doctors to the Cooperative). If the Cooperative fails to provide the doctors and services to the hospitals, the hospital has the right to hire its own doctors (or work with another Cooperative). This arrangement incentivizes the doctors in the Cooperative to improve. Likewise, when a doctor needs hospital services (like timely access to an operating room for a patient), the doctor is obligated to use the hospital participating with the Cooperative. If the hospital cannot provide satisfactory services for the patient (unsatisfactory access to an operating room), then the doctor is free to take the patient to a hospital that can provide the service. This incentivizes the hospital to improve. In both cases, patient well-being benefits.
Finally, doctors, even when hospital employed, can participate in a Medical Cooperative model for service agreements just like independent doctors. This mitigates the need for “physician subsidy” since all contracted services are handled through the cooperative. This is the arrangement we had at the Greenville Health System. It looks like this:
If our goal is to improve medical care and make patient well-being the priority, the first best step might include the creation of Medical Cooperatives as a means to obviate the wholesale employment of doctors by hospitals.
Shanafelt TD, West CP, Dyrbye LN, et al. Changes in Burnout and Satisfaction with Work-Life Integration in Physicians During the First 2 Years of the COVID-19 Pandemic. Mayo Clin Proc 2022; 97 (12): 2248-2258
Charles S. MD. The Collective Stand: The Rising Trend of Physician Unionization. MDLinx; December 2023; https://www.mdlinx.com/exclusive/a-collective-stand-the-rising-trend-of-physician-unionization/7ym2HIML2sOmbkeP5cYWTc
Kaufman Hall. Physician Flash Report: 2023 Year-in-Review. January 2024; https://www.kaufmanhall.com/insights-reports/physician-flash-report
Comments