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Carilion, in transition: Well into its conversion to a clinic system, competing doctors, national health care experts and the Feds all have their...
[October 12, 2008]

Carilion, in transition: Well into its conversion to a clinic system, competing doctors, national health care experts and the Feds all have their...


(Roanoke Times, The (Roanoke, VA) Via Acquire Media NewsEdge) Oct. 12--Even while local critics continue to cry foul over changes to Carilion Clinic's business model, the hospital system is maintaining its focus to redefine the way health care is provided and financed in Southwest Virginia.



With a goal of addressing an issue facing health care providers across the country, Carilion has set out to reshape its internal structure to a system aligned more with the revered Mayo Clinic than the traditional hospital system.

The intention is to have a tangible impact on the quality of patient care both in treatment and in cost.


But, 212 years into an eight-year, $125-million plan to convert to the clinic system, Carilion has encountered a few public relations bumps along the way as patients and doctors complain of poor treatment and anti-competitive behavior.

As Carilion has built its employed medical staff to about 450 physicians, complaints of limiting referrals within the network have flourished among independent doctor offices who are not drawing a Carilion paycheck.

Carilion's purchase of several other local medical practices has led some to call the billion-dollar organization a monopoly, and in one case has led to a federal inquiry. The Federal Trade Commission has made inquiries into Carilion's purchase of the Center for Advanced Imaging.

Carilion, however, has also attracted several new physicians to the area who are eager to be part of a unique health care delivery business model that is drawing national attention.

Plans to not only be the first hospital system to convert to a clinic but also to have a strong educational component with the private-public partnership to open a medical school have several in the national medical community taking note.

"What they are doing has really changed the Roanoke community for me and I think for everyone," said Dr. Mariana Phillips, a dermatologist who grew up in the area but only recently decided to return to practice medicine because of the changes at Carilion.

"Instead of coming to practice in a small town, you are coming to practice in an academic community that is dedicated to improving health care."

Billions in wasted health care spending at stake

Since first deciding to embark on the plan to change Carilion's business model to one where doctors are given control of patient care and have a stake in the financial well-being of the nonprofit, Carilion CEO Dr. Ed Murphy has maintained the way health care is funded is not sustainable.

Additionally, Murphy argues something has to be done to cut out the $700 billion a year the Congressional Budget Office has identified as wasted health care expenses that don't improve outcomes.

"I think we have to get our arms around that wasted spending and reclaim it," he said. "But that's hard. The question becomes how do you decrease wasted expenditures while, at the same time, making sure you don't withhold stuff patients need?"

Changing the way Carilion does business by converting to a clinic model that owns hospitals, specialty care centers and primary physician offices is how Murphy believes he can cut wasted spending.

With the country's health care system facing serious challenges and presidential candidates each touting health care reform policies, many eyes from the academic, bureaucratic and industry realms are focused on Carilion.

"A lot of other hospitals are paying attention," said Rick Wade, a senior vice president and spokesman with the American Hospital Association. "Depending on where they are geographically, I think many hospitals are looking to restructure in some way to ensure financial stability and quality of care improvements in the years ahead."

While the clinic conversion isn't a simple process that can be counted successful by ticking off various steps, Murphy said there are some early signs that he believes show the new model is the correct path to take. Still, he admits it's an unmarked path.

"This is the kind of course where there is not an easy road map laying out what to do," Murphy said. "I personally tend to be impatient, and I think we all are eager to see results. Right now, it's a lot of pick and shovel work that has to get done. ... Intellectually I know we are further ahead now than I thought we would be at this point, but living in the transition isn't fun. It's a lot of extra work."

Improved communication a key to transformation

The details of the conversion include constructing a five-story clinic building at the corner of Reserve Avenue and South Jefferson Street that will house many of the newly hired physicians.

Infrastructure has also gone into supporting the foundation for the new business plan, including allocating $65.8 million in capital costs for a new systemwide electronic medical record system.

Other tangible aspects of the transformation involve hiring more than 200 new physicians to date and purchasing several local independent medical practices, including the Center for Advanced Imaging, the Center for Surgical Excellence and Consultants in Cardiology.

As the pieces come together, Murphy said the emphasis has been on communication.

And he isn't just talking about communication between the board room and the exam room -- which is part of it -- but communicating between the family doctor and the specialist surgeon.

It's the interaction from one doctor to the next, or the "hand-offs," where Murphy said Carilion is focusing much of its attention.

Carilion openly talks about its efforts to improve communication by establishing referral agreements.

But it's those agreements that have unaffiliated doctors in Roanoke and Southwest Virginia claiming Carilion is closing its doors to outside physicians. Carilion has consistently said its doors will remain open to nonemployed physicians.

The agreements are guidelines for when to refer and what is expected of each physician, including who is expected to perform what test and how to determine the urgency of a patient's need.

When a physician refers outside Carilion, Carilion officials ask the referring physician what can be done to keep that referral in-house and better meet the needs of the patient.

It's these agreements that have independent physicians upset and claiming that their long-existing referral networks are being broken. That, they say, is costing them money and, in some cases, forcing them to re-evaluate the financial stability of their medical practices.

Patient complaints of Carilion's refusal to refer them to non-Carilion physicians have also surfaced, and the Citizens Coalition for Responsible Healthcare has taken a lead in criticizing the heavy hand Carilion has in patient access to care and health care costs.

But it's Carilion's effort to improve communication through things such as referral agreements that has attracted many new physicians to the area, said Dr. Anthony Slonim, vice president of medical affairs.

Slonim came to Carilion in April 2007 from Children's National Medical Center in Washington after hearing about Carilion's clinic plans.

He initially called Carilion because he was intrigued from a research perspective, not because he wanted a new job.

"This is not a place for the weak of heart," he said. "We are constantly moving, implementing and generating new ideas. It's a place where you've got to have a lot of energy."

For Slonim, Carilion has offered an environment where doctors can talk about opportunities to advance health care outcomes for patients by putting them in charge. Slonim is an example of a doctor working in both worlds -- he holds degrees in medicine and in business. While he is an administrator, he also spends times doing clinical work in Carilion's pediatric intensive care unit.

Carilion documenting results from plan already

Murphy said the changes to the clinic model are already improving care.

At Carilion Roanoke Memorial Hospital, the hospital-associated infection rate and the average length of stay have both declined. These, Murphy said, are direct indications that the changes to the clinic model are paying off.

The hospital associated infection rate is 1.56 percent, down from 1.97 percent last year.

Last year inpatients spent an average of 5.28 days at Roanoke Memorial, while the current average is slightly lower at 5.08 days. While the reduction appears small, it has saved about $6.2 million in medical costs, according to Carilion.

Still, Carilion said in August that it expected to take a financial hit, in part because of the expenses associated with converting to the clinic. A midyear glimpse at Carilion's unaudited financial statement showed the nonprofit reporting a $39.7 million loss for the first six months.

At the time, Carilion's chief financial officer said he expected Carilion to post a loss for the year. Carilion's fiscal year ended Sept. 30.

An update on the unaudited year-end financial standing was not available, Carilion spokesman Eric Earnhart said.

The conversion is also intended to fill gaps in access to certain health care fields such as dermatology and psychiatry.

When Phillips decided to return to Roanoke, it wasn't just about bringing back a younger professional to the aging Roanoke Valley.

It was about bringing a desperately needed specialist to the community. Carilion has touted her as not only filling a gap in dermatological needs, but as the only physician capable of doing a particular precise skin cancer surgery.

Fixing national health care situation a priority

Murphy isn't looking to the next president to solve the woes of the country's health care system.

But like many others in the health care arena, he believes the economic crisis and the Wall Street bailout plan will spur more discussion of the escalating cost of the nation's health care.

"When you get that solved, whatever the economic reverberation is, all that is going to create additional financial stress," he said of the national economic downturn. "It's not going to take long before the discussion shifts to health care, not because of the policy wonks in health care, but because we just can't afford it."

That health care is the largest single component of the gross domestic product, and that many in the sector are looking for answers to control spending, is part of what makes others interested in Carilion's clinic conversion.

American Hospital Association spokesman Wade, however, cautioned that while many are paying attention to Carilion, duplicating Carilion's clinic transformation maybe difficult to do in another community. He also noted that some of the community uproar over Carilion is to be expected when a community institution changes.

"Anytime something as big in the community as a hospital changes, it is tumultuous to the community," Wade said.

The need for the changes aren't simply about cutting unnecessary health care spending, Wade said, but also figuring out how to address a host of other issues from the aging population and expensive new technology to government cuts in Medicare and Medicaid reimbursements, and "erratic behavior of private insurers."

"There is enormous uncertainty," Wade said. "This is not a logical progression, this is something that you do as you try and look to the future and figure out how to survive."

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Copyright (c) 2008, The Roanoke Times, Va.
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