BY JAY GREENERising costs, flat revenue and concerns

about patients moving to high-deductibleinsurance products could make 2006 a dif-ficult year for medical groups, says MarkShields, M.D., senior medical director withAdvocate Health Partners.

“The future looks tough. The expense sideis going up faster than the revenue side,”Shields says. “Doctors will face higher debtand more upfront collections with the high-deductible, consumer-driven health plans. Idon’t think this is an issue that has sunk inoperationally to most physician practices.”

On the other hand, Shields says the grow-ing use of electronic medical records, pay-for-performance and renewed partnershipswith hospitals could temper negative trends.

While physicians were scheduled to absorb4.4% in Medicare reimbursement cuts set totake effect Jan. 1, Congress was working tofreeze the rate at deadline. A final vote onthe deficit reduction measure—aimed to

Continued on p. 2

COV E R STO RY

Quality pays—if you’re in charge ofother physicians Page 4

Editorial FeaturesNews . . . . . . . . . . . . . . . . . . . 4

Briefly . . . . . . . . . . . . . . . . . . 6

Opinion . . . . . . . . . . . . . . . . . 8

First Person . . . . . . . . . . . . . . 9

Special Report . . . . . . . . . . . 10

By the Numbers . . . . . . . . . . 11

News Makers . . . . . . . . . . . . 12Vol. 10, No. 1 • January 2006Business news and information for physician executives, leaders and entrepreneurs

Aging population demands more geriatric specialists Page 9

Four groups of Rhode Island docsform own IT firm Page 10

WWHHEERREE IISS IITTAALLLL GGOOIINNGG??

Physiciangroup

owners andoperators

face biggerfinancial

squeeze in2006

lower the $314 billion federal budgetdeficit projected for 2006 by theCongressional Budget Office—isexpected in January.

“The best-case scenario is thatMedicare will go up 1%.The worst case is 4.4%down,” says Shields,whose Oak Brook, Ill.-based physician-hospitalorganization has 2,700members. “Managed-careorganizations also aredoing their best to reducecompensation. We hopeto demonstrate improvedoutcomes, higher qualityand safety to payers anduse that to negotiate high-er rates.”

Seeing payment cuts coming,most medical groups have budgetedfor reductions, says William Jessee,M.D., president and chief executiveofficer of the Medical GroupManagement Association. TheMGMA represents about 237,000physicians, with about 69% of mem-bers in small medical groups with10 or fewer physicians.

“It will be a pretty significantblow to most practices, especiallywith expenses going up 5.5% peryear,” Jessee says. “The outlookfor groups is the worst in manyyears, particularly for primary-carepractices. Specialists have theability to do ancillary services likeimaging services to create newrevenue streams.”

In a 2005 report to Congress,

Medicare’s trustees estimated cutsfrom the Balanced Budget Act of1997 would reduce reimburse-ments 25% from 2006 to 2011.During that same period, physicianexpenses are expected to rise 15%.

“The financial vitality ofgroups is worse than” inpast years, says DonFisher, president and CEOat the American MedicalGroup Association. TheAMGA represents largemultispecialty groups withan average size of 272physicians.

Ironically, Fisher says thereimbursement cuts arecoming at a time whengovernment and privatepayers are asking doctors

to invest in EMRs. “Groups are notgoing to run out and spend$400,000 on an EMR system iftheir reimbursements are cut,”Jessee says.

One way medical groups canaddress declining reimbursement isto focus on production through inno-vation, says Roger Schenke, execu-tive vice president of the AmericanCollege of Physician Executives.

Typically, doctors increase produc-tion by working more hours, seeingmore patients or performing morehealth services. But Schenke saysusing information technology alsocan increase production. “The prob-lem is there needs to be more sys-tems to pay physicians for answer-ing e-mails from patients,” he says.

Steve Shortell, dean of the School

of Public Health at the University ofCalifornia at Berkeley, says medicalgroups that install EMRs will farebetter in 2006. “Medical groupshave more incentives to adoptEMRs and care-managementprocesses,” he says. Care-manage-ment processes include the use ofhospitalists, case management andclinical guidelines.

Another challenge for groups is cap-italizing on pay-for-performance oppor-tunities in which physicians are paidfinancial bonuses for hitting variousclinical, quality and patientsatisfaction targets. “Pay-for-performance is gearingup faster than anyonethought,” Fisher says.Large medical groups “willcome out better than solodoctors and small groupsbecause many havealready invested in medicaltechnology and can do(data) reporting.”

Physicians also areexpected to expand thetypes of products sold intheir offices, says Hank Duffy, presi-dent of the JHD Group, a consultan-cy. “They need to find alternateways to get revenue,” he says. “It iseverything from selling vitamins intheir office to offering more ancillaryservices like bone density andstress tests.”

Lisa Goldstein, senior vice presi-dent with ratings agency Moody’sInvestors Service, says physiciansand hospitals will partner in a varietyof ways reminiscent of the 1990s,

but with more strings attached.“As payers rapidly consolidate,

hospitals and doctors are comingtogether to be that indispensablenetwork for contracting,”Goldstein says.

During the 1990s, hospitalsaggressively acquired medicalgroups and employed physicians inan effort to build integrated deliv-ery systems.

“In the past, hospitals thatemployed physicians didn’t setclear productivity goals and that

led to financial disaster,”Duffy says. “We areencouraging hospitals, ifit makes sense, to buy orbuild an owned physicianpractice. But you have tohave a compensationsystem that is productivi-ty- and incentive-orient-ed.”

Goldstein says doctorsare more amenable tohospital employment now“because they are seeingtheir income restrained

and want more economic security.They seek access to capital forinformation technology and help inpaying their malpractice premiums.Hospitals want more market shareand those star physicians.”

Joint ventures also will flourishin 2006 between hospitals anddoctors, Duffy says. “The warbetween doctors and hospitalsover surgery centers, endoscopycenters, imaging centers may

COV E R STO RY

Continued from p. 1

Continued on p. 3

Modern Physician | January 2006 • 2

Shortell: Thereare more EMRincentives.

Fisher: Groups’financial vitalityis worse.

start to subside,” he says. “The(specialty hospital) moratorium puta spotlight on the fact that it isnot a good thing for hospitals anddoctors to become competitors.”

To finance joint ventures, somehospitals have issued privateplacement bonds that are pur-chased by doctors. “Thegoal of the hospital is totie the doctor financiallyto the hospital doingwell,” Goldstein says.

In return, physicianssign noncompete clausesthat prevent physiciansfrom using other facilitiesor starting their own serv-ices within a certainradius of the hospital overan agreed upon period oftime, Goldstein says.

Most experts also pre-dict more groups and independentpractice associations will merge,affiliate and integrate clinical andadministrative operations.

“IPAs understand they must bemore integrated to negotiate man-aged-care contracts,” Duffy says.“The FTC made it very clear with theBrown & Toland agreement thatgroups need to (integrate) to avoidantitrust scrutiny.”

In 2004, Brown & Toland MedicalGroup, San Francisco, settled anFTC antitrust complaint that allegedthe 1,500-physician IPA improperlyfixed prices of PPO contracts formember doctors without undergoingsufficient clinical or financial integra-

tion. About 15 other “messenger-model” IPAs nationwide have strucksimilar settlements. The FTC sug-gests integration can be done in sev-eral ways, including implementing anactive program to evaluate and modi-fy network physicians’ practice pat-terns and by creating a high degreeof interdependence and cooperation

among the physicians tocontrol costs and ensurequality.

Jessee says he expectssmaller practices to consol-idate to take advantage ofeconomies of scale and formanaged-care contracting.

But small practices stilldominate the landscape.In a 2003 survey, theAmerican MedicalAssociation found 43% ofsome 20,000 group prac-tices have three to four

physicians. There were only 241groups with 100 physicians ormore, the AMA says.

Donald Crane, president and CEOof the California Association ofPhysician Groups, says medicalgroups that accept capitated reim-bursement are struggling somewhatwith their identity because insurersare moving to PPOs and high-deductible products.

“To the extent capitation declinesand reimbursement moves to feeschedules, this provides groups withjust enough money to survive,”Crane says. “There is no money todevelop systems of care and infor-mation technology.” ■

COV E R STO RY

THINGS ARE LOOKING UP

FOR PHYSICIANS AND ADMINISTRATORS WHO

ATTEND A SPEECH RECOGNITION WEB FORUM!

SIGN UP HERE

THE VOICE OF PHYSICIANS IN HEALTHCARE.

Continued from p. 2

Modern Physician | January 2006 • 3

Jessee: Expectconsolidation forsmall groups.

BY MICHAEL ROMANOHealthcare’s intense focus on qual-

ity and patient safety is reflected inthe growing importance and theswiftly ballooning salaries of individu-als who oversee that high-profilearea, according to a new nationalsurvey on compensation for physi-cian-executives.

Median compensationfor vice presidents ofquality has risen about18% since 2003, climb-ing from $229,000 to$270,000—almost twicethe increase of any of theother 15 physician-execu-tive positions surveyed in2005 by St. Louis-basedCejka Search and theTampa, Fla.-basedAmerican College ofPhysician Executives.

“There’s clearly been a growingimportance on the position of vicepresident for quality,” says CarolWestfall, president of Cejka, anational recruitment firm that spe-cializes in physician-executives. “Andthat fits with the increasing empha-sis on the part of healthcare organi-zations on quality, outcomes andpatient safety.”

The survey results, based onresponses from 2,422 ACPE mem-bers and released exclusively toModern Physician, found thatsalaries for physician-executives

rose 6.7% overall from the last sur-vey in 2003, increasing to$240,000 in 2005 from $225,000.That is slightly lower than the 7.1%increase between 2000 and 2003.

Not surprisingly, the highestmedian salaries went to the topofficers—board chairs—whose

median compensation in2005 was $310,000, an11% increase from 2003.Presidents and chief exec-utive officers of all typesof healthcare organiza-tions were next in lineamong the 15 positionssurveyed, earning about$301,500, or 9% abovethe 2003 figure.

A separate ACPE surveyof nearly 1,000 physician-executives found littlefaith in the pay-for-per-

formance movement. Of the 932physician-executives surveyed,almost 40% say their healthcareorganization is currently participat-ing in a pay-for-performance pro-gram; and among the more than53% who say they aren’t participat-ing, 57.5% say they are consider-ing it.

Yet, only about 34% of respon-dents say they feel pay-for-per-formance programs are fair,while about 8% say they areunfair, and about 57% say it istoo early to tell. ■

Quality docs earning moreMedian compensation rose 18%, according to survey

N E WS Modern Physician | January 2006 • 4

Westfall: Qualityexecs have moreimportance.

A Farmington Hills, Mich.-basedcompany that bills itself on its Website as the nation’s largest physi-cian house-call organization isbeing investigated in Michigan andOhio by federal authorities on alle-gations of cheating Medicare outof as much as $6 million per year.

The Visiting PhysiciansAssociation sendsdoctors to the homes ofmore than 25,000 elderlyand disabled patients inGeorgia, Michigan, Ohio,Texas and Wisconsin.The company says it has10,000 patients inMichigan, most of whomare covered by Medicare.

The U.S. attorney’soffice and HHS’ inspector general’soffice declined to give detailsabout the investigation of VisitingPhysicians, but said in court fil-ings that the probe involves“similar allegations” to those ina whistle-blower lawsuit filed inFebruary 2000 in federal court inColumbus, Ohio.

That lawsuit, brought by LauraPajestka, a former manager of thecompany’s Cleveland office, saysVisiting Physicians billed Medicareand other government healthcareprograms for medically unneces-sary services and manipulatedmedical billing codes to inflatereimbursements.

Pajestka said in court filingsthat the fraud exceeded $50,000per month for the Cleveland officeand more than $500,000 permonth companywide.

Under federal law, whistle-blowers are provided financialincentives for participating in the

prosecution of fraud.The lawsuit was put

on hold in August 2005at the request of theU.S. attorney’s officepending completion ofits investigation. Federalprosecutors said incourt filings that theinvestigation could becompromised by the“expansive scope” of

the civil discovery process. Visiting Physicians said through

its attorney, Max Hoffman, thatthe company was fully cooperat-ing with investigators andbelieved it had done nothingwrong. “It is our belief that therewas no improper (conduct) tobegin with,” Hoffman says.

The company said in courtfilings that Pajestka’s claimslacked “credible factualfoundation” and that she failed toidentify a single allegation that“any individual could not havesimply thought up or created outof whole cloth.” ■

—Crain’s Detroit Business

Billing problemsMich. house-call organization investigated for Medicare fraud

N E WS Modern Physician | January 2006 • 5

“It is our beliefthat there was

no improper(conduct) tobegin with”— Max Hoffman

Attorney

Smaller ASCs more profitableSmaller ambulatory surgery cen-ters reported higher net incomeper case than larger facilities, inspite of larger facilities’ greatercost efficiencies, according to astudy by the Medical GroupManagement Association. Surgerycenters with fewer than 3,000cases per year had a mean netincome of $473.02 per case in2004, compared with larger cen-ters’ mean net income of$341.32, a 27.8% difference. Thedifference may reflect higher uti-lization of operating rooms andperhaps more profitable proce-dures at smaller centers, particu-larly single-specialty facilities, saysDavid Schlactus, chief executiveofficer at Willamette SurgeryCenter, Salem, Ore. Surgery cen-ters that performed at least 5,000cases annually paid less for med-ical and surgical supplies, $185per case, compared with $228per case at centers handlingfewer than 2,000 proceduresannually. The MGMA report, pre-pared with the American Associationof Ambulatory Surgery Centers, wasbased on responses from 166 sur-gery centers nationwide.

IPAs lose one, win oneThe Federal Trade Commissionaffirmed a 2004 ruling from anFTC administrative law judge thatfound an independent practiceassociation had illegally fixedprices in the Dallas-Fort Worthmarket. North Texas Specialty

Physicians, Fort Worth, says it willappeal the commission’s ruling tothe 5th U.S. Circuit Court ofAppeals. The FTC commissionersbanned 480-physician NorthTexas from contracting with pay-ers on behalf of members exceptin the case of qualified risk-shar-ing and clinically integratedarrangements. North Texas says itbelieves its appeal was supportedby a recent arbitration decision inan antitrust case betweenAdvocate Health Care, Oak Brook,Ill., and insurer UnitedHealthcareof Illinois. The arbitration paneldismissed all claims againstAdvocate and its IPA.

Groups agree to partnershipTwo San Francisco-based medicalgroups with close ties to SutterHealth’s California PacificMedical Center agreed to renego-tiate the terms of their partner-ship in a move that forestalls animminent breakup. Sutter-affiliatedPhysician Foundation, an 80-doc-tor specialty group, and Brown &Toland Medical Group, an inde-pendent practice association rep-resenting about 1,500 doctors,reached a temporary compromisethat extends their “binding letterof agreement” until May 15 whilethey hammer out a new long-termagreement. Physician Foundationhas subcontracted its HMO busi-ness to Brown & Toland since1996. But the groups have beenfeuding for much of the past year

B R I E F LY

Continued on p. 7

Modern Physician | January 2006 • 6

over the foundation’s direct pur-suit of HMO contracts and recruit-ment of local specialty physi-cians, which have allegedlyincreased competition betweenthe two. A split-up would compli-cate Sutter’s ongoing push to cre-ate a network of affiliated physi-cian groups in the San Franciscoarea in order to grab businessfrom Kaiser Permanente andother competitors.

Docs say hospital not playing fairA physician group in Iowa sued anot-for-profit Waterloo hospital,alleging the hospital, its chiefexecutive and Catholic parentcompany conspired to competeunfairly, violate state trademarklaws and drive the physicians outof business. Cedar Valley MedicalSpecialists, a 53-physician multi-specialty practice, filed a lawsuitin Black Hawk County (Iowa)District Court against 281-bedCovenant Medical Center, part ofthree-hospital Covenant HealthSystem; its president and chiefexecutive officer, JackDusenberry; and its parent com-pany, 13-hospital Wheaton (Ill.)Franciscan Services. CovenantVice President of BusinessDevelopment Chris Hyersdeclined to comment on the law-suit, saying the system’s policy isto not discuss pending litigation.The 10-year-old physician groupalleged that last July, Covenantillegally named its 19-acre

planned medical developmentGreater Cedar Valley MedicalCenter, infringing on the physiciangroup’s trademark, confusing con-sumers and trading on the physi-cian group’s reputation. Thephysicians allege that Covenanthas withheld staff privileges, ter-minated call coverage and upcod-ed charges as part of its schemeto drive them out of business.

The taxman cometh to ClevelandCleveland Clinic Health Systemmight have to pay $2.8 million inback property taxes, penalties andinterest after Ohio TaxCommissioner William Wilkinsissued a final determination deny-ing a property tax exemption for aclinic-owned medical office build-ing and surgery center. ACleveland Clinic spokeswomansays the 12-hospital system willappeal, believing that the facility inBeachwood, Ohio, is an “integralpart” of the clinic’s not-for-profitmission. Beachwood City SchoolDistrict sued, claiming the propertywas used for commercial purpos-es and had historically been clas-sified as taxable. Wilkins sidedwith the district, distinguishingbetween tax-exempt owners andtax-exempt use of property. Thefacility provides very little charitycare, Wilkins says, adding thatcharity care provided at otherCleveland Clinic facilities was notrelevant. Several other school dis-tricts have also sued overCleveland Clinic-owned properties.

B R I E F LY Modern Physician | January 2006 • 7

Continued from p. 6

O P I N I O N

Welcome to the new ModernPhysician! The healthcare indus-try’s leading source of businessnews and information for physi-cian-executives, leaders and entre-preneurs is now a monthly elec-tronic magazine. The changes infrequency (to monthlyfrom quarterly) and in for-mat (to electronic fromprint) will enable us todeliver a more timelyanalysis of the news andtrends affecting thephysician businessmanand businesswoman.

Each issue of the newModern Physician willfeature an exclusivecover story; an expansivebusiness news section; an op-edwell of editorials, letters and com-mentaries; an in-depth specialreport or feature dissecting thelatest business trend for business-minded physicians; a By theNumbers section filled with usefulstatistics, rankings and financialfigures; and a News Makers sec-tion chronicling the comings andgoings of physician-executives,leaders and entrepreneurs.

In this issue’s cover story, fre-quent Modern Physician contribu-tor Jay Greene predicts a finan-cially uncertain year ahead forphysician group practices andtheir physician owners. Rising

costs, flat revenue and the poten-tial of increased bad debt frompatients with high-deductiblehealth plans may weigh heavilyon the bottom lines of physicianpractices, according to Greene.

That, in turn, may prompt manypractices to seek newsources of capital formedical and informationtechnology, and thosesources may include newbusiness ventures.

Speaking of businessventures, four physiciangroups in Rhode Islandhave formed a for-profitcorporation to assistfellow physicians incomparing, selecting,

installing and operating the latestinformation technologies. You canread about these enterprisingphysicians in this issue’s SpecialReport by reporter Joseph Connon Page 10.

Those pieces are just two of themany stories in this issue that willhelp physicians move from the clin-ical world to the business world.

Our readers’ information demandsare changing, and we’re changingwith them. If you have any questions,comments or suggestions about thenew Modern Physician, pleasecontact me at dburda@crain.com, or312-649-5439.

—David Burda, editor

New year, new lookResidency is just the startIt is interesting to me thateveryone seems to be cryingabout how many hours residentsare working (“The secret lives ofphysicians,” Modern Physician,October 2005, p. 7). It’s not as ifthings are going to changedramatically after residency. Myworkweek ranges from 60 to 80hours. One weekend in seven Iam on call, which starts at 5 p.m.Friday and ends at 7 a.m.Monday. During that time I ampaged countless times. I end upwith eight to 16 admissions, plusrounds with my own patients andthose of other doctors in my callgroup. After that, my workweekbegins again. Our local residencyprogram closes down if it’soverloaded. My partners and Idon’t get that luxury.

M.A. MitchellOsteopath

Wichita Falls, Texas

It’s bad here, tooWhile this article, “Poorernations suffer physician ‘braindrain,’” (Modern Physician Stat,Oct. 28, 2005) does not paint apretty picture for the physicianworkforces of some Third Worldcountries, between its lines isalso a dismal picture for thephysician workforce in the

Modern Physician turns into an electronic monthly magazine

Modern Physician | January 2006 • 8

L E T T E R S

DAVID BURDAEditor

What do you think? Let us and your fellowModern Physician readers know. Send yourletter to the editor to moddoc@crain.com.

United States. A related articlein an earlier edition indicatesthat the freshman classes ofU.S. medical schools are 2%greater than in previous years,however, applications to medicalschools have been on a decline.Consequently, competition forapplicants is less robust than inthe past, and the best andbrightest undergraduates maybe seeking careers in otherprofessions. Hence, the U.S.has a brain drain of a differentkind. The source of this braindrain is that it is less desirableto become a physician. Inaddition, although foreignmedical graduates may betraytheir duties to the homelandsthat subsidized and invested inthe costs of their educationswhen they leave to practice in amore developed nation, in anironic turn, the U.S. betrays theduty it owes to its own citizenswho want a career in medicine.This is because no one, otherthan medical studentsthemselves, pays for the costsof medical education in the U.S.

Howard N. Smith, M.D.Washington, D.C.

BY DAVID SCHMIDTEach year, more than 16,000

students graduate from one ofthe 125 accredited medicalschools in the U.S. Each of thesegraduates is required to learnhow to deliver a baby during theircourse of study, but inmost instances, stu-dents can complete theirresidencies, earn theirdegrees and enter themedical profession with-out learning how to carefor the elderly.

Given the changingdemographics of theAmerican population, itis time for our country’smedical schools torethink their outdatedcurriculum and revamptheir learning to acknowledge bothends of the life-cycle continuum.

By the year 2030, one in everyfive Americans will be elderly,with the number of those age 65or older doubling from 35 millionin 2000 to 71.5 million. The jobof caring for the physical, mental

and societal needs of these agingadults will fall on a great many ofour citizens, including familymembers, professional care-givers, social workers, nursesand community agencies.

But locally based physicians willcontinue to be the back-bone of our healthcaresystem as older adultswill continue to receivetheir medical care fromprimary-care physicians intheir own communities.

Despite these reali-ties, physician trainingin geriatric care is lack-ing at every level. Lessthan 10% of all medicalschools require anycourse at all in this spe-cialty, and many of the

nation’s medical schools lack adedicated geriatrics department.

As a result, only a small per-centage of the more than650,000 physicians in practicetoday received training and edu-cation in geriatrics.

And, to exacerbate the situa-tion, the Association of Directorsof Geriatric Academic Programswarns that the number of certi-fied geriatricians will fall fromthe current figure of 7,200 to6,100 in the very near futurebecause the number of geriatri-cians not seeking recertification

F I R ST P E R S O N

Gearing up for elderly is larger than the number ofyoung physicians completingtheir geriatric fellowships.

Not only do we need physicians,but if medical schools are toappropriately alter their curricu-lum, there will be an increasedneed for faculty in geriatrics.

In 2002, the InternationalLongevity Center estimated thata minimum of 1,450 academicgeriatricians will be required toprepare the physician workforcefor aging patients.

There also is the issue ofaddressing older adults’ mentalhealth and psychiatric care.Here too, we are sorely lacking.Of the 35,000 psychiatrists inthe U.S., only 5,000 identifygeriatrics as one of their areasof interest.

Even if that number is doubledby 2030, the Public Policy &Aging Report of 2003 projectsthat we will barely succeed inpreventing today’s shortagefrom worsening.

It appears that a perfect stormis approaching. I believe thereare three things we must do toavoid a geriatric-healthcare work-force crisis from engulfing us all.

First, medical schools mustimmediately begin to revamptheir educational requirements tomake the study of geriatric carean essential element of educa-tion, regardless of the medicalspecialty a physician in trainingwishes to pursue.

Second, we must make caring

Demographic shifts mean docs need to learn geriatric care

Schmidt: “Theissue is sustain-ability.”

Modern Physician | January 2006 • 9

If you’re a physician and you’d like to tellyour business story, please contact us atmoddoc@crain.com. Submissions shouldbe no longer than 1,000 words and shouldinclude a color photo of the author.

David Schmidt is president andchief executive officer of SCANHealth Plan, Long Beach, Calif., ageriatric-focused health planserving more than 75,000 seniorsin Southern California and one ofthe fastest-growing MedicareAdvantage Plans in the state.

for the elderly a part of residen-cy training so physicians gainhands-on experience under thesupervision of trained profes-sionals before entering theworkforce, not only in attendingto the physical needs of a geri-atric patient but in learning howto address their emotionalrequirements as well as thoseof their families.

Third, we need to make geri-atric care, including end-of-lifecare, a part of continuing med-ical education for physicians whoare already practicing.

That means offering a com-plete array of online or in-personcontinuing medical educationcourses that expose physiciansto the new realities of the mar-ket and require continuing learn-ing in the field of geriatrics, par-ticularly for those physicians whodid not have such training duringmedical school.

The crisis of caring for the eld-erly will only worsen unless dra-matic steps are taken immedi-ately to assure that our presentand future physicians are prop-erly prepared to care for achanging nation. ■

S P EC I A L R E P O RT

BY JOSEPH CONNFour physician organizations in Rhode Island

have formed a for-profit corporation to promote adeceptively simple solution to some of the knotti-est healthcare IT problems facing physicianstoday: selecting an electronic medical recordssystem, getting EMRs in the hands of outpatientphysicians at an affordable price and finding away to make the installed EMRs interoperablewith each other and local hospitals.

The company, Electronic Health Records ofRhode Island, was incorporated on Oct. 17,2005, according to the Rhode Island secretary ofstate’s office.

“The dream here is tohave every doc in the stateown one IT system,” saysMark Jacobs, M.D., chair-man of EHRRI’s board ofdirectors. The company iscompleting negotiations witha single EMR system vendorthat Jacobs says will beidentified soon. There are4,091 physicians in RhodeIsland, according to theAmerican MedicalAssociation’s data book.The four founding groups, or EHRRI, account forabout 1,400 of them.

Jacobs also is the president and chief execu-tive officer of Coastal Medical, an 80-physician,multispecialty medical group based inProvidence that is one of the four EHRRI found-ing physician organizations.

The other member groups areLifespan/Physicians Professional ServicesOrganization, based in Providence, with about

800 physicians; the physician-hospital organiza-tions at Women and Infants Hospital inProvidence and Kent County Memorial Hospital inWarwick, which are part of the Care New Englandintegrated healthcare system and have about400 physicians; and Thundermist Health Center,a two-facility community health center inWoonsocket with 20 physicians.

Jacobs says he is in negotiations with a candi-date to become the company CEO. The newexecutive should be on the job this month.Rollout of the first EMRs will begin this year.

“I think we’re looking at 125 docs in year one,”says Jacobs, adding that while the estimate offirst-year physician adoption “is conservative, it’sconservative for a good reason. The learningcurve is steep. We’re obviously going to learnfrom the early adopters. But I think there is goingto be a cascade effect here.”

Jacobs, who uses an e-prescribing system butnot an EMR, says he is going to be one ofEHRRI’s first customers. He was a member of anadvisory committee of the not-for-profit RhodeIsland Quality Institute that set up a statewidee-prescribing initiative with software vendorSureScripts. While the institute is not a partnerin EHRRI, he credits it with being “a good con-vener” that brought the founding groups together.

Coastal started looking at EMR systems tobuy about 14 months ago, Jacobs says, but10 months ago it joined the collaborative that ledto the formation of EHRRI.

HHS’ Office of the National Coordinator forHealth Information Technology in September2005 contracted with the CertificationCommission for Healthcare InformationTechnology to come up with a vetting processfor EMR systems, but by pooling their expert-ise, Jacobs says the doctors at EHRRI alreadyhave done what the commission will do andwhat few physicians would have the time or thedesire to do on their own.

In addition to gaining price leverage, a largegroup purchase will shrink the problem ofdeveloping interfaces between physician EMRsand the IT systems in the state’s 11 acute-care hospitals.

According to Jacobs, EHRRI will offer both astand-alone EMR to physicians who use theirexisting electronic practice management sys-tems as well as their vendor’s suite of both sys-tems. EHRRI also will offer the EMR in an appli-

cation service providermodel, in which, for amonthly fee, physicians canbuy the software, mainte-nance and data storageprovided via a central serverand data connection.

Initially, the IT vendor EHRRIselects will supply most ofthe installation services andsoftware support, but EHRRIwill begin to take over thosefunctions as the new com-pany gets off the ground inmid-2006, Jacobs says.

Cedric Priebe, M.D., chief medical informationofficer at Care New England, is not a boardmember of EHRRI, but considers himself “a spiri-tual founder” of the physician-led effort. Priebehas served as a physician-executive in IT at IDX,Allscripts and McKesson before coming to CareNew England in 2004. He says he likes the ideaof a physician-centric approach to solving theirown IT adoption problems.

“I’ve seen lots of different relationships betweencompeting hospitals and physician organizationsand this is really unique,” Priebe says. “If we canprove this can be done here in the small-doc mar-ket, it will be a message that if you decrease thenumber of options out there, you can do more withinteroperability. There are several vendors outthere who could do this well.” ■

Modern Physician | January 2006 • 10

Jacobs: Dream isfor one systemused statewide.

Priebe: EHRRI isoffering a uniquesolution.

EMR solutionsDoc organizations band together in R.I.

BY T H E N U M B E R S Modern Physician | January 2006 • 11

verage house staff stipends aren’t exactly soaring in teaching hospitals

Source: Association of American Medical Colleges survey of member facilities of theCouncil of Teaching Hospitals and Health Systems

Growth is slow

$30,753

$38,2581994-1995

1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

$31,650

$39,360

$32,789

$40,849

$33,387

$41,144

$34,104

$42,121

$34,985

$43,045

$35,728

$43,975

$37,383

$45,680

$38,238

$47,259

$39,809

$49,085

First year after medical school Sixth year after medical school

A

Total medical revenue per full-time-equivalent physician

Making an investmentpending more on administration boosts revenueS

Source: MGMA Cost Survey, 2004 report based on 2003 data

$50,000and under

$50,001 to$75,000

$75,001 to$100,000

$100,001 to$125,000

More than$125,000

Total administrative cost per full-time-equivalent physician

Source: Center for Studying Health System Change

Allphysicans

Allprimary-carephysicians

Allspecialists

Allphysicans

Allprimary-carephysicians

Allspecialists

Unadjustedincome

UrbanAll rural

Income adjustedby cost of living

ountry doctors of all specialties averaged greater buying power thantheir city counterparts when the lower cost of living in rural areas

was taken into account, according to a recent report by the Center forStudying Health System Change. Country docs averaged $225,000 inbuying power, while urban physicians averaged $199,000, according tothe report, based on a survey of about 12,000 physicians conducted in2001 and was adjusted for inflation to 2003 levels.

Country livingC

$514,999$642,027

$743,239$885,787 $876,017

$2

18

,00

0

$2

04

,00

0

$1

61

,00

0

$1

70

,00

0 $2

53

,00

0

$2

45

,00

0

$1

99

,00

0

$2

25

,00

0

$1

45

,00

0

$1

89

,00

0

$2

32

,00

0

$2

66

,00

0

N E WS M A K E R S

ASSOCIATIONSDarrell Kirch, M.D., dean of PennState College of Medicine andsenior vice president for healthaffairs at Pennsylvania State

University, willbe the new pres-ident of theWashington-basedAssociation ofAmerican MedicalColleges, suc-ceeding JordanCohen, M.D.Kirch, who alsoserves as chief

executive officer of Penn StateMilton S. Hershey Medical Center,Hershey, Pa., is the current chair-man-elect of the AAMC, a not-for-profit association that represents all125 accredited U.S. medicalschools, and has served on theorganization’s executive councilsince 2001. Kirch, 56, takes overas president on July 1 ... theAmerican Medical GroupAssociation, the Alexandria, Va.-based organization that representsmajor medical groups across theU.S., announced that FrancisCrosson, M.D., executive director ofthe Permanente Federation, willserve this year as board chairman.

Crosson, who takes over the postthis month, heads the nationalorganization that oversees some ofthe business operations ofPermanente’s eight medical groups… Raymond Fabius, M.D., presi-dent and chief medical officer ofChadds Ford, Pa.-based I-trax, hasbeen elected to a three-year term

on the board ofdirectors of theAmericanCollege ofPhysicianExecutives inTampa, Fla.Fabius, the for-mer global med-ical leader atGeneral ElectricCo., took over in

April 2005 as the leader of I-trax,which provides a wide range ofservices, including clinical pro-grams, management solutions andinformation technology.

GOVERNMENTHHS reassigned former CMS ChiefMedical Officer Sean Tunis, M.D.,to the Agency for HealthcareResearch and Quality in light of aprobe of Tunis’ actions regardinghis continuing medical educationcredits. In May 2005, Tunis hadhis medical license suspended forone year by the Maryland Board ofPhysicians and was fined $20,000after the board determined he fal-sified records to meet CMErequirements. In a statement,Tunis wrote: “I regret having made

mistakes in handling my CMErecords, but I am now pleased tobe moving forward into a newphase of my career.”

HOSPITALS, SYSTEMSMartin Brotman, M.D., presidentand chief executive officer at SutterHealth’s 783-bed California PacificMedical Center, San Francisco, wasappointed to head the turnaround ofSutter’s financially weak St. Luke’sHospital, also in San Francisco. Thenot-for-profit hospitals agreed tomerge in September in an attemptto keep 220-bed St. Luke’s fromclosing amid mounting losses. Themerger will likely turn St. Luke’s intoa campus of California Pacific.Brotman, who led a successful turn-around at once-failing CaliforniaPacific a decade ago, will serve asinterim CEO at St. Luke’s until themerger is completed … TheUniversity of California at Irvineplaced the chief executive officer ofits medical center on paid adminis-

Modern Physician | January 2006 • 12

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trative leave after the hospital shutdown its scandal-stricken liver-trans-plant program. CEO Ralph Cygan,M.D., will remain off the job while acommittee of experts explores whythe program turned down scores ofdonated organs as patients on thewaiting list were dying ... AndrewAgwunobi, M.D., resigned as presi-dent and chief executive officer atGrady Health System, Atlanta.Agwunobi, 40, took over the finan-cially struggling public system in

June 2003. Oneof his firstactions was torecruit JohnHenry, formerCEO of EmoryHospitals,Atlanta, out ofretirement.Henry, now chiefoperating officerat Grady, was

scheduled to replace Agwunobi onan interim basis on Jan. 1.

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Fabius

Agwunobi

Kirch