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Speaker 1: For a lot of companies in the business of providing healthcare.

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Speaker 1: These days, it seems bigger is always better. For decades,

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Speaker 1: the industry has been consolidating. Health insurance companies have merged

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Speaker 1: into big conglomerates that also own doctor and pharmacy businesses.

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Speaker 1: Hospitals have gloamed together into big regional systems. They've gobbled

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Speaker 1: up physician groups too, So there's a good chance your

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Speaker 1: local doctor works for a giant health system. More doctors

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Speaker 1: worked as salaried employees than as owners of their own practices,

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Speaker 1: according to a survey from the American Medical Association. That's

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Speaker 1: never happened before. Welcome to Prognosis, bloom Brigs podcast about

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Speaker 1: the future of healthcare. I'm your host, Michelle fake Cortes.

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Speaker 1: For both patients and their doctors, what happens in the

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Speaker 1: exam room is in recently influenced by big bureaucracies they

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Speaker 1: don't understand and they can't control. This has left a

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Speaker 1: lot of patients unsatisfied and a lot of physicians burned out.

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Speaker 1: But some doctors have said enough. Here's Bloomberg News health

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Speaker 1: reporter John Tazzi with the story of one group of

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Speaker 1: doctors in North Carolina who took a different path. In Charlotte,

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Speaker 1: North Carolina, a pair of big hospital systems dominate the

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Speaker 1: local healthcare market. The biggest, Atrium Health, is a powerhouse.

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Speaker 1: Its annual revenue is more than twice as much as

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Speaker 1: its largest rival. Atrium has dozens of hospitals in three states,

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Speaker 1: thousands of doctors, and tens of thousands of employees. A

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Speaker 1: few years ago, a group of doctors who worked for

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Speaker 1: Atrium did something unprecedented. One day in the fall of seen,

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Speaker 1: cardiologist Dale Owen and his colleagues walked into a meeting

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Speaker 1: with hospital managers and said they wanted a divorce. They

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Speaker 1: wanted to become an independent group. Dale told me about

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Speaker 1: it recently at his office in Charlotte. Well, they looked

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Speaker 1: at us like they were incredulous, you know, like, um not,

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Speaker 1: how dare you? But it was so far into them,

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Speaker 1: It's like outer space. How how could anybody conceive of

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Speaker 1: such a thing? Dale and eight seven other physicians in

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Speaker 1: the medical group were breaking up with atri m Health,

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Speaker 1: the hospital system that they worked for, and I owned

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Speaker 1: their practice. They told the hospital leaders that they wanted

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Speaker 1: to be independent. I'll never forget They said, what do

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Speaker 1: you mean by independent and and how does that really

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Speaker 1: look in your mind? Well, completely separated? Well, wouldn't you

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Speaker 1: like to be part of this with us and this

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Speaker 1: with us? No, we really want to just be independent.

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Speaker 1: This was a big deal. For years, the health care

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Speaker 1: industry has been moving in the opposite direction. It's become

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Speaker 1: more consigned. I dated, hospitals have emerging with each other

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Speaker 1: to form big health care systems. They've been buying up

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Speaker 1: doctors groups and outpatient clinics. The number of physician practices

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Speaker 1: owned by hospitals more than doubled between twenty twelve and

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Speaker 1: twenty eighteen. You've probably noticed this in cities across the

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Speaker 1: United States. The banners of big hospital systems have spread

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Speaker 1: to more and more neighborhood clinics and outpatient centers. As

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Speaker 1: health care systems expanded their footprints. It was unheard of

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Speaker 1: for a big group of doctors to split from their

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Speaker 1: hospital system owner. And Dale's group was big, about ninety doctors.

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Speaker 1: They took care of more than a hundred thousand patients,

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Speaker 1: about one out of every ten people in the county.

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Speaker 1: The reason this was such a big move goes back

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Speaker 1: to when Dale was first getting into medicine. Dale joined

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Speaker 1: the practice. It was around this time that Americans were

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Speaker 1: getting more and more concerned about the rising cost of

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Speaker 1: medical care, and health insurance companies responded by putting new

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Speaker 1: limits on how much they would pay. And it really

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Speaker 1: came down to the fact that there was such financial

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Speaker 1: pressure on the group as a whole because of decreased

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Speaker 1: reimbursement rates, the doctors agreed to sell their practice to Atrium.

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Speaker 1: Dale voted against selling, but he understood why his colleagues

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Speaker 1: had a different view. The insurance rates remuneration was going

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Speaker 1: down substantially, and it puts such financial pressure on our

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Speaker 1: group as it did others, that it forced physician groups,

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Speaker 1: independent groups especially to seek refuge with another entity. And

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Speaker 1: the hospitals were the ones who raised their hands. This

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Speaker 1: was part of a trend towards consolidation in healthcare that

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Speaker 1: really hasn't stopped. There have been more than six hospital

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Speaker 1: mergers in the past twenty years. Many local markets became

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Speaker 1: dominated by a handful of big health systems. One study

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Speaker 1: found that more than of metro areas had highly concentrated

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Speaker 1: markets for hospital care in and that's left hospitals with

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Speaker 1: a lot of power when it comes to negotiating prices.

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Speaker 1: Here's Austin Fract, a health economist affiliated with the Department

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Speaker 1: of Veterans Affairs, Boston University and Harvard. They can just say, well,

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Speaker 1: we want, you know, more than last year, or we're

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Speaker 1: not joining your network, and UM, in many cases, UH

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Speaker 1: plans can't can't say no because it's either the only

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Speaker 1: game in town or the major game in town. UM,

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Speaker 1: and they're members, you know, they obviously need to have

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Speaker 1: the hospital in their network, they need to see doctors,

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Speaker 1: and so they're kind of over barrel. A lot of

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Speaker 1: economists who have studied hospital mergers say they tend to

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Speaker 1: lead to higher prices. The hospital industry argues that bigger

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Speaker 1: health systems can be more efficient and deliver higher quality care.

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Speaker 1: They can reduce fragmentation and coordinate between primary care doctors

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Speaker 1: and specialists, all of which can benefit patients. But some

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Speaker 1: big hospital systems have been accused of using their market

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Speaker 1: power unfairly. That includes Atrium, the system where Dale worked.

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Speaker 1: In the Department of Justice filed a civil antitrust lawsuit

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Speaker 1: that accused Atrium of blocking health insurers from steering patients

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Speaker 1: to less expensive hospitals. The government said that the restrictions

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Speaker 1: quote reduced competition, resulting in harm to Charlotte area consumers, employers,

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Speaker 1: and insurers. In a settlement two years later, Atrium agreed

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Speaker 1: to modify its contracts without admitting to any wrongdoing. Atrium

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Speaker 1: declined to comment on the settlement. In a statement, the

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Speaker 1: company said that quote Atrium Health prides itself on delivering

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Speaker 1: the best health care to our patients and communities close

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Speaker 1: to home. With strong roots in this community, Our patients

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Speaker 1: in Charlotte and the surrounding areas have trusted us with

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Speaker 1: their health and the care of their family members end quote.

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Speaker 1: Atrium is still the dominant hospital system in the area

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Speaker 1: out and in recent years, as hospitals and insurance companies

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Speaker 1: became bigger and more powerful players in the health care system,

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Speaker 1: a lot of doctors felt this distance growing between them

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Speaker 1: and their patients. They both felt that the big bureaucracies

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Speaker 1: of health systems and insurance companies were driving up costs

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Speaker 1: without improving care. We have a price problem, absolutely this

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Speaker 1: as far as Mustachari, he runs a company called Allidate

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Speaker 1: that works with hundreds of independent physician groups. It is

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Speaker 1: the prices, particularly on the commercial side, but it is

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Speaker 1: also that we have a crappy health care system that

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Speaker 1: doesn't take care of people very well and as fragmented,

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Speaker 1: and no one's in charge, and no one feels accountable

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Speaker 1: for the patient's outcomes, and we got to fix that too.

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Speaker 1: It's not just a cost problem. There's also a quality problem,

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Speaker 1: and a utilization problem and a compassion problem. You may

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Speaker 1: have noticed this as a patient as well, if you've

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Speaker 1: been caught in a dispute between your insurance company and

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Speaker 1: a big health system fighting over whether some treatment should

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Speaker 1: be approved. Day and other doctors say these growing bureaucracies

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Speaker 1: also getting the way of doctor's ability to do right

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Speaker 1: by their patients. Part of the problem is that they

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Speaker 1: got paid for each service they performed. It was about volume,

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Speaker 1: so you got you got paid for doing more rather

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Speaker 1: than solving patients problems um, which is you know, poorly

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Speaker 1: aligned and senate doctors had to cram more work into

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Speaker 1: short visits and got to the point where in a

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Speaker 1: fifteen minute office visit, about half the time was spent

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Speaker 1: with the electronic medical record and getting all of the

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Speaker 1: UH shot records in and putting in data and so forth,

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Speaker 1: that only half of the time was actually spent with

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Speaker 1: the patient. UM and so that was not very fulfilling

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Speaker 1: for patients nor physicians. With less time to deal with

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Speaker 1: patients problems, doctors referred them to specialists. And so if

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Speaker 1: patient might come in with the typical uh list of

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Speaker 1: three or four things they wanted to talk about, and

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Speaker 1: you really only have time to deal with one efficiently,

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Speaker 1: and so you wind up creating all of these referrals

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Speaker 1: to handle all of the other portions of what they

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Speaker 1: wanted to have accomplished. UM and a lot of these

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Speaker 1: referrals are really silly. They just weren't needed. The physicians

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Speaker 1: just needed more time to be able to spend with

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Speaker 1: the patient, to be able to handle these issues and

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Speaker 1: stop these referrals. But they didn't have any incentive to

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Speaker 1: do that because they were paid based on how many

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Speaker 1: patients they saw. This feeling of being on a hamster

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Speaker 1: wheel turning through appointments is common among doctors. It contributes

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Speaker 1: to a pervasive feeling of physician burnout. That's why Dale

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Speaker 1: began thinking about breaking away from the hospital system, trying

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Speaker 1: to close the distance between himself and his patients. He says,

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Speaker 1: it's time for doctors to take back their autonomy. So

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Speaker 1: all of this and this push of volume, patients didn't

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Speaker 1: feel fulfilled for positions didn't feel fulfilled. And then we

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Speaker 1: got to a point um where after they changed how

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Speaker 1: we were practicing and push more volume and so forth,

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Speaker 1: we just said we'd have enough. Dale wants to move

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Speaker 1: toward a system where doctors get paid more for keeping

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Speaker 1: patients healthy and out of the hospital. He wants doctors

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Speaker 1: to spend more time with patients and avoid unnecessary referrals

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Speaker 1: to specialists. And this is part of a bigger movement

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Speaker 1: that's shaped the health care industry for the last decade.

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Speaker 1: And the visits are getting shorter and shorter and shorter

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Speaker 1: because you gotta you gotta see more and more patients

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Speaker 1: because I'm going to get paid on a per visit basis.

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Speaker 1: As far as ad says, the traditional way of paying

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Speaker 1: for healthcare favors big hospital systems. And the more market

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Speaker 1: power you have, the more clout you have, the more

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Speaker 1: bigger market share you have, the tougher you negotiate with

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Speaker 1: the plan, and the more you get paid for doing

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Speaker 1: the same thing right. Alladate is trying to get doctors

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Speaker 1: off the hamster wheel. The company works with independent physician

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Speaker 1: groups who together take care of more than half a

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Speaker 1: million patients. These doctors have all agreed to contracts that

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Speaker 1: will pay them more if they can reduce the total

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Speaker 1: cost of their patient's care. He says these contracts can

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Speaker 1: tilt the balance of power away from big hospital systems

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Speaker 1: in favor of leaner, more nimble, independent groups that can

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Speaker 1: reduce unnecessary costs. If you're just independent primary care providers

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Speaker 1: who can act in the patient's best interest and think

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Speaker 1: about just what do I need to do to keep

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Speaker 1: this person from going to the emergency room of being hospitalized,

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Speaker 1: And turns out primary care is the answer. Dale wanted

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Speaker 1: to do the same thing. His practice joined the hospital

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Speaker 1: system in the because they needed leverage with inferrors to

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Speaker 1: negotiate rates. But if he could change the way the

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Speaker 1: doctors got paid, they wouldn't need to be part of

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Speaker 1: the hospital system anymore. As Dale contemplated leaving in he

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Speaker 1: spent months going around the country to meet with insurance companies,

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Speaker 1: hospital systems, and other physicians. He wanted to understand what

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Speaker 1: it would take to survive as an independent group, and

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Speaker 1: they taught me a lot, But it was really about

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Speaker 1: could we create the critical mass and if we could,

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Speaker 1: did we have the resolve to lock arms and go

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Speaker 1: do this. Back in Charlotte, he started recruiting his colleagues

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Speaker 1: to join him in an exodus from atri M. In secret,

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Speaker 1: they began to pot a course to independence. And so

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Speaker 1: I met with about sixty five physicians individually first and

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Speaker 1: in everybody's homes and playing patty cake with babies and

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Speaker 1: things like that, and and to an individual, everyone was

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Speaker 1: on board, but the hospital system did not make it easy.

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Speaker 1: All the doctors had contracts with atri M, and those

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Speaker 1: contracts had not compete causes. We had significant restrictive covenants

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Speaker 1: in our contracts that prevented us from going out and competing.

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Speaker 1: And after months of talks with hospital management, Dale says,

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Speaker 1: it became clear that they wouldn't release the physicians from

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Speaker 1: their noncompete causes. The doctors each pitched in five thousand

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Speaker 1: dollars to hire lawyers, and they sued to ask at

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Speaker 1: M to release them from the contracts. And I'm literally

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Speaker 1: negotiating on Easter Day, okay with the with the hospital system,

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Speaker 1: and realized they're just not going to move off of

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Speaker 1: a particular position, and we weren't either. So we went

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Speaker 1: ahead and filed the next morning The lawsuit argued that

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Speaker 1: the non compete causes were invalid. The doctors also accused

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Speaker 1: the health system of quote monopolistic and anti competitive actions.

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Speaker 1: A few months after it was fild, Atrium agreed to

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Speaker 1: let them split off. Atrium didn't comment on the lawsuit.

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Speaker 1: The doctors had just a couple of months to set

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Speaker 1: up the new independent practice. There was a lot they

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Speaker 1: needed to do. It's it's literally everything that has to

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Speaker 1: be done. They couldn't keep their offices, equipment, or even

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Speaker 1: the name of the group. All of that belonged to

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Speaker 1: the hospital system. They decided to name the new group

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Speaker 1: Tryon Medical Partners, after the street where the original practice

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Speaker 1: was founded. They had to hire office staff, line up financing,

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Speaker 1: and outfit new clinics spread across the city of Charlotte.

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Speaker 1: And so we're standing up eight buildings office sites, i

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Speaker 1: should say, and one of them has four floors, so

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Speaker 1: essentially eleven offices. And we were literally painting at three

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Speaker 1: in the morning before it opened at seven. Doctors did

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Speaker 1: the kind of work that doctors don't normally do. Um

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Speaker 1: We had physicians putting in paper, towel, sand, and toilet

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Speaker 1: paper rolls. They also sent out joint letters to a

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Speaker 1: hundred and fifteen thousand patients. The letters were carefully negotiated

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Speaker 1: with the hospital system to let patients know about the

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Speaker 1: breakup without swaying them one way or another. They could

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Speaker 1: continue to get karat a t M with other physicians,

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Speaker 1: or follow their doctors. The doctors had a sense of

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Speaker 1: camaraderie and shared purpose that helped see them through snaffhoos.

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Speaker 1: With the transition, the freight elevator went out in their

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Speaker 1: main building as they were trying to build out four

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Speaker 1: floors of clinic space, delaying the opening. The steel, the

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Speaker 1: wall board, um, anything and everything. They couldn't bring it up,

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Speaker 1: and so they were literally people plumbers carrying stuff up

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Speaker 1: ten flights of stairs. Try And officially opened on September

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Speaker 1: with just two offices. It was a big gamble. Dale

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Speaker 1: didn't know how many of their old patients would follow

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Speaker 1: the doctors. Karen Stall, Tryon's chief operating officer, says, they

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Speaker 1: didn't have to wait long to see if that bet

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Speaker 1: would pay off. We thought we had time. We were

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Speaker 1: going to ramp up. We could build our team pretty

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Speaker 1: readily over the latter part of eighteen um no way

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Speaker 1: our phones exploded we had issues with the phones that

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Speaker 1: were selected to begin with. They could not manage the

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Speaker 1: volume that was coming in. Doctors shared the space by

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Speaker 1: working in fifths, so we worked seven am to one

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Speaker 1: pm in one shift of eleven and then two pm

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Speaker 1: to eight pm was the second shift of different eleven physicians.

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Speaker 1: So that's money through Friday, and we did the same

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Speaker 1: thing on the weekends and split them up as well. Eventually,

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Speaker 1: the new group opened to nine clinics in and around Charlotte,

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Speaker 1: including an endoscopy center in a newly built three story building.

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Speaker 1: On a cold day in mid November, Dale is pointing

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Speaker 1: at our Neon sign above Tryon's main office in Charlotte's

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Speaker 1: South Park neighbor instruction building. The try On Medical name

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Speaker 1: glows inflorescent lights from the top of the ten story building.

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Speaker 1: That was That was a heck of job getting that

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Speaker 1: thing that's on there. Dale gave me a tour of

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Speaker 1: a couple of Tryon's clinics. He banters with patients and staff.

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Speaker 1: One long time patient observes that he smiles a lot

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Speaker 1: more than he used to. Dale says the group runs

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Speaker 1: more efficiently outside of the hospital system. In one example,

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Speaker 1: he said they were able to save costs on real

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Speaker 1: estate because doctors didn't need as much office space. We

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Speaker 1: felt like we had too much physician office space and

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Speaker 1: that it was probably the least you last space in

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Speaker 1: the entire organization, and so they shrank offices and streamed

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Speaker 1: the number of exam rooms and our footprint just on

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Speaker 1: the rent and so forth. It's saving three million dollars

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Speaker 1: a year. The group's leaders say it can save all

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Speaker 1: kinds of money that's just wasted in bigger organizations. Frankly,

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Speaker 1: being in the system, they don't hair about waste, they

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Speaker 1: don't look for efficiencies. They are too big. Karen still

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Speaker 1: Try and chief operating officer, spent sixteen years as an

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Speaker 1: administrator at Atrium. So in the system setting, you're moving

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Speaker 1: the Titanic, it takes months and months to get anything changed, moved,

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Speaker 1: or accomplished. In an independent practice setting like this, we

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Speaker 1: can do that on a time and Dale says that

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Speaker 1: they can be more competitive. He estimates that he can

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Speaker 1: lower costs of medical care by ten to fifteen percent

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Speaker 1: compared to a hospital owned group. So when a physician

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Speaker 1: group leaves a hospital system, then the overhead of the

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Speaker 1: hospital system is no longer having to be covered financially.

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Speaker 1: Dale wouldn't discuss how much doctors are now compared to

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Speaker 1: when they worked for the hospital, but all the physicians

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Speaker 1: did put in their own money to fund the group.

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Speaker 1: Dale won't say how much, but that investment helped secure

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Speaker 1: a bank loan that the group is liable for. We

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Speaker 1: have skin, feet, and eyeballs in the game, and Dale

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Speaker 1: says that makes them apt to be more efficient. He

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Speaker 1: gave me an example of one way his group could

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Speaker 1: reduce costs. He says, in a hospital system, there's a

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Speaker 1: lot of implicit pressure to refer patients to specialists or

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Speaker 1: other care inside the system. When they were part of Atrium,

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Speaker 1: the doctor's got regular reports about how many of their

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Speaker 1: patients were getting referred to competing hospitals. I think that

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Speaker 1: we've already started to see that some of these um

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Speaker 1: unnecessary referrals and downstream spend are already decreasing. It's it's palpable.

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Speaker 1: In a statement to Bloomberg News, Atrium said that of

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Speaker 1: Tryon's patients have returned to the hospital system for some

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Speaker 1: form of care. The statement also said that Atrium is

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Speaker 1: the community's safety net hospital with a mission to treat

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Speaker 1: all patients regardless of the ability to pay. It said

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Speaker 1: the health systems doctors are integral to the mission. Doesn't

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Speaker 1: want to portray hospitals as the bad guys, but he

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Speaker 1: says they've become too inefficient. It's it's not that the

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Speaker 1: hospitals themselves are failed entities. That's not the issue. I

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Speaker 1: love hospitals. I've got a lot of great friends in hospitals,

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Speaker 1: do great work in hospital. But we can't ignore the

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Speaker 1: fact that administrative costs of the past ten and fifteen

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Speaker 1: years of increased. It's difficult to get hard numbers to

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Speaker 1: see how Tryon compares to the hospital system in terms

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Speaker 1: of the prices they charge. But here's one sign of

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Speaker 1: Dale's willingness to compete on price. Last summer, the state

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Speaker 1: health plan proposed linking its payments to doctors and hospitals

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Speaker 1: to the prices that Medicare pays. It would have meant

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Speaker 1: pay cuts for a lot of providers because the payments

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Speaker 1: would have been lower than what commercial health plans typically pay.

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Speaker 1: Deal cheered the plan on, while hospitals statewide opposed it. Ultimately,

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Speaker 1: the state treasurer backed away from the proposal after hospitals

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Speaker 1: refused to sign On. The Tryon group is also attempting

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Speaker 1: to go around insurance companies and contract directly with employers.

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Speaker 1: They call it Tryon Direct. The plan will offer unlimited

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Speaker 1: primary care visits to employers in exchange for a fixed

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Speaker 1: monthly fee. The doctors have signed up three employers so far.

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Speaker 1: Dale and his colleagues say they're just beginning, and try

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Speaker 1: And has big ambitions to expand in Charlotte and beyond.

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Speaker 1: The company's chief strategy Officer Gas Engaged, told me that

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Speaker 1: he envisions a practice with potentially thousands of doctors and

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Speaker 1: millions of patients all over the country. It's too early

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Speaker 1: to say how far Tryon will expand its reek, whether

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Speaker 1: it's a pipe dream to think that they can replicate

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Speaker 1: what they've done in Charlotte in other cities or regions.

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Speaker 1: Dale predicts that more and more doctors will split from

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Speaker 1: health system owners around the country. He says he's hearing

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Speaker 1: from physicians who want to join all the time. We

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Speaker 1: have dozen of physicians knocking on the door right now

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Speaker 1: trying to get in of all different types of specialties

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Speaker 1: and surgical specialties and so forth like that, from both

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Speaker 1: this county and other counties. Dale believes that try and

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Speaker 1: will be more competitive if the healthcare industry really does

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Speaker 1: shift from paying doctors for how many services they provide

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Speaker 1: to paying for how healthy they can keep their patients.

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Speaker 1: But most healthcare is still reimbursed on a fee for

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Speaker 1: service basis, and there are a lot of factors that

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Speaker 1: still point toward more mergers, more consolidation, and bigger hospital systems.

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Speaker 1: Trium could be just a footnote in a marketplace where

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Speaker 1: the winning strategy for decades has been bigger is better,

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Speaker 1: but Dale sees the company as part of a broader

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Speaker 1: transformation he hopes will soon sweep the American healthcare industry.

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Speaker 1: And that's it for this week's prognosis. Thanks for listening.

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Speaker 1: Do you have a story about healthcare in the US

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Speaker 1: or around the world we want to hear from you.

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Speaker 1: Find us on Twitter at Fake Cortes or at jay Taws.

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Speaker 1: If you were a fan of this episode, please take

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Speaker 1: a moment to rate and review us. It really helps

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Speaker 1: new listeners find the show, and don't forget to subscribe.

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Speaker 1: This episode was produced by Laura Carlson in tofor Foreheads.

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Speaker 1: Our story editor was Rick Shine. Special thanks to Darrelle

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Speaker 1: Dillard and health Care Team. Later Drew Armstrong. Francesca Levie

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Speaker 1: is head of Bloomberg Podcasts. We'll be back next week

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Speaker 1: with the new episode. See it then,