Calif. fault lines

Hos­pi­tal, med­i­cal group sue over foun­da­tion

Modern Healthcare - - The Week In Healthcare - Re­becca Ve­sely

Ac­cu­sa­tions are fly­ing on all sides at the City of Hope in Duarte, Calif., with the hos­pi­tal and a med­i­cal group su­ing each other over a plan to form a not-for-profit foun­da­tion. Of­fi­cials at the 183-bed teach­ing and re­search hos­pi­tal, near Los An­ge­les, con­tend that the pro­posed med­i­cal foun­da­tion would cre­ate bet­ter align­ment be­tween the not-for-profit fa­cil­ity and physi­cians. But the med­i­cal group coun­ters that the foun­da­tion is a sham and a power grab.

The foun­da­tion would func­tion sim­i­lar to those set up by Catholic Health­care West of San Fran­cisco, Sut­ter Health of Sacra­mento, Scripps Health of San Diego and many other Cal­i­for­nia-based hos­pi­tal sys­tems, ac­cord­ing to City of Hope of­fi­cials. In Cal­i­for­nia, hos­pi­tals are not per­mit­ted to di­rectly em­ploy physi­cians be­cause of a ban on the prac­tice of cor­po­rate medicine. But since 1980, hos­pi­tals have been able to set up sub­sidiary med­i­cal foun­da­tions that con­tract with a mul­ti­spe­cialty med­i­cal group ex­clu­sive to the foun­da­tion. Hos­pi­tals need at least 40 physi­cians from 10 spe­cial­ties to form such a foun­da­tion and must op­er­ate a clinic.

This type of struc­ture is be­com­ing more at­trac­tive to hos­pi­tals in other states be­cause of the new fed­eral health re­form law, ex­perts said. Un­der the law, ac­count­able care or­ga­ni­za­tions can en­joy sav­ings by 2012 as part of the Medi­care Shared Sav­ings Pro­gram. Med­i­cal foun­da­tions give hos­pi­tals more flex­i­bil­ity to de­velop in­te­grated de­liv­ery sys­tems, said Michele Volpe, a lawyer with Bershtein, Volpe & McKeon in New Haven, Conn. Form­ing a med­i­cal foun­da­tion is one step in the process of de­vel­op­ing an ac­count­able care or­ga­ni­za­tion, Volpe said. Last July, Con­necti­cut le­gal­ized med­i­cal foun­da­tions, cit­ing po­ten­tial qual­ity and cost ad­van­tages to this model.

Un­der City of Hope’s pro­posal, the 187 physi­cians now em­ployed by the Cal­i­for­nia Can­cer Spe­cial­ists Med­i­cal Group, or CCSMG, of Mon­rovia, would in­stead work for a new med­i­cal group ex­clu­sive to the foun­da­tion. The med­i­cal group’s con­tract with the hos­pi­tal ex­pires Jan. 31.

But of­fi­cials at Cal­i­for­nia Can­cer Spe­cial­ists, backed by the Cal­i­for­nia Med­i­cal As­so­ci­a­tion vig­or­ously op­pose the plan, say­ing the model would al­low the hos­pi­tal “to ex­er­cise un­due in­flu­ence over pro­fes­sional prac­tice de­ci­sions to the detri­ment of pa­tient care, and would ex­pose the physi­cians to le­gal risks,” ac­cord­ing to its com­plaint, filed in Los An­ge­les County Su­pe­rior Court on May 3.

“They pro­posed what I con­sider a hos­tile takeover,” said Lawrence Weiss, pres­i­dent of the CCSMG. “They are try­ing to de­stroy our med­i­cal group and de­stroy our doc­tors.”

The med­i­cal group also is ac­cus­ing the hos­pi­tal of try­ing to seize its free-stand­ing can­cer cen­ters es­tab­lished by the physi­cians and put them on the hos­pi­tal’s li­cense, which would al­low the hos­pi­tal to raise re­im­burse­ment rates by be­tween 43% and 103%, ac­cord­ing to the med­i­cal group. Adding the South Pasadena (Calif.) Can­cer Cen­ter, for one, to the li­cense would boost hos­pi­tal rev­enue by $4 mil­lion a year, said Vince Jensen, chief op­er­at­ing of­fi­cer at the CCSMG. In its le­gal com­plaint, the med­i­cal group al­leges that the hos­pi­tal’s pro­posed med­i­cal foun­da­tion is il­le­gal in part be­cause it doesn’t have the req­ui­site clinic at­tached.

Michael Fried­man, pres­i­dent and CEO of the City of Hope, called that ac­cu­sa­tion “an in­ter­est­ing fan­tasy,” adding the hos­pi­tal is more in­ter­ested in align­ing goals, in­te­grat­ing elec­tronic health records and of­fer­ing a more seam­less pa­tient ex­pe­ri­ence than gain­ing con- trol of the med­i­cal group’s clin­ics. The City of Hope is build­ing its own am­bu­la­tory-care cen­ter on cam­pus. “I wish them the best with their lit­tle out­pa­tient op­er­a­tion,” Fried­man said. “I couldn’t care less about that.”

The hos­pi­tal is seek­ing to form the foun­da­tion now, Fried­man said, to take ad­van­tage of op­por­tu­ni­ties un­der na­tional health re­form. “It’s an open in­vi­ta­tion to hav­ing physi­cians make a more mean­ing­ful con­tri­bu­tion,” he said.

The hos­pi­tal filed a coun­ter­suit on May 18 over the is­sue, sup­ported by the Cal­i­for­nia Hos­pi­tal As­so­ci­a­tion.

City of Hope has been post­ing losses the past two years. In 2009, the hos­pi­tal lost $9.1 mil­lion on to­tal op­er­at­ing rev­enue of $485 mil­lion. In 2008, it posted $437 mil­lion in to­tal op­er­at­ing rev­enue with $4.2 mil­lion in losses, ac­cord­ing to the hos­pi­tal and state records.

Physi­cians who don’t join the new foun­da­tion will still be able to treat their pa­tients at the hos­pi­tal. But, ac­cord­ing to the med­i­cal group, they will lose re­search fund­ing. The for­profit med­i­cal group has rev­enue of about $100 mil­lion a year, and roughly a third is from re­search fund­ing, such as Na­tional In­sti­tutes of Health grants, through the hos­pi­tal, Jensen said. More than 90% of physi­cians prac­tic­ing at City of Hope are part of CCSMG.

Mean­while, the fight has gone pub­lic. The med­i­cal group sent a let­ter to pa­tients on April 27 in­form­ing them that the hos­pi­tal is mov­ing for­ward with the foun­da­tion plan “po­ten­tially plac­ing City of Hope clin­i­cal and re­search pro­grams at risk.”

Alexan­dra Levine, a can­cer and HIV spe­cial­ist and chief med­i­cal of­fi­cer at City of Hope, said she is hope­ful that physi­cians will sign on. Levine is head­ing up the new med­i­cal group, called On­col­ogy Spe­cial­ists of City of Hope, which will con­tract ex­clu­sively with the yet-to-be-formed foun­da­tion. In her pri­vate con­ver­sa­tions with 60 physi­cians, only two have expressed dis­ap­proval of the pro­posed changes, she said.

Lawyers for CCSMG sent a let­ter to Levine in April in­struct­ing her to halt these one-onone con­ver­sa­tions, cit­ing non­com­pete and nonsolicitation clauses in the physi­cians’ cur­rent con­tract with the hos­pi­tal. On March 24, the physi­cians ap­proved a no-con­fi­dence vote in hos­pi­tal man­age­ments, with 82% of about 120 physi­cians vot­ing yes, ac­cord­ing to the med­i­cal group.

Levine said the physi­cians’ in­put is nec­es­sary to en­sure suc­cess. “I want to ex­plore this and de­velop this with the physi­cians,” she said. “This is not set in stone. Let us work to­gether.”

City of Hope’s not-for-profit foun­da­tion idea is a power play, a med­i­cal group con­tends.

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