July 1995 Bulletin

Point of View

Urges vertical integration


by Donald M. Mauldin, MD

Donald M. Mauldin, MD, is a practicing orthopaedic surgeon in Dallas, Texas and chairman of the board, Allied Physicians of DFW, a recently founded multispecialty physician group.

The time has arrived for the medical profession to take back control of the delivery of medical care. As physicians, we must restore the dignity and honor of medicine. We owe it to each other and to those for whom we labor - our patients.

Lacking an unlimited budget for health care expenditures, physicians must assume total responsibility for the quality of care delivered and for controlling the cost of this care. No longer can our country or we, as individual physicians, afford to sit by and remain divided by outside forces that are incapable of organizing our profession and its attendant behavior into a finely tuned healthcare delivery system. We know the challenges facing our profession so we must answer the questions.

Do we organize ourselves along horizontal lines of specialists and primary care? Or, do we break down these recently erected barriers that pit specialists against the primary physician and join together in vertically integrated groups of physicians?

To remain segregated into horizontal groups will lead inevitably to total loss of control and the continued erosion of the physician's financial well-being. The ability of the physician to control the overall quality of care that patients receive will likewise be lost. The horizontal alignment allows the middlemen and third parties to reduce health care to a commodity bidding war. This results in progressively fewer dollars being directed to physicians for direct patient care while the dollars flowing into the third-party bureaucracy undergo massive increases. Unless we organize, we will fail to return the control of health care to those most capable of managing the delivery system. It is generally accepted that the physicians directly or indirectly control up to 80 percent of all health care expenditures. With this fact in mind it should be self-evident that the logical point of control should be in the hands of this group. To relinquish the control to third-party payers or large hospital chains is tantamount to abdicating our responsibility to our profession and our patients.

The general incidence of disease and catastrophic illness in any large group of patients is an actuarially determined statistic. The statistical risk exists no matter who controls the delivery of health care. The true financial risk to pay for these events is directly related to the ability to control physician behavior. Not only does this mean controlling the incentives that influence physician behavior, but likewise requires the physicians to organize themselves into integrated groups that promote cost-effective utilization of hospital facilities and services.

Therefore, since physicians direct the spending of the majority of health care dollars and the challenge of health reform depends on controlling physicians' behavior, it is only logical that integrated groups of physicians should be the most capable of succeeding in this arena. If we fail to organize and accept the challenge, we can only blame ourselves as we stand by and watch the erosion of freedom for the two most important groups in health care: physicians and their patients.

The restoration of health care control to its professionals will occur only if we align ourselves into vertically integrated, multispecialty groups. With proper integration and alignment of incentives, physicians will be capable of delivering quality health care in a cost-effective manner. Integration will allow for the delivery system to move away from the current piecemeal and fragmented fee-for-service system with its attendant inflationary effect and into a more predominantly prepaid environment. This transition allows the physicians to align their incentives with those of their patients in striving to achieve the best value for all involved.

True integration will allow physician groups to move away from the failed attempts to realign physicians' income with a somewhat illogical system of RBRVS as it relates to providing health care services. Likewise, attempting to divide capitated dollars among the various specialty and primary care groups can be eliminated by integrating. We, as a profession, must strive to eliminate divisiveness so that all members of the group are aligned with one goal in mind - to maximize value in the delivery of health care to our patients.

Physician organizations, both primary and specialty, must unite as a single profession to move forward in the rapidly changing environment of health care reform. The capital and expertise to organize ourselves are available. We must move away from individual attitudes among the various specialty societies which constantly strive to further their specific specialty needs. Instead, we must join together in a unified effort, put our past differences behind us and move forward to take back the control of delivering quality health care to all Americans. The integration required to accomplish this will only happen if we dedicate our full and undivided effort to it.


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