It’s late Friday afternoon, almost closing time at Metropolitan Internists, and all of the 16 purple chairs in the clinic’s compact, brightly illuminated waiting room are empty. An array of orchids, recharged a few hours earlier by their weekly watering, lends more serenity to the scene. Yet behind the front desk, three receptionists are still answering phones, making appointments, and shuffling through paperwork. To the rear of a wall behind them, hard-copy medical records of thousands of current and former patients loom just off the corridors that lead to a dozen or so examining rooms. Over time, Metropolitan has grown to occupy almost an entire floor of the Parkside Professional Building where, stowed away in the basement seven floors below, are even more of its patients’ records.
Many of Metropolitan’s 8,000 patients have been coming to the practice, across the street from Hennepin County Medical Center at the edge of downtown Minneapolis, for decades. The practice’s five physicians work hard, sharing on-call duty, with each taking a turn every fifth day and every fifth weekend. They still make daily visits to see hospitalized patients. Most patients can set an appointment on the day they request them. “I’ve never had a vacation of more than two weeks in 30 years,” says Dr. Ronald Kaufman, who joined Metropolitan in 1977.
The clinic has only three times as many support staffers as doctors, an unusually low ratio. About half of its gross expenses are overhead, also below average. The practice owns all of its equipment, and its rent is low. “It’s the old-fashioned way of practicing,” says Kaufman. “We’re kind of a dinosaur of medicine.”
But the most unusual thing about Metropolitan Internists is its independence. The doctors own the practice, govern it, and love being their own bosses. “We hate meetings,” Kaufman says. Yet now they need business meetings every two weeks; just three years ago, they met once every two months. There’s so much more to talk about now. Dr. Stuart Borken, who worked at Metropolitan for 12 years, retired 14 months ago. He explains that at age 70, he found himself too depleted to take night calls, and his colleagues were not willing to absorb the off-hours work. Borken still comes in every Friday to water the orchids.
Metropolitan lost some of its specialness when Borken retired. He functioned as the clinic’s social chairman, planning its holiday parties. A gourmand, he also provided nourishment for his colleagues. “I would cook for the office, bake for the office, bring in treats.”
Borken gave his email address to some of his patients—not to discuss medical issues but to chat about vacations, restaurants, or recipes. As for his consultations with them, “I would spend two hours with a patient if I needed to.” Borken liked working for a small independent practice owned by its doctors, rather than a clinic owned by a large corporation because, for one thing, you stayed put. The big players, he says, sometimes move their physicians around.
A powerful combination of forces, mostly by for-profit entities, has been squeezing physician-owned practices. The result is their absorption by larger organizations, often large hospitals or other “Big Med” entities. Alternately, some independent practices collapse when a key physician retires or leaves.
Why should you care? Minnesota has the best- performing health care system in the country, according to a recent report from the Agency of Healthcare Research and Quality. And comparing quality and costs at independent practices versus Big Med clinics offers no clear answers about superiority. But one recent study suggests that generally, independent practices outperform those owned by hospitals.
In February 2011, John Kralewski, professor emeritus at the University of Minnesota’s School of Public Health, and three colleagues released a study that found physician-owned practices did better than those owned by the hospitals. Kralewski is now senior adviser for the Medica Research Institute. The study, funded by the Robert Wood Johnson Foundation, covered two large groups of practices—256 of them scattered through each of 48 states and, separately, 52 more in the Twin Cities region. In the national group, the independent clinics had higher-quality care and lower costs; in the Twin Cities group, seven of the 11 best practices were owned by doctors.
The Federal Trade Commission and the Idaho attorney general are investigating practice consolidation in Boise, where two hospital systems employ more than half of the region’s doctors and are using consolidation to limit competition and drive up costs, the New York Times reported.
In 2010, the Minnesota Medical Association (MMA), noting the march toward consolidation, convened a task force to gather data about the trend, dig into its causes and implications, and come up with ways to help independent practitioners survive. The task force defined independent medical practices as those owned and governed by physicians who take business risk running their operations.
Dr. Robert Meiches, the medical association’s CEO, says the MMA embraced the task force’s conclusion: that independent practices are “an essential and valuable component of a pluralistic health care delivery system.”
Meiches points to striking contrasts in the financial condition and outlook for Minnesota’s independent practitioners. “Some are on solid footing; some are struggling.” But generally, he says, it’s getting “harder and harder” to remain independent.
Lyle Swenson’s streak of independence is rooted in his boyhood days as the middle child among five brothers, a circumstance that shaped his desire to strike out on his own. After his sophomore year at North Dakota State University, he took out a loan, bought a one-way airfare to Alaska, and flew to Ketchikan with his best friend. Jobless for three weeks, they finally landed work after a logging camp owner suggested they apply on a Sunday, when loggers hung over from Saturday-night binges often failed to show up. At first, the job looked impossible. The two men had to huff and puff their way up a mountainside, thick with trees and underbrush, to lock a cable around a clump of logs. Observing their struggles, their boss muttered, “Oh my God, what have I got here?” But by the end of the day, Swenson and his buddy had mastered the task. “That was fun,” says Swenson. “If you want to do something, just do it. I like running my own show.”
So in 2008, Swenson and another cardiologist, Mark Erhard, left a seven-physician independent practice to launch their own clinic, East Metro Cardiology, in Maplewood. By then, the two doctors had 40 years of combined experience as cardiologists. Swenson, president of the MMA in 2011-12, knew hundreds of primary care practitioners—the doctors who refer patients to specialty clinics like his.
Clinical and research physicians at Mayo
Big Med-employed physicians in the Twin Cities
But Swenson says starting up was difficult, adding that he can’t imagine anyone coming out of school trying it today. Early on, the clinic had the wrong name of its corporate entity on a form required by Medicare administrators, a slip-up that delayed payments from Medicare for three months. Nearly three-fifths of East Metro’s practice is Medicare patients, so it hurt when Medicare slashed payments to independent cardiologists by 40 percent and eliminated coverage for consultations. Cardiologists working for the large hospitals are reimbursed at notably higher levels than their peers at independent practices, he says. “Anybody in their right mind, except for me, would join a hospital because [cardiologists] get paid a lot more there.”
In 2010, mounting concern about the trend toward consolidation led the medical association’s trustees to adopt Swenson’s resolution for a task force, after it failed to act on a similar resolution he had proposed in 2007. Swenson praises what became the Independent Physician Practice Task Force’s efforts, but worries that continuing pressure will lead to more consolidation. He points to a surge of recent hospital mergers in Minnesota and the nation which, critics argue, have raised health care costs by giving hospitals more pricing power. What are the odds that his practice will still be standing as an independent clinic a decade from now? Slim to none, he says.
The problem isn’t lack of demand. In 2000, Dr. Michael Tedford launched a solo specialty practice, the Ear Nose and Throat Clinic & Hearing Center in Edina. Today, he and Dr. Geoffrey Getnick own the clinic, which employs 13 support staffers. Tedford concedes that the clinic “is endangered,” but is optimistic that it will survive as an independent. “My partner and I are turning away patients every day,’’ he says, adding that his clinic has been seeking to add two more doctors for the last three years (one doctor coming out of residency could join soon).
Maplewood-based Entira Family Clinics doesn’t seem likely to lose its independence anytime soon. Entira (pronounced enTIRA-ah), formed by the 2008 merger of two smaller family practices, operates a dozen clinics at east metro sites ranging from St. Paul’s East Side to Shoreview. The average age of its patients is 40. Fifty-seven of its 63 doctors own the company, which employs 380, which includes nurses and support staffers. Heads of six business units—technology, insurance, human relations, accounting and finance, clinical practice, and operations—report to Chief Operating Officer Paul Berrisford. Entira managed to survive the recession without any layoffs.
In October, Consumer Reports called Entira a “North Star State success story” in a 32-page special section that rated Minnesota practitioners. The magazine found that Entira’s Bellaire clinic in White Bear Lake led all 552 practices in the study, ranked by the percentage of patients meeting all of the targets for both diabetes and vascular disease. “Hardly a month goes by without someone contacting us to see if we’re interested in some kind of relationship,” says Berrisford, but “our patients don’t want us to be acquired.”
Entira has worked with a number of medical schools to offer training, internships, and opportunities for students to shadow its physicians. At least half of the clinic’s doctors got to know Entira through these programs before they joined the practice, Berrisford says. “We don’t want to hire employees” when recruiting doctors, he says. “We want to hire owners.”
Independence can go hand-in-glove with strength, particularly if you’re part of a large specialty practice such as Minnesota Oncology.
Sixty physicians work here, the largest private oncology practice in Minnesota, with 500 employees at nine clinics throughout the Twin Cities area, with plans to open a tenth in 2013 in Plymouth. The practice has benefited from its ties to US Oncology, a Houston-based management company that offers access to capital, clinical research, treatment guidelines, and technology expertise to more than 1,300 oncologists in independent practices across the country. Two years ago, McKesson Corporation, the nation’s largest drug distributor, acquired US Oncology for $560 million. Dr. Thomas Flynn, president of Minnesota Oncology since 2001, says US Oncology’s support has helped his firm grow, diversify, and provide an integrated approach to cancer treatment by bringing specialists of all kinds into a single setting.
Minnesota Oncology was formed in 1995, after Dr. Burton Schwartz, a practitioner at a Minneapolis oncology clinic, approached three similar practices in St. Paul. All merged, bringing 20 oncologists together. In the late 1990s, the practice began hiring radiation oncologists; it has five now. It has also added thoracic surgeons, dietitians, social workers, an insurance counselor for patients, and many other specialists. In 2001, Margery Sborov, whose husband Mark practices at Minnesota Oncology, founded the Angel Foundation, which has provided more than $2 million in grants for groceries, transportation, and other nonmedical needs to more than 500 cancer patients and their families. In 2008, the practice opened an integrated cancer center on the United Hospital campus in St. Paul, in a partnership with Allina Hospitals and Clinics.
Flynn says Minnesota Oncology has maintained stable profits, despite a steady ratcheting down of reimbursements and a sluggish economy. He credits its success partly to its independence, which he says has given it the flexibility to control quality, determine clinic locations, attract talent, and benefit from efficiencies of scale.
Flynn points to a Community Oncology Alliance study last spring, which found that 392 oncology practitioners nationally either went into affiliations with new partners or were acquired by hospitals in the last four and a half years. Independent oncology clinics with only a handful of physicians are “a thing of the past,” he says.
You pay more to receive more at the Specialists in Internal Medicine (SIM) clinic in Minneapolis. Most of the clinic’s business is in a traditional practice with patients of all ages, but in 1999 it launched its Executive Health Care plan to provide enhanced medical care for about 1,000 executives, many at Fortune 500-size companies in the Twin Cities. The executives’ employers pay a fixed annual fee, largely for a “deeply comprehensive” two-hour physical exam. Another tier, Executive Elite, offers year-round care in addition to the comprehensive physical. Such operations are often described as “concierge” or “boutique” practices. The clinic’s three physicians work closely with specialists at Abbott Northwestern Hospital and the Minneapolis Heart Institute, but they own and control both the executive program and the rest of the business. One of the three, Dr. Jason Reed, is chief of staff-elect at Abbott. A fourth physician, now completing his residency, is expected to join the practice soon.
In 2005, SIM’s regular practice opted out of Medicare. It has many Medicare patients, and the government program continues to cover their hospitalization, visits to specialists and prescriptions, but not their visits to the clinic itself. Patients often use private health savings accounts to cover their clinic visits. Typically, their physical exams take an hour. In most cases, patients receive a personal letter from their doctor after each visit.
Reed values the autonomy that comes with independence. He says that in large corporate-owned clinics, doctors typically are expected to see more patients and thus spend less time with them. Usually, he sees only 10 to 12 patients a day now versus 18 to 23 before he joined SIM. “I’m much less overwhelmed, much less stressed, and more gratified by the kind of care I can render.”
Because the clinic opted out of Medicare, he says, it was able to move its medical records online at minimal expense in just three months through a fast-track bidding process not complicated by regulatory oversight. The winning bidder charged $8,000; all the other bids were more than $100,000.
The doctors and their patients don’t have to think twice about whether a test or consultation done by the practice is covered by Medicare. Reed says the clinic’s business strategy reduces the time patients spend in hospitals. One of his patients was averaging three to five hospital stays annually before she came to the practice; now she’s coming in more often, once every two or three weeks, and has only one hospital stay annually. Recently, the doctors there decided to put hand sanitizers just outside the door to each exam room. “It was a five-minute discussion,” says Reed.
Imagine becoming a doctor, starting up a practice in your hometown and then making a success of it. This seems an impossible dream in a day when large corporations have grown so dominant in a field that has become so complicated. Yet Dr. Jennifer Gobel has done it. Against all odds, Gobel launched her own clinic, Mendakota Pediatrics, Ltd., in July 2004 in West St. Paul. Today, she remains the sole owner. Her clinic has 2,300 patients. The clinic recently doubled its physical space. A second pediatrician has joined the practice. Two nurses, a medical assistant, three front-office staffers and Gobel’s spouse, Mark, the business manager, bring the total staff to nine full -and part-time employees. Mark Gobel is also co-owner of a small business that sells disaster recovery services for IBM.
Jennifer Gobel, who graduated from Macalester College in 1981 and then from the University of Minnesota Medical School, worked for larger clinics before striking out on her own. When she launched her business, her former colleagues were not believers. “They thought I was crazy,” she says. Mendakota was the first pediatric startup in the Twin Cities area in four years; other small pediatric clinics continue to be absorbed by larger entities.
Her first year was rocky. Mark Gobel says it was hard to induce patients to leave other clinics. She faced major up-front costs—rent, equipment, personnel, technology—before her first patients came in the door. A breakthrough came in 2006, when one OB/GYN group began referring large numbers of patients to the clinic. The second pediatrician joined the clinic in 2009. One or the other of them, or a third pediatrician who backs them up, is always on call for patients.
“The major reason people come here is they are sick and tired of being at a big clinic,” says Gobel. “The biggest joy is taking care of my patients and their families, and knowing that there’s no administrator knocking on my door telling me I have to hurry up or see more patients.”
Back at Metropolitan, Ron Kaufman is recounting the clinic’s history as the longest-incorporated internal medicine practice in the Cities. Three physicians—Donald Amatuzio, Frank Martin, and Ralph Silas—founded the practice in the 1950s, after serving in World War II and the Korean War. They moved to its current location in 1976. Two year later, they rechristened Amatuzio, Martin, and Silas, which became Metropolitan Internists.
Big Med-employed physicians in greater Minnesota
Independent physicians statewide
Gradually, younger doctors replaced those who retired, but today that process has become more of a burden. In April, Metropolitan hired a 40-year-old doctor, trained in India, to replace Stu Borken. It took four or five years to find him, Kaufman says, explaining that many medical school graduates are opting for careers as “hospitalists”—internal medicine doctors who care for hospitalized patients—instead of joining clinics owned by their doctors. They prefer the pay, flexible vacation time, and security of working for the “Big Med” entities that own more and more hospitals.
Retirements down the road could mean more recruiting challenges for Metropolitan: Kaufman is 63; his partners are 70, 65, and 59, and the practice expects another retirement this year.
Then there’s the average age of the practice’s patients. It’s all over the place. “I saw a 101-year-old today, and a 25-year-old,” says Kaufman. But roughly half his patients are older than 65. Kaufman notes they typically require almost four times as much medical care as younger patients. Also, older patients are covered by Medicare, which has been reimbursing the clinic at steadily lower rates. Another concern: The dawn of accountable care organizations (ACOs), a function of the new federal health care act (often called “Obamacare”), which are being developed to hold down health care costs by giving clinics and other providers a fixed reimbursement amount to care for a specific number of patients. Advocates of the ACOs argue they will reduce costs by no longer determining reimbursements to physicians on the basis of how many tests or procedures they order. But for smaller independent clinics, such arrangements increase the risk that they won’t have enough revenue if an unusually large share of their patients gets sick.
Then there’s perhaps Kaufman’s most pressing immediate concern: the need to “go electronic” with Metropolitan’s acres of medical records. In 2009, Congress passed the HITECH Act, which seeks to encourage providers to put their medical records online by setting up a system of incentives and penalties that govern Medicare and Medicaid reimbursement to physicians. Making these conversions can be pricey. Some clinics have done it; Metropolitan hasn’t, so it still faces a large expense.
All of these factors make Metropolitan’s survival in its current ownership structure problematic. Fifteen years ago, when an earlier wave of consolidation was rolling through the health care industry, Minnesota’s “Big Med” corporations came calling to see if Metropolitan’s physicians would be willing to sell the practice. They weren’t, but next time may be different. Kaufman cites two other independent clinics in the Twin Cities that recently negotiated professional service agreements that led the clinics to swap their equity for financial support. Metropolitan, which has ties to Allina Health, has been in talks with Allina about a similar arrangement or an employment model where doctors would function as employees of Allina.
The oldest independent practice in the Twin Cities will survive, predicts Stu Borken, but probably not in the same form as today.
Once upon a time, Marcus Welby, MD, a family doctor who owned a two-physician practice, was the poster boy for the medical profession. Today, large corporations, dubbed “Big Med,” are gobbling up small and mid-size independent practices or picking up patients when these clinics close. Startups are as rare as house calls.
It’s not unlike what has happened in retailing (think Target and Wal-Mart) and manufacturing (think the auto industry, which in its earliest days had scores of car and truck companies). Except that in health care, the process has been more chaotic because it is playing out amid an intimidating maze of regulations, political wars, soaring costs, and cerebral debates about how best to care for easily the most precious commodity of all—life itself.
A Look at the Numbers
As the numbers suggest, Big Med dominates Minnesota. The biggest in terms of physicians is the Mayo Clinic, which says that more than 2,075 “patient care and research physicians” work at its sprawling headquarters complex in Rochester; 434 more work at Mayo Clinic Health System sites in Minnesota. The state medical association does not consider Mayo Clinic an independent practice.
Another 4,500-plus physicians in Minnesota work for large health care entities based in the Twin Cities (Allina Health, University of Minnesota Physicians, HealthPartners [including Park Nicollet], Fairview, Hennepin Healthcare System and HealthEast). About 1,300 more work outstate for CentraCare, Essentia Health, and Sanford Health.
The big are getting bigger. The HealthPartners-Park Nicollet merger, announced in August, brought roughly 1,500 physicians and nearly 100 clinics into the same tent.
In other instances, independent clinics are closing as doctors move to corporate-owned entities. In November 2011, a highly regarded doctor, Paul Gotlieb, left Consultants Internal Medicine, an independent practice in Edina, after 19 years there, to join Fairview. Many patients followed. Subsequently, the clinic’s four remaining physicians departed. Last June, Consultants closed its doors.
The St. Paul Heart Clinic, which was the only large independent cardiology practice remaining in the Twin Cities area, closed two years ago after sharply rising expenses and tightening reimbursements. Half of the 36-year-old practice’s 35 cardiologists went to Allina, half to Health- East. Today, only one of every 10 cardiologists in the metro area remains in an independent practice.
Doctors in independent practices:
The pressures have hit solo practitioners in Minnesota particularly hard, says Virginia Barzan, executive vice president at the Minnesota Academy of Family Physicians. In 2008, the latest year for which the academy has data, only 36 members remained in solo practices; in 1990, there were 89. By 2008, the share of members in solo practices was just 2.4 percent versus 17.6 percent nationally.
How did consolidation advance faster in Minnesota than in the rest of the country? Physicians cite the early emergence of HMOs, which brought large-scale managed care to the state in the 1970s.
Dr. Michael Tedford, co-owner of an independent specialty care clinic in Edina, says that the Twin Cities’ unusually large cadre of Fortune 500 corporations was a factor. An early-1990s push by these companies to lower the cost of health insurance helped spark mergers of several of the region’s largest hospitals, Tedford says.
Many independent physicians add that insurance reimbursement levels are lower in Minnesota than in many other states.
Young doctors, saddled with towering student loan debt, are opting for the higher starting pay and security offered by Big Med. Women, a growing share of new doctors, often prefer part-time work. “You can’t do independent practice on a part-time basis,” says Dr. John English, medical director at the Midwest Independent Practice Association, an alliance of 400 primary care physicians in Minnesota and Wisconsin.
Some say it’s too late to do much about the trend. “The horse is out of the barn,” says Fairview’s Gotlieb.
Tamping Down the Trend
Nonetheless, the Minnesota Medical Association hopes to slow the rush to Big Med. Two of its strategies: promoting the positives of independent practice to students doing residencies; and convincing legislators that more mandates could make it even harder for these practices to survive. In 2008, the association began staging forums for independent practitioners on topics such as electronic medical records, coding for reimbursements, and hospital policies.
Speaking up for the cause can be swimming upstream. English’s group created posters to tout the virtues of independence. “Independent practitioners . . . freer to give you more attention, more choices, and be your best advocate,” the posters declared. English mothballed the poster campaign after independent practitioners, traditionally not marketing-oriented, were reluctant to put them up in their clinics.
Dave Beal is a frequent contributor to Twin Cities Business. He is the retired business editor of the St. Paul Pioneer Press.