In Charlotte, one of the most expensive health care markets in the country, scores of doctors have split off from the area’s giant hospital systems. They can say they can provide better health care, for less.

By Mark Tosczak

In the prosperous suburbs north of Charlotte, some 42 primary care doctors have broken away from hospital giant Novant Health and joined with Holston Medical Group, a large, independent practice spread across three states.

For Dr. David Cook, a family medicine specialist and one of the physicians leading the effort, his first day independent of Novant will be today.

“I would say we’ve been ready for 25 years to do this,” said Cook, a family medicine specialist and one of the doctors leading the effort to split off from Novant. “It’s sort of the natural state of what we do — taking care of patients, putting them at the center.”

The cohort of 42 doctors is the second large group in the last year to split away from a major health system and form an independent practice.

In 2018, a group of 88 physicians left Atrium Health in Charlotte to form Tryon Medical Partners, a practice that now counts nearly 100,000 patients on its rolls.

The two groups’ decisions to leave their respective health system runs counter to years of physicians going the other way. Hospital systems have been snapping up physician practices and hiring doctors at a record pace for the last several years.

A Physicians Advocacy Institute study found that the percentage of physicians employed by hospitals nationwide increased from 25.8 percent in 2012 to 44 percent last year, with more than 74,000 doctors joining health systems.

In North Carolina, one of the state’s largest independent practices — High Point-based Cornerstone Health Care — was purchased by Wake Forest Baptist Medical Center in 2016. Cornerstone employed some 300 physicians, physician assistants and nurse practitioners.

Just last year, Raleigh’s Capitol Pediatrics and Adolescent Center, a 13-doctor group, affiliated with UNC Health Care, said it needed UNC’s financial and technological backing to stay viable.

“Hospitals are buying up physician practices a lot more than physician practices are leaving,” said Barak Richman, a health policy researcher at Duke Law School.

But, he added, as control over the practice of medicine shifts to hospitals, “I think that physicians might be frustrated by that.”

Expensive market

Tryon CEO Dr. Dale Owen, as well as Cook with the Holston group, say independent practices can provide higher-quality care at a lower cost than patients get in hospital settings.

“I had a patient that is having a cardiac problem that’s going to require some serial echocardiograms and they wanted to do it in the hospital,” Owen, a cardiologist, said. “I just had to say ‘No,’ because we can do the very same thing at the same quality for cheaper.”

Many outpatient services, which don’t require an overnight stay in the hospital, can be provided in a hospital or in a physician’s office. But such services are often cheaper to provide in a doctor’s office or outpatient clinic, and Medicare and other payers typically reimburse lower amounts for those services when they’re done at a doctor’s office instead of a hospital. Hospitals, in contrast, are permitted to tack on so-called facilities fees when they perform those procedures, increasing the overall price of a procedure.

And Charlotte is home to especially high prices when it comes to health care. According to the Health Care Cost Institute, which analyzed more than 1.8 billion of health insurance claims from 2012 to 2016, Charlotte is the 10th most expensive metro area in the country when it comes to overall health care prices.

Charlotte’s prices in 2016 were 18 percent above the national median. Raleigh, by comparison, was just 1 percent above the median and the Greensboro-High Point area was the same as the national prices.

“I believe there’s going to be a lot of external forces coming down on Charlotte,” Cook said. “The high price of health care is not sustainable.”

Owen and Cook both cite a movement toward “value-based care,” where providers are paid at least in part on the quality of the care they provide as well as its cost. Although large health systems in North Carolina are shifting toward value-based care, “the systems that we have in place now have not done what they need to do to shift that quickly enough,” Cook said.

Cost and quality

When health systems own more physician groups, Richman said, control shifts.

“The hospital becomes the locus of control, which I think in general means a bad thing, both in terms of cost and in terms of quality of care,” he said.

But independent practices are facing challenges of their own in remaining competitive and adapting to new models of health care, say physician group leaders.

Jeff James, CEO of Wilmington Health, a large independent practice with 23 locations, noted that under value-based care models, physicians end up being responsible for cost and quality outcomes even though they’re not providing — and may not even know about — all of the care a patient is getting.

“The health plans, they want to move the risk to us but they will not give us complete claim files that allow us to manage the population appropriately,” he said.

Independent physician practices also have less capital for investment in new technology, such as computer systems to help track patient outcomes and costs, and less margin for financial error when they adopt new payment models.

Those types of risks, James said, could spur more physician practices to sign on with health systems or join other nontraditional physician employers, such as health insurance companies or even venture capital-backed firms that are buying physician groups.

“It’s not uncommon for us to be approached a handful of times a year,” he said. But so far, the practice has said no to potential suitors.

“Where we find ourselves challenged with many of those models, and probably including hospital system models, is ‘How does the transaction improve the value of what we do?’,” he said. “If we can’t answer that in a way that makes sense, the conversation’s pretty short.”

Hospitals bring capital and more

For other practices, though, the value offered by health systems is clearer.

Before Cornerstone was purchased by Wake Forest Baptist, it had achieved some unusual success as part of a pilot program run by Medicare that aimed to lower costs and increase quality.

“We had the highest quality scores, and the lowest cost of any of the [Medicare accountable care organizations] that actually saved money,” said former Cornerstone CEO Dr. Grace Terrell, who still sees patients a few days a month in High Point while also leading a genomic medicine start-up in Alabama and juggling consulting gigs.

But the financial strain on the practice was considerable. In the end, Cornerstone turned to Wake Forest Baptist for the financial and other resources that the medical system could provide. And integration with health systems could provide benefits to other physician practices, she said.

“The advantage is, in theory, that you can have everyone on the same team really focused on getting the right care at the right place at the right time, and having an integrated information system,” she said. “But it’s a very, very hard thing for these big systems to do because they are so facility-focused with respect to their capital investments in the big hospital systems.”

Terrell co-founded and is still on the board of a company, spun-off from Cornerstone, that aims to help doctors and hospitals cut costs and improve the quality of care the same way the High Point practice did.

Last year, Wake Forest Baptist purchased High Point Regional from UNC Health Care, which had hired away some Cornerstone doctors while it owned the High Point hospital. The end result is that in High Point, which a few years ago had an independent hospital and a large independent practice group in Cornerstone, is now another part of the sprawling Wake Forest Baptist system.

When health systems acquire physician practices, Richman argued, prices go up, in part because competition between doctors and hospitals over services they both provide is reduced.

In Charlotte, Tryon Medical Partners in February opened a gastrointestinal surgical center that can perform many of the same GI procedures that patients sometimes get done in hospitals.

In a news release, Owen noted that the center is “an example of our ability to treat patients in our offices at a state-of-the-art facility at a lower cost than what the typical hospital would change for the same service. This is due in part to the fact that our patients at this clinic will not be required to pay unnecessary hospital facility fees that add no value to their quality of care.”