Dale Owen has been called many things, depending on who’s talking. He’s a cardiologist with a “bullseye” on his back, who is fighting to resurrect a dinosaur: independent, doctor-owned practices.
Last year, he led 88 doctors away from Atrium Health, North Carolina’s behemoth hospital system. This year, he’s fighting to free seven primary care doctors from CaroMont Health. He wants to set them up right across the street, under the auspices of Tryon Medical Partners.
Across the states, other physicians are eyeing Owen. Some called him a visionary who fired a “shot heard round the health care world.” Others wondered whether he would last the year.
“Dale has got an almost religious fervor about this. He believes this is the future of health care,” said attorney Noah Huffstetler, who represents the seven primary care doctors in their lawsuit against CaroMont. “Everyone knows that the cost of health care is unsustainable — and Dale’s idea is that by physicians getting control of their practices … they can offer high quality care at a lower cost.”
When hospitals own primary care doctors, patients feel the difference. Owned primary care doctors face pressure to refer within the system, whether they’re sending patients to the best doctor or not. Patients also face higher costs, as hospitals can charge them extra fees that can total hundreds or thousands of dollars.
Owen dragged people out of retirement, hunted for office space on the sly, had doctors answering phones for weeks — all to create Tryon Medical Partners. He wants to kindle a movement that will burn across the nation.
“It’s about doing what is right for patients. It’s corny, but it’s why we went to med school,” Owen said. “If physicians don’t do this and wake up together … the feds are coming, and it’s going to be a single-payer system. I don’t think we want the government controlling all of health care.”
“They thought this might be their last shot at practicing medicine the way they went to school to do it,” said Marni Carey, executive director of the Association of Independent Doctors. “The young doctors thought it might be the last dinosaur, and the old doctors remembered the way it used to be.”
One of those young doctors, Dr. Michael McCartney, is suing CaroMont to escape his restrictive covenant. He says he lost control of his practice three years ago, when he switched to the hospital’s IT system, and he wants it back.
“It became more what’s best for the hospital system,” McCartney said. “We lost control of the ability to set the cost, so it became hospital pricing instead of out-patient family physician pricing. So, those patients with a high deductible are suddenly getting hit with more charges, and we can’t change that.”
When hospitals gobble up physician practices, prices jump an average 14%, raising insurance premiums and deductibles.
“There’s been quite an appetite on behalf of hospitals, and that’s not a trend that has been positive for consumers or even doctors,” Carey said. “Consolidation only drives prices one way — straight up.”
The N.C. Healthcare Association, which represents hospitals, didn’t respond to voicemail and email messages from Carolina Journal seeking comment for this story.
Millions and billions: Snapping up independent practices, and your wallet
At the end of the day, this is about money.
By themselves, primary care doctors are worth little. On the ladder of doctors’ salaries, they dwell at the very bottom. There’s a mounting shortage of primary care doctors, as medical students eye the salaries of specialists — who can make almost three times more than primary care doctors — and specialize.
But to a hospital, primary care doctors are worth much more.
They control referrals. As the first point of contact a patient has with the medical industry, primary care doctors decide where to send patients who need to see specialists, get tests, or receive treatment. They are the gateway to the medical system — and whoever controls the entrance controls the building.
Owning primary care doctors is even more lucrative than it seems. Because hospital systems provide charity care, Congress allows them to slap patients with fees forbidden to independent physician practices.
These facility fees can cost hundreds and thousands of dollars, without adding value for the patient.
“[It is] one of the peculiarities and stupidities of our health care system,” said Georgetown Law professor David Hyman. “You can dramatically increase the payouts from the insurer and feds by bringing the doctor in-house and billing the services he provides as though they were provided by the hospital. It’s crazy. It’s just a rip-off. No other business could get away with this nonsense.”
If a health system keeps referrals within its system, it can rake in facility fees at each step of a patient’s referral process.
It’s illegal to control a physician’s referrals. But it’s common enough that it has its own slang: “leakage” and “keepage.” When they left Atrium, the doctors accused the system of keepage.
“When you have a leakage survey, the intent is to stop the leak. How do you do that without saying it? You run leakage surveys, and let everyone see it and know that Big Brother is watching,” Owen said. “They never came to us and told us never to refer outside. That would be illegal. But a leakage survey is the next best thing.”
The primary care doctor’s case against CaroMont hinges on captive referrals. McCartney said the “vast majority” of his referrals stay within the CaroMont system, but that he would like to refer patients to the best available care.
“There are definitely lists keeping percentages of in-house referrals and referrals leaving the system,” McCartney said. “It’s definitely published, and physicians are definitely aware of what their own referral patterns are.”
The seven primary care doctors suing to leave CaroMont hold at least $120 million in referrals. When Tryon’s 88 doctors left Atrium, the system lost more than $1 billion in referrals, said people familiar with the matter.
CaroMont said it offered “fair and reasonable options” to the doctors who wanted to leave for Tryon.
“If you have competing hospitals, just like if you have competing hamburger stands, whoever has the best product should win the day, not who puts a fence around the customers,” Owen said. “And that’s what this is really about: not having to compete on quality … it’s truly about captive referrals.”
The cost of consolidation
Months ago, State Treasurer Dale Folwell showed up at the clinic, waving a torn newspaper article and demanding to see Dale Owen.
The two Dales share a common vision and a common enemy. Folwell is battling hospitals over pricing transparency; Owen is wrestling them over restrictive covenants.
Tryon Medical Partners was the first to sign onto Folwell’s Clear Pricing Project, but Folwell has another reason to like the independent practice.
Owning primary care doctors helped the hospital systems sink Folwell’s reforms.
“It gives them more market power. The more assets they own, the harder it becomes to exclude them from the network, especially if they own most primary care doctors,” Robert Wood Johnson Foundation senior policy adviser Katherine Hempstead said.
As hospitals tighten their control of the market, it’s almost impossible to fight with antitrust regulations. And so some experts say Owen’s vision is the free market’s answer to growing consolidation in health care.
“If hospitals start buying them up, one or two doctors at a time, you will eventually get to a duopoly [or oligopoly],” Cory Capps of Bates White Economic Consulting said. “Yet all you had along the way is little tiny transactions that if the [government] was to investigate, people would say, are you kidding me? … That’s where the breakdown happens.”