Southampton Hospital Absorbs Private Practices: Changing Times, Or Part Of A Strategy?

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In an age of drastically changing health care—higher expenses and lower reimbursement rates included—Southampton Hospital has quietly been absorbing private physicians and practices, joining a national trend that proponents say keeps doctors’ practices alive.

The opposing argument holds, however, that the hospital is aggressively buying up the practices in an attempt to create a monopoly of employed physicians, thereby driving local, independent doctors out of practice, or dictating how they practice and driving up costs. No physician was willing to voice this position on the record, but the opinion lingers with some privately.

The hospital signed its first physician to its Meetinghouse Lane Medical Practice, a not-for-profit closely affiliated with the hospital, in late 2007. The practice has been “growing ever since,” said Dr. Frederic Weinbaum, the hospital’s executive president for operations and chief medical officer. To date, the practice includes 32 medical providers, including physicians, nurse practitioners and physician assistants.

Bob Chaloner, the president and CEO of Southampton Hospital, and Dr. Weinbaum, in an interview on Friday at the hospital, explained how the hospital traditionally was a freestanding entity and the doctors were always independent. But times have changed.

“In the last few years, health care has changed pretty dramatically. It’s gotten a lot more complicated. It’s gotten a lot more expensive, and insurance companies don’t reimburse the private practices the way they used to, so many of the practices are having trouble standing alone,” Mr. Chaloner said.

He added that on the East End, in particular, with its high cost of living, doctors with private practices were being priced out of the market. When he and Dr. Weinbaum arrived at Southampton in 2006, he said, it was a “real crisis with the number of doctors dwindling.”

The largest practice in Southampton had dropped from 15 or 16 doctors to two, both of whom said they were leaving the area, Mr. Chaloner recalled. “That right there was the impetus for taking action. We said to the hospital board, ‘We’ve got to reorganize the doctors in this community if we’re going to keep doctors in the community.’”

Mr. Weinbaum said it’s less a matter of acquiring doctors’ practices than it is of helping them survive and stay in the area. Doctors on their own, he said, have little capacity to negotiate with the companies that provide payment for care. Commercial players wouldn’t negotiate with them and would offer a pay scale significantly below what Medicare would pay them.

“When that happened, the doctors, who were being treated by the companies as if they were in an area of the country that is rural and low-cost, were actually living in the Hamptons,” he said. “If you believe the Hamptons are farm country, then good luck to you, because you won’t survive out here.”

Using the hospital’s leverage, they can negotiate for better reimbursement rates, he said. Also, the hospital can recruit new physicians if there are significant gaps in specialty coverage—the first board-certified rheumatologist was recently recruited to come under the hospital’s umbrella—and can provide a salary and job security for doctors coming out of medical school with large debts. Expanded insurance coverage is another plus.

“One of the doctors came up to me and said, ‘Thank you for giving me my life back,’” said Mr. Chaloner. “I asked her, ‘Why?’ and she said, ‘Because I used to have to see patients all day, then go home at night, sit down at the kitchen table and figure out how to pay all the bills. Now that’s your job.’ We are not only giving them the financial ability to survive in their practice, but it’s almost a quality-of-life issue that we can help with.”

But one specialist in the community, a private physician who has privileges at Southampton Hospital, and spoke on condition of anonymity for fear of repercussions, strongly disagrees. “They’re really keeping everything under one roof for the benefit of the hospital,” he said, adding that the hospital gains control over the physicians by “buying them up” and will gain negotiating power with insurance companies.

“A lot of them go for that carrot, that dangling carrot,” he said of physicians. The physician described the hospital’s attempt to buy up practices as further intimidating doctors who are already fearful of not being able to keep their doors open with the cost of living going up and Medicare not keeping up with the cost of what it takes to pay rent. The result is a better bottom line for the hospital, he said.

The pace has quickened in the wake of last fall’s announcement that the hospital would deepen its affiliation with Stony Brook University.

A private physician, the doctor opined, is also more invested in his patient, but a hospital-employed physician has more of the “9-to-5 attitude” of getting paid no matter what.

“I’m just nervous,” he said. “I’m hoping a big institution isn’t going to come and sweep Southampton away and push the local doctors out.”

Dr. Weinbaum, for his part, had a counterpoint: “I think there are doctors who, if they had their druthers, would rather be independent. There is something nice, a romance, about having your own business, about signing all the checks. You also can’t make it a mom-and-pop family business under a larger group of doctors. The problem is simply the economics.”

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