A strange example of health care competition unfolded at Northstar this summer. Publicly funded, not-for-profit Tahoe Forest Hospital and private medical group Truckee Tahoe Medical Group went head-to-head, vying for the contract to operate the medical clinic at the base of the ski resort.

After a series of events that angered Truckee Tahoe Medical Group (TTMG) doctors, who originally thought they were partnering with Tahoe Forest Hospital on a proposal, Tahoe Forest Hospital and CEP America won the contract to operate the Northstar clinic. CEP America, based in Emeryville, Calif., is one of the nation’s largest acute care staffing and management companies. The company currently manages Tahoe Forest Hospital’s emergency room.

“What happened really kind of blindsided us,” said Rick Ganong, president of TTMG.


While TTMG will no longer control the clinic — which it had done for the past eight years, at times in partnership with Tahoe Forest Hospital —  its doctors will be offered positions to work under Tahoe Forest Hospital in partnership with CEP America at the clinic.

TTMG partners said they were expecting to submit a combined proposal to Vail Resorts for the operation of the clinic, and had even sent the hospital a copy of their proposal to review. The hospital did not reciprocate, Ganong said, and TTMG realized at the last minute that it would be competing against Tahoe Forest Hospital, not partnering with them, for operation of the clinic.

The process has put a strain on the relationship between Tahoe Forest Hospital and the largest remaining private primary care practice in the region.

“Our confidence was shaken by the manner in which this was handled,” said Gina Barta, a long-time doctor at TTMG who also serves as the Tahoe Forest Hospital District’s chief of staff, at a July 23 meeting of the Tahoe Forest Hospital District Board. “What we are asking for is just improved respect and communication.”

Tahoe Forest Hospital said it won the contract for the clinic through the quality of its proposal.

“The greater focus of the partnership is to improve the overall coordination of care … advance clinical quality, and benchmark outcomes as we do in the hospital,” wrote Tahoe Forest Hospital CEO Bob Schapper in an email to Moonshine Ink. “This would serve to support resort guests by advancing guest services at a much greater level than is typically available in a private medical practice.”

The clinic will also offer occupational health services to Vail Resorts employees, a service that TTMG could not provide, according to Tahoe Forest Hospital.

But the competition for operation of the ski clinic highlights a trend of health care consolidation in the Truckee/North Tahoe area that has left few independent private practices in the region. And with Tahoe Forest Hospital now managing the Northstar clinic, it represents an increase in the control that Tahoe Forest Hospital has over almost all elements of local health care delivery.

Health Care Consolidation
Health care consolidation is not new or unique to Truckee/North Tahoe. Across the nation, doctors’ offices overwhelmed by health care regulation, complex billing systems, and exposure to liability have opted to join their local hospital system in one way or another.

A June 2013 New York Times article entitled “Health Care’s Overlooked Cost Factor,” said that “in 2002 doctors owned about three in four physician practices. By 2008 more than half were owned by hospitals.”

In Truckee/North Tahoe, that trend has taken the form of the Tahoe Forest MultiSpecialty Clinics — a group of 35 doctors that all practice under the umbrella of the Tahoe Forest Health System. Before the growth of the multi-specialty clinics, many independent private medical practices populated the area, like North Lake Pediatrics, a practice that was recently absorbed into the hospital-managed clinic.

In many ways, the multi-specialty clinic model works for both parties. Doctors can focus on practicing medicine, while hospital administrators handle the business side of health care.

But the consolidation of health care also squeezes competition out of the equation, and some health care experts say that decreased competition is dramatically driving up the cost of health care.

The New York Times’ article said health care competition is “the elephant in the room that appears to have been overlooked in the debate over how to rein in the galloping cost of health care.”

And some studies are skeptical that the promises of consolidation — improved efficiency, quality, and integration of health care delivery — have been delivered on.

A June 2012 Robert Wood Johnson Foundation study entitled “Impact of Hospital Consolidation — Update” noted that “physician-hospital consolidation has not led to either improved quality or reduced costs. Studies find that consolidation was primarily for the purpose of enhanced bargaining power with payers.”

That increased bargaining power with payers has led to rapid price increases following health care consolidation. A 2009 study by Leemore Dafny of Northwestern University showed that hospitals increased prices by an average of 40 percent immediately following mergers with nearby rivals.

TTMG has been the outlier in this widespread consolidation. Founded more than 50 years ago, the private practice operated four offices in Truckee, Tahoe City, Squaw Valley, and, until recently, Northstar. While the doctors have always collaborated with the hospital by referring patients to Tahoe Forest Hospital for procedures that they can’t complete or by staffing emergency room shifts at the hospital, the practice has never been controlled by the hospital.

“We ran a very efficient and lean operation, something we have learned to do, having gained the experience of operating these sorts of clinics over the years,” said Ganong in an email to Moonshine Ink.

The Re-emergence of Primary Care
Federal health care reform has sent health care providers scrambling to adapt to monumental coming changes. Those changes are shifting the very foundations of the health care business model, like Medicare reimbursement levels and fee-for-service payments.

The Holy Grail of health care reform has been the removal of the perverse financial incentive that rewards health care providers for the more sick and injured patients they have. Like power companies that promote energy conservation, health care reform seeks to turn the tables on that financial formula underpinning health care, and to refocus on rewarding quality primary care and preventative medicine that keeps people from expensive medical tests and treatments.

Glen Stream, board member of the American Academy of Family Physicians, said that patient access to health care is threatened by a payment system “that has overvalued procedures and undervalued the often time-intensive primary medical care that would prevent the need for those procedures” in a statement published on the American Academy of Family Physician’s website.

But large hospitals and the overall health care system might find adaptation to these new reforms more difficult. The health care delivery model has been so focused on rewarding specialists that today few medical students enter primary care, and hospitals have built an infrastructure that focuses on highly lucrative specialties in health care and profitable diagnostic imaging and testing.

Hospitals are now scrambling to court primary care doctors as they become the centerpieces of “accountable care organizations,” which are integrated networks meant to coordinate care and bring down health care costs under federal health care reform legislation.

Experts say the shortage of long-undervalued primary care doctors may make for intense competition between hospitals and private practices for these doctors services once health care reform adds more than 30 million newly insured health care consumers into the marketplace.

It’s hard to know if the increased focus on primary care is what spurred Tahoe Forest Hospital’s renewed interest in controlling the Northstar clinic. But Bob Schapper, Tahoe Forest Hospital CEO, admitted that both the hospital and private practices are positioning themselves to react to unprecedented changes in health care.

“We are all fearful. Every one of us in this room cannot predict what will be three to four years in front of us. It is a fuzzy crystal ball,” said Schapper at the Tahoe Forest Hospital Board of Directors meeting on July 23 when discussing the Northstar clinic.

Still, John Falk, a past board member of the Tahoe Forest Hospital District, said that TTMG must be disappointed with losing control of a clinic that they built just as the Northstar community was maturing into a busy resort destination.

“They took on a role that was probably not the most profitable extension of their business, but they took it on as a community service because there was a gap in service,” said Falk of the early days of the clinic.

The Cost to the Patient and the ‘Facility Fee’
Both Tahoe Forest Hospital and CEP America said that the prices at the Northstar clinic will remain similar to the prices that were charged under TTMG.

“You should not suspect that the fee will be going up with us,” said Dr. Rob Hamilton, CEP America’s regional director for Northern California. “I think that our charges will be fair and reasonable and market-based.”

The company will, however, be charging a “facility fee,” a flat fee tacked onto bills for general use of the facilities. Dr. Hamilton said CEP America’s facility fee will be reasonable, and is a necessary charge to fund the operation of the clinic and pay for overhead costs like nursing staff, rent, utilities, and other overhead.

Truckee Tahoe Medical Group did not charge a facility fee. They financed overhead, like rent and nursing staff costs, through individual charges for medical services. The one exception is that TTMG did charge a “global fee” for more complicated cases that required follow-up doctor visits — but that one charge paid for multiple doctor visits, said Ganong.

Facility fee charges have come under intense scrutiny across the nation as more and more outpatient clinics are bought by hospitals and patients see hospital-sized “facility fees” tacked onto bills for simple outpatient procedures. Patients have complained that the fee drives up the cost of health care by hundreds, and sometimes thousands, of dollars.

A ski clinic bill from Vail Valley Medical Center submitted anonymously to Moonshine Ink illustrates how much cost the facility fee can add to a simple procedure. The bill showed a knee X-ray procedure billed at $270. Two professional fees were added to the bill for $244, which would have made for a bill of $514. But the hospital-owned clinic tacked on a $747 “emergency room fee,” more than doubling the cost of the clinic visit.

Dr. Hamilton said CEP America’s charges will be much less than hospital facility charges, and one single fee will account for both professional fees and the facility fee.

But Ganong, who intimately understands the finances of running ski clinics from years of operating the Northstar and Squaw clinics, said, “Anytime an emergency room group staffs something, the charges almost always go up.”

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