For a lot of companies in the business of providing healthcare. These days, it seems bigger is always better. For decades, the industry has been consolidating. Health insurance companies have merged into big conglomerates that also own doctor and pharmacy businesses. Hospitals have gloamed together into big regional systems. They've gobbled up physician groups too, So there's a good chance your
local doctor works for a giant health system. More doctors worked as salaried employees than as owners of their own practices, according to a survey from the American Medical Association. That's never happened before. Welcome to Prognosis, bloom Brigs podcast about the future of healthcare. I'm your host, Michelle fake Cortes. For both patients and their doctors, what happens in the exam room is in recently influenced by big bureaucracies they
don't understand and they can't control. This has left a lot of patients unsatisfied and a lot of physicians burned out. But some doctors have said enough. Here's Bloomberg News health reporter John Tazzi with the story of one group of doctors in North Carolina who took a different path. In Charlotte, North Carolina, a pair of big hospital systems dominate the local healthcare market. The biggest, Atrium Health, is a powerhouse. Its annual revenue is more than twice as much as
its largest rival. Atrium has dozens of hospitals in three states, thousands of doctors, and tens of thousands of employees. A few years ago, a group of doctors who worked for Atrium did something unprecedented. One day in the fall of seen, cardiologist Dale Owen and his colleagues walked into a meeting with hospital managers and said they wanted a divorce. They wanted to become an independent group. Dale told me about
it recently at his office in Charlotte. Well, they looked at us like they were incredulous, you know, like, um not, how dare you? But it was so far into them, It's like outer space. How how could anybody conceive of such a thing? Dale and eight seven other physicians in the medical group were breaking up with atri m Health, the hospital system that they worked for, and I owned their practice. They told the hospital leaders that they wanted
to be independent. I'll never forget They said, what do you mean by independent and and how does that really look in your mind? Well, completely separated? Well, wouldn't you like to be part of this with us and this with us? No, we really want to just be independent. This was a big deal. For years, the health care industry has been moving in the opposite direction. It's become more consigned. I dated, hospitals have emerging with each other to form big health care systems. They've been buying up
doctors groups and outpatient clinics. The number of physician practices owned by hospitals more than doubled between twenty twelve and twenty eighteen. You've probably noticed this in cities across the United States. The banners of big hospital systems have spread to more and more neighborhood clinics and outpatient centers. As health care systems expanded their footprints. It was unheard of for a big group of doctors to split from their
hospital system owner. And Dale's group was big, about ninety doctors. They took care of more than a hundred thousand patients, about one out of every ten people in the county. The reason this was such a big move goes back to when Dale was first getting into medicine. Dale joined the practice. It was around this time that Americans were getting more and more concerned about the rising cost of medical care, and health insurance companies responded by putting new
limits on how much they would pay. And it really came down to the fact that there was such financial pressure on the group as a whole because of decreased reimbursement rates, the doctors agreed to sell their practice to Atrium. Dale voted against selling, but he understood why his colleagues had a different view. The insurance rates remuneration was going down substantially, and it puts such financial pressure on our group as it did others, that it forced physician groups,
independent groups especially to seek refuge with another entity. And the hospitals were the ones who raised their hands. This was part of a trend towards consolidation in healthcare that really hasn't stopped. There have been more than six hospital mergers in the past twenty years. Many local markets became
dominated by a handful of big health systems. One study found that more than of metro areas had highly concentrated markets for hospital care in and that's left hospitals with a lot of power when it comes to negotiating prices. Here's Austin Fract, a health economist affiliated with the Department
of Veterans Affairs, Boston University and Harvard. They can just say, well, we want, you know, more than last year, or we're not joining your network, and UM, in many cases, UH plans can't can't say no because it's either the only game in town or the major game in town. UM, and they're members, you know, they obviously need to have the hospital in their network, they need to see doctors, and so they're kind of over barrel. A lot of economists who have studied hospital mergers say they tend to
lead to higher prices. The hospital industry argues that bigger health systems can be more efficient and deliver higher quality care. They can reduce fragmentation and coordinate between primary care doctors and specialists, all of which can benefit patients. But some big hospital systems have been accused of using their market power unfairly. That includes Atrium, the system where Dale worked.
In the Department of Justice filed a civil antitrust lawsuit that accused Atrium of blocking health insurers from steering patients to less expensive hospitals. The government said that the restrictions quote reduced competition, resulting in harm to Charlotte area consumers, employers, and insurers. In a settlement two years later, Atrium agreed to modify its contracts without admitting to any wrongdoing. Atrium
declined to comment on the settlement. In a statement, the company said that quote Atrium Health prides itself on delivering the best health care to our patients and communities close to home. With strong roots in this community, Our patients in Charlotte and the surrounding areas have trusted us with their health and the care of their family members end quote.
Atrium is still the dominant hospital system in the area out and in recent years, as hospitals and insurance companies became bigger and more powerful players in the health care system, a lot of doctors felt this distance growing between them and their patients. They both felt that the big bureaucracies of health systems and insurance companies were driving up costs without improving care. We have a price problem, absolutely this as far as Mustachari, he runs a company called Allidate
that works with hundreds of independent physician groups. It is the prices, particularly on the commercial side, but it is also that we have a crappy health care system that doesn't take care of people very well and as fragmented, and no one's in charge, and no one feels accountable for the patient's outcomes, and we got to fix that too. It's not just a cost problem. There's also a quality problem,
and a utilization problem and a compassion problem. You may have noticed this as a patient as well, if you've been caught in a dispute between your insurance company and a big health system fighting over whether some treatment should be approved. Day and other doctors say these growing bureaucracies also getting the way of doctor's ability to do right by their patients. Part of the problem is that they
got paid for each service they performed. It was about volume, so you got you got paid for doing more rather than solving patients problems um, which is you know, poorly aligned and senate doctors had to cram more work into short visits and got to the point where in a fifteen minute office visit, about half the time was spent with the electronic medical record and getting all of the UH shot records in and putting in data and so forth, that only half of the time was actually spent with
the patient. UM and so that was not very fulfilling for patients nor physicians. With less time to deal with patients problems, doctors referred them to specialists. And so if patient might come in with the typical uh list of three or four things they wanted to talk about, and you really only have time to deal with one efficiently, and so you wind up creating all of these referrals to handle all of the other portions of what they wanted to have accomplished. UM and a lot of these
referrals are really silly. They just weren't needed. The physicians just needed more time to be able to spend with the patient, to be able to handle these issues and stop these referrals. But they didn't have any incentive to do that because they were paid based on how many patients they saw. This feeling of being on a hamster wheel turning through appointments is common among doctors. It contributes
to a pervasive feeling of physician burnout. That's why Dale began thinking about breaking away from the hospital system, trying to close the distance between himself and his patients. He says, it's time for doctors to take back their autonomy. So all of this and this push of volume, patients didn't feel fulfilled for positions didn't feel fulfilled. And then we got to a point um where after they changed how we were practicing and push more volume and so forth,
we just said we'd have enough. Dale wants to move toward a system where doctors get paid more for keeping patients healthy and out of the hospital. He wants doctors to spend more time with patients and avoid unnecessary referrals to specialists. And this is part of a bigger movement that's shaped the health care industry for the last decade.
And the visits are getting shorter and shorter and shorter because you gotta you gotta see more and more patients because I'm going to get paid on a per visit basis. As far as ad says, the traditional way of paying for healthcare favors big hospital systems. And the more market power you have, the more clout you have, the more bigger market share you have, the tougher you negotiate with the plan, and the more you get paid for doing the same thing right. Alladate is trying to get doctors
off the hamster wheel. The company works with independent physician groups who together take care of more than half a million patients. These doctors have all agreed to contracts that will pay them more if they can reduce the total cost of their patient's care. He says these contracts can tilt the balance of power away from big hospital systems in favor of leaner, more nimble, independent groups that can
reduce unnecessary costs. If you're just independent primary care providers who can act in the patient's best interest and think about just what do I need to do to keep this person from going to the emergency room of being hospitalized, And turns out primary care is the answer. Dale wanted to do the same thing. His practice joined the hospital system in the because they needed leverage with inferrors to
negotiate rates. But if he could change the way the doctors got paid, they wouldn't need to be part of the hospital system anymore. As Dale contemplated leaving in he spent months going around the country to meet with insurance companies,
hospital systems, and other physicians. He wanted to understand what it would take to survive as an independent group, and they taught me a lot, But it was really about could we create the critical mass and if we could, did we have the resolve to lock arms and go do this. Back in Charlotte, he started recruiting his colleagues to join him in an exodus from atri M. In secret,
they began to pot a course to independence. And so I met with about sixty five physicians individually first and in everybody's homes and playing patty cake with babies and things like that, and and to an individual, everyone was on board, but the hospital system did not make it easy. All the doctors had contracts with atri M, and those contracts had not compete causes. We had significant restrictive covenants in our contracts that prevented us from going out and competing.
And after months of talks with hospital management, Dale says, it became clear that they wouldn't release the physicians from their noncompete causes. The doctors each pitched in five thousand dollars to hire lawyers, and they sued to ask at M to release them from the contracts. And I'm literally negotiating on Easter Day, okay with the with the hospital system, and realized they're just not going to move off of
a particular position, and we weren't either. So we went ahead and filed the next morning The lawsuit argued that the non compete causes were invalid. The doctors also accused the health system of quote monopolistic and anti competitive actions. A few months after it was fild, Atrium agreed to let them split off. Atrium didn't comment on the lawsuit. The doctors had just a couple of months to set up the new independent practice. There was a lot they
needed to do. It's it's literally everything that has to be done. They couldn't keep their offices, equipment, or even the name of the group. All of that belonged to the hospital system. They decided to name the new group Tryon Medical Partners, after the street where the original practice was founded. They had to hire office staff, line up financing, and outfit new clinics spread across the city of Charlotte.
And so we're standing up eight buildings office sites, i should say, and one of them has four floors, so essentially eleven offices. And we were literally painting at three in the morning before it opened at seven. Doctors did the kind of work that doctors don't normally do. Um We had physicians putting in paper, towel, sand, and toilet paper rolls. They also sent out joint letters to a
hundred and fifteen thousand patients. The letters were carefully negotiated with the hospital system to let patients know about the breakup without swaying them one way or another. They could continue to get karat a t M with other physicians, or follow their doctors. The doctors had a sense of camaraderie and shared purpose that helped see them through snaffhoos. With the transition, the freight elevator went out in their main building as they were trying to build out four
floors of clinic space, delaying the opening. The steel, the wall board, um, anything and everything. They couldn't bring it up, and so they were literally people plumbers carrying stuff up ten flights of stairs. Try And officially opened on September with just two offices. It was a big gamble. Dale didn't know how many of their old patients would follow the doctors. Karen Stall, Tryon's chief operating officer, says, they didn't have to wait long to see if that bet
would pay off. We thought we had time. We were going to ramp up. We could build our team pretty readily over the latter part of eighteen um no way our phones exploded we had issues with the phones that were selected to begin with. They could not manage the volume that was coming in. Doctors shared the space by working in fifths, so we worked seven am to one pm in one shift of eleven and then two pm to eight pm was the second shift of different eleven physicians.
So that's money through Friday, and we did the same thing on the weekends and split them up as well. Eventually, the new group opened to nine clinics in and around Charlotte, including an endoscopy center in a newly built three story building. On a cold day in mid November, Dale is pointing at our Neon sign above Tryon's main office in Charlotte's South Park neighbor instruction building. The try On Medical name glows inflorescent lights from the top of the ten story building.
That was That was a heck of job getting that thing that's on there. Dale gave me a tour of a couple of Tryon's clinics. He banters with patients and staff. One long time patient observes that he smiles a lot more than he used to. Dale says the group runs more efficiently outside of the hospital system. In one example, he said they were able to save costs on real
estate because doctors didn't need as much office space. We felt like we had too much physician office space and that it was probably the least you last space in the entire organization, and so they shrank offices and streamed the number of exam rooms and our footprint just on the rent and so forth. It's saving three million dollars a year. The group's leaders say it can save all
kinds of money that's just wasted in bigger organizations. Frankly, being in the system, they don't hair about waste, they don't look for efficiencies. They are too big. Karen still Try and chief operating officer, spent sixteen years as an administrator at Atrium. So in the system setting, you're moving the Titanic, it takes months and months to get anything changed, moved, or accomplished. In an independent practice setting like this, we can do that on a time and Dale says that
they can be more competitive. He estimates that he can lower costs of medical care by ten to fifteen percent compared to a hospital owned group. So when a physician group leaves a hospital system, then the overhead of the hospital system is no longer having to be covered financially. Dale wouldn't discuss how much doctors are now compared to when they worked for the hospital, but all the physicians did put in their own money to fund the group.
Dale won't say how much, but that investment helped secure a bank loan that the group is liable for. We have skin, feet, and eyeballs in the game, and Dale says that makes them apt to be more efficient. He gave me an example of one way his group could reduce costs. He says, in a hospital system, there's a lot of implicit pressure to refer patients to specialists or other care inside the system. When they were part of Atrium, the doctor's got regular reports about how many of their
patients were getting referred to competing hospitals. I think that we've already started to see that some of these um unnecessary referrals and downstream spend are already decreasing. It's it's palpable. In a statement to Bloomberg News, Atrium said that of Tryon's patients have returned to the hospital system for some form of care. The statement also said that Atrium is the community's safety net hospital with a mission to treat all patients regardless of the ability to pay. It said
the health systems doctors are integral to the mission. Doesn't want to portray hospitals as the bad guys, but he says they've become too inefficient. It's it's not that the hospitals themselves are failed entities. That's not the issue. I love hospitals. I've got a lot of great friends in hospitals, do great work in hospital. But we can't ignore the fact that administrative costs of the past ten and fifteen
years of increased. It's difficult to get hard numbers to see how Tryon compares to the hospital system in terms of the prices they charge. But here's one sign of Dale's willingness to compete on price. Last summer, the state health plan proposed linking its payments to doctors and hospitals to the prices that Medicare pays. It would have meant pay cuts for a lot of providers because the payments would have been lower than what commercial health plans typically pay.
Deal cheered the plan on, while hospitals statewide opposed it. Ultimately, the state treasurer backed away from the proposal after hospitals refused to sign On. The Tryon group is also attempting to go around insurance companies and contract directly with employers. They call it Tryon Direct. The plan will offer unlimited primary care visits to employers in exchange for a fixed monthly fee. The doctors have signed up three employers so far.
Dale and his colleagues say they're just beginning, and try And has big ambitions to expand in Charlotte and beyond. The company's chief strategy Officer Gas Engaged, told me that he envisions a practice with potentially thousands of doctors and millions of patients all over the country. It's too early to say how far Tryon will expand its reek, whether it's a pipe dream to think that they can replicate what they've done in Charlotte in other cities or regions.
Dale predicts that more and more doctors will split from health system owners around the country. He says he's hearing from physicians who want to join all the time. We have dozen of physicians knocking on the door right now trying to get in of all different types of specialties and surgical specialties and so forth like that, from both
this county and other counties. Dale believes that try and will be more competitive if the healthcare industry really does shift from paying doctors for how many services they provide to paying for how healthy they can keep their patients. But most healthcare is still reimbursed on a fee for service basis, and there are a lot of factors that still point toward more mergers, more consolidation, and bigger hospital systems.
Trium could be just a footnote in a marketplace where the winning strategy for decades has been bigger is better, but Dale sees the company as part of a broader transformation he hopes will soon sweep the American healthcare industry. And that's it for this week's prognosis. Thanks for listening. Do you have a story about healthcare in the US or around the world we want to hear from you. Find us on Twitter at Fake Cortes or at jay Taws. If you were a fan of this episode, please take
a moment to rate and review us. It really helps new listeners find the show, and don't forget to subscribe. This episode was produced by Laura Carlson in tofor Foreheads. Our story editor was Rick Shine. Special thanks to Darrelle Dillard and health Care Team. Later Drew Armstrong. Francesca Levie is head of Bloomberg Podcasts. We'll be back next week with the new episode. See it then,