Health Check

Management strategy influences medical treatment 

Woman with both hands on her pregnant belly.

In today’s healthcare landscape, physicians generally have the option to keep running their own practice, sell to a hospital and become a salaried employee of that facility, or sell to a physician practice management company (PPMC). For doctors, it can seem like a no-brainer: Management experts, often private equity firms, offer to handle the logistical and financial drudgery of their practices, leaving the doctors to focus on patient care.

However, Assistant Professor Ambar La Forgia has found that even PPMCs claiming to preserve physician autonomy can alter clinical outcomes for better or worse.

C-sections are more profitable than vaginal births because insurance companies typically pay out more in reimbursements.

The study, published in Management Science, examined the strategies adopted by PPMC-owned obstetrician and gynecologist practices and found they influenced rates of cesarean sections for low-risk patients.

La Forgia tracked three PPMC-owned practices that together accounted for more than 40% of Florida’s OB-GYNs between 2006 and 2014. One PPMC focused on attracting “value”-based contracts, which link payment to clinical performance by providing clinical management services, while two focused on raising revenue by providing financial management services and negotiating higher-paying, fee-for-service contracts, which link payment to quantity of services.

C-sections are more profitable than vaginal births because insurance companies typically pay out more in reimbursements. But unnecessary C-sections can increase risks for both mother and infant, so a rise in C-sections performed on mothers at low risk for childbirth complications can raise suspicions.

La Forgia found that the OB-GYN practice focusing on clinical management cut C-sections for low-risk women by 22%. Those that focused on financial management showed a 10% to 11% rise in C-sections.

Notably, the two financially managed PPMCs performed more C-sections on privately insured patients than those insured by Medicaid, the government insurance program that typically covers people with lower incomes. Florida, La Forgia notes, is one of the few states where Medicaid reimburses physicians at the same rate for C-sections and vaginal births.

“Even though PPMCs say they preserve physician autonomy, managerial changes do appear to influence physician treatment choices,” says La Forgia.