Highmark working hard to reverse flight of doctors

Dr. Blair Jobe joined struggling West Penn Allegheny Health System this summer after working five years for Western Pennsylvania's dominant hospital network UPMC.

Jobe, a 47-year-old surgeon considered to be among the region's top specialists in esophageal diseases, said he couldn't resist the opportunity to be a part of a new system being set up by insurer Highmark Inc. that intends to reshape the cost and quality problems plaguing the American health care industry.

“The nation is really watching this relationship,” Jobe said, referring to Highmark's proposed $475 million acquisition of West Penn Allegheny. “It's an experiment in addressing the problems in health care.”

Jobe is one of six physicians that West Penn Allegheny and Highmark have lured away from UPMC in the last six months, thanks to a boost in money from deep-pocketed Highmark — the state's largest health insurer.

While the number is small — UPMC employs more than 3,200 physicians — it represents a significant departure from the decidedly one-way trend of doctors fleeing West Penn Allegheny for UPMC in the last dozen years.

“It started right after AHERF,” said Dr. Tony Farah, West Penn Allegheny's chief medical officer, referring to the 1998 bankruptcy of Allegheny Health, Education and Research Foundation, the predecessor of today's five-hospital West Penn Allegheny system.

“The perception, and the reality, is that quality of care has always been very good” at the system's hospitals, Farah said. “But from a job-security standpoint, we were not viewed as a secure environment long term.”

And with good reason. The system has bled money for years, losing more than $180 million from operations in the last three financial years.

Through the first nine months of the current fiscal year, the system lost $87.8 million on operations.

The system's flagship hospital, Allegheny General on the North Side, closed its Suburban Campus hospital in Bellevue in 2010, and the system was in the process of shutting down West Penn Hospital in Bloomfield when nonprofit Blue Cross Blue Shield company Highmark stepped in last year.

Highmark is developing a $1 billion integrated health system to compete with UPMC, once a newly extended reimbursement contract between the two organizations ends on Dec. 31, 2014. To provide health care services for its 2 million members in Western Pennsylvania, the insurer wants to buy West Penn Allegheny — a deal awaiting approval from the state Insurance Department — and it is taking control of Jefferson Regional Medical Center in Jefferson Hills.

It is buying land in communities around Pittsburgh, such as Cranberry, Pine, Ross, Monroeville and South Strabane, for a network of outpatient medical centers, and acquiring a number of independent physician practices throughout the region.

“Clearly one piece of developing the system includes owning physicians,” Highmark spokesman Aaron Billger said.

The latest is the hiring of Dr. Mark Wholey, which Highmark announced a week ago. Wholey, described as one of the nation's leading interventional radiologists, was previously affiliated with UPMC and practiced at the system's Mercy, Shadyside and St. Margaret hospitals.

West Penn Allegheny employs 630 physicians, up from 557 a year ago, a 13 percent increase, spokesman Dan Laurent said. The totals don't include Highmark, which has hired 96 physicians this year, including the more than 60 doctors it picked up in January when it bought Monroeville's Premier Medical Associates, the region's largest independent practice.

Farah said that since Highmark announced plans to acquire the system, he's heard from hundreds of doctors interested in leaving UPMC.

“They feel it's a top-down approach,” Farah said of UPMC's management. “They would like to have more say.”

UPMC has added nearly 400 new physicians to its staff in the last year, a 13 percent increase, spokesman Paul Wood said. “We're not having any problem attracting physicians from around the nation and around the region,” he said.

UPMC isn't concerned about losing a few doctors, he said.

“We're getting a lot of phone calls from West Penn physicians,” he said. “They're looking for an out from a failing institution.”

The competition for physicians, who are critical to retaining and growing patient volumes, has sparked a bidding war, experts say.

“There are active local recruitment campaigns by all providers,” said John Krah, executive director of the Allegheny County Medical Society.

UPMC has been buying up physician practices for years without competition, said Michael Cassidy, chair of the health care practice at Tucker Arensberg, a Downtown law firm.

“The compensation paid was controlled by the fact that there weren't really any other options,” Cassidy said.

Now, “Demand for physician practices has produced a sellers' market,” he said. “This is an opportune time for them” to negotiate new high-paying contracts.

Physicians of all types are increasingly being employed directly by health systems rather than starting their own private practices, according to Merritt Hawkins, a Texas company that helps hospitals recruit physicians. It recently estimated that 75 percent of doctors will be employed by hospitals in the next two years. That's up from 11 percent in 2004.

And along with employment come fat paychecks, paid malpractice insurance, signing bonuses and other perks, Merritt Hawkins said in a 2012 survey of doctor compensation.

“To incorporate required technology, comply with regulations, and participate in new delivery models like Accountable Care Organizations, physicians today almost have to be part of larger practices or be employed by hospitals,” founder James Merritt said.

Gastroenterologists, such as Jobe, earn an average base salary of $433,000 — up 14 percent from five years ago, Merritt Hawkins found. Radiologists such as Wholey receive salaries on average of $358,000.

And more hospitals are offering new doctors production bonuses, relocation assistance, signing bonuses, and paid benefits such as health and malpractice insurance, retirement plans, and will even pay off medical school loans, Merritt Hawkins found.

Hospitals may pay out a lot, but it's money well spent, a previous study by Merritt Hawkins showed.

In 2009, the company determined gastroenterologists generated annual revenue of $1.45 million for hospitals. Top brain and heart surgeons generated revenue of more than $2 million a year.

Highmark's efforts have also garnered criticism.

During a hearing on Aug. 1 in Westmoreland County, state Sen. Kim Ward, R-Hempfield, and leaders of Greensburg-based Excela Health accused Highmark of trying to poach Excela's physicians — a charge Highmark's Deborah Rice, senior vice president, denied.

While no evidence was presented to back up her assertions, Ward said Highmark is actively recruiting physicians away from Excela.

“Although I have heard repeatedly, from Highmark in particular, that they want to work with the community hospitals, their actions behind the scenes — setting up shell companies to buy up property and physicians in the counties surrounding Allegheny — tell a different story,” she said.