Are bigger health-care networks better or just creating a monopoly?

The Carilion clinic in the Roanoke Valley is riding the tail of health-care reform to introduce a new model of medical care.
By Alec MacGillis
Washington Post Staff Writer
Monday, August 16, 2010

ROANOKE -- Railroads put this city on the map, but the king of the domain is now health care -- or rather, the Carilion Clinic.

Carilion owns the two hospitals in town and six others in the region, employs 550 doctors and has set off a bitter local debate: Is its dominance a new model for health care or a blatant attempt to corner the market?

Carilion says it represents an ideal envisioned by the nation's new health-care law: a network that increases efficiency by bringing more doctors and hospitals onto one team, integrating care from the doctor's office to the operating room. The name for such networks, which the new law strongly promotes with pilot programs, is accountable care organizations, or ACOs -- providers joining together to be "accountable" for the total care of patients, with incentives from insurers to keep people healthy and costs down.

"We need to fundamentally get off a transaction system where you're paid for what you do to patients to being paid to care for them," says Carilion chief executive Edward Murphy.

But skeptics apply a more old-fashioned term to networks like Carilion: monopolies, which they say will make health care even more expensive.

"The only way to decrease costs that truly works is increasing competition, but for some reason in health care, we're supposed to believe that competition drives up costs," said ophthalmologist Frank Cotter.

The gap between those two views is at the heart of whether the law succeeds in controlling costs. Meanwhile, the question is creating a schism in the Roanoke Valley, a region of more than 250,000 people that depends on Carilion's 12,300 jobs but also worries about health-care costs out of proportion to the area's cost of living.

Hospitals merge

Roanoke's two hospitals joined forces under the Carilion name in 1989 (after a failed effort by the Justice Department to block the merger). In 2006, Carilion converted to a nonprofit multi-specialty clinic, modeled on the Mayo Clinic. The system bought up many independent practices, adding 200 doctors to its payroll.

To integrate care, Carilion spent $100 million on electronic medical records. Nurses provide immediate follow-up when patients are released from the hospital in an effort to prevent costly readmissions. And the clinic is turning its 37 primary-care practices toward the "medical home" model: "Care coordinators" reach out to people with diabetes, hypertension and other chronic conditions who have gone too long without a checkup; and physicians meet nightly with nurses to review the next day's appointments to ensure the visits are productive.

Primary-care practitioners praise the new approach for being more organized, but today's payment system penalizes this method because it results in fewer lucrative procedures later.

"The better primary care gets, the less money for the hospitals. And for a system with eight hospitals, that's some concern," said John Wendland, a former Toyota manager hired by Carilion to lead the shift toward ACOs.

The approach is also evident in the new office building for Carilion's specialists, opposite the even newer medical school that it is opening with Virginia Tech. To forge a team mindset, Carilion made all offices the same size.

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