The “Specialist-Hospital Industrial Complex:” Does It Fit In The ACO Community?

Ever since President Dwight Eisenhower raised the term “military-industrial complex” in a farewell speech on January 17, 1961, we have seen how that particular industry drives military spending.  There was a time when raising the question about specialists and hospitals driving the costs in health care would have been considered absurd.  In fact, many would consider the question out of place even in today’s environment.  Specialists’ clinical contributions to the community’s health care are significant; nonetheless, the “specialist-hospital industrial complex” remains a potentially troublesome combination in our changing health care scene.

Academic and tertiary hospital centers are almost uniformly dominated by specialists.  Many of the patients managed by specialists of all varieties require the complex institutional support that hospitals provide.  Hospitals, in turn, thrive on providing the complex imaging, intensive medical and surgical care services, and operating room/procedure room technical services.  These high fixed-cost overhead institutions necessarily require lots of admissions under the present payment methodology to financially survive.  On the other hand, high-cost admissions are contrary to the idea of admission-readmission reduction.   As a result, the NextGen ACO model seems to be producing lackluster results in spite of increased flexibility to use telehealth, home visits, and the three-day skilled nursing facility (SNF) waiver.[i]  This poor NextGen performance may be, among other things, driven by the “specialist-hospital industrial complex”.

Most of the current NextGen ACOs are heavily specialized or are supported by hospital systems.  Primary care owned NextGen ACOs are in the minority; nonetheless, three-fifths of the total participating physicians in this payment model are primary care with two-fifths made up of specialists.[ii]  Nonetheless, primary physicians working within a hospital system may often feel the pressure of supporting the system. 

The stated goals of primary care inside of an ACO are contrary to the traditional goals of an acute care hospital.  The new population-focused objective is to identify and potentially prevent health disorders that require hospitalization.  When patients are hospitalized, the continued purpose in their care is to manage their condition efficiently and discharge them to home or an SNF as soon as safe and practical.  The transitions of care then become a very important part of the care.  In fact, a Salient/Palm Beach ACO study presented at NAACOS showed an average savings of $3,149 when the discharged patient is seen in the office for a follow-up visit within seven days.[iii]  The savings generated by a well-managed hospital-home transition are a measure of the improved quality of the care and the stability of the patient’s clinical condition.

Primary care physicians have had to pay attention to the broader management of their patients’ clinical and social condition.  Beyond just seeing patients every fifteen minutes in the office, the doctors must now pay attention to more immediate access and actively reducing emergency room utilization.  Additionally, they have to pay attention to social issues around transportation, and medication access.  In other words, primary care has again assumed the role of being a physician. 

Is it reasonable to ask an orthopedic surgeon, a psychiatrist, or an ophthalmologist to be a physician to their patients?  This means keeping a professional eye on matters beyond their narrow specialized interest.  This means better and more secure communications with primary care for follow-up and management of chronic conditions.  This means a new focus on the “physician-patient industrial complex” driving better clinical outcomes at a lower cost to a more satisfied customer.  We know this as the Triple Aim.



[iii] “A Case Study on Post-Acute Care Costs:  Overcoming a Roadblock on the Path to Shared Savings”  Presented at NAACOS, February, 2018.

Craigan Gray

About the Author

Craigan Gray, MD, MBA, JD

Dr. Craigan Gray, Salient Healthcare’s Chief Medical Officer, brings rich experience from private practice, hospital leadership, and governmental health-benefit programs. Prior to joining Salient, Dr. Gray was director of North Carolina’s $12 billion Medicaid program. His time as VPMA at Bon Secours Our Lady of Bellefonte Hospital in Kentucky was distinguished by moving the facility into the top-quality performance tier for Health Grades and CMS health quality indicators. Dr. Gray is a Stanford University trained Obstetrician/Gynecologist. In addition to an MD degree, Dr. Gray holds an MBA degree and a JD degree. He is a Certified Physician Executive and is published in various medical journals.

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