Integrated hospital-physician arrangements, which align clinical and financial interests, will be critical to the future success of hospitals and health systems. Under the emerging value-based care delivery and payment system, hospitals will be required to manage care more efficiently and with a focus on outcomes. Improved care management depends largely on gaining physicians' active participation and collaboration.
In most areas of the country, the race is on to establish new hospital-physician structures, acquire practices and employ specialists and primary care physicians under various compensation arrangements. In many regions, physicians themselves are proactively seeking employment or other more formal alignment options. To achieve better results, alignment models must be different from those of the 1990s.
Evolving to Meet Goals
Given the readiness of physicians and hospitals for integration, the models now being developed and deployed can and should yield benefits for both parties. But successful integration is an evolution that will occur over years in most local markets.
Leading organizations will proactively develop, implement and monitor an integration strategy that will accomplish four objectives over time:
- Support overall strategy
- Help physicians prepare for continued shifts in practice
- Provide access and coverage for an expanded population of newly insured patients
- Ensure shared goals related to quality, cost and outcomes
Here are six strategies hospitals and systems should pursue to accomplish these objectives:
- Develop an integration plan that supports the organization's strategic goals and that uses multiple approaches. This plan must be integrated with an overall strategic plan, which includes service-line offerings, facilities, technology and other resources required to support the organization's goals. Alignment may take many forms, including physician employment, practice acquisitions, contractual arrangements, formalized customer service offerings that are focused on making an organization and its facilities more responsive to physician needs, and technology support and integration. It is important to ensure that alignment initiatives reflect organizationwide strategic goals, such as growth, securing or expanding existing market share, improving quality, driving efficiencies or developing new programs. Strategies must be quantified through detailed strategic and financial projections, which assure the availability of capital to execute the strategies. To maximize the investment in alignment initiatives, organizations must use a disciplined approach to allocating capital.Including physician leaders in the planning process is critical.
- Ensure sufficient capital for physician-hospital integration. Because most hospitals and health systems have limited capital resources, it is important to ensure that capital spending needs are identified, quantified and prioritized. Organizations should focus their financial and human capital on those alignment options that most effectively support their quality, service line, geographic, access and other strategic goals. Before committing to a specific physician strategy, leaders must ensure that the organization has adequate capital to undertake the proposed initiatives. Integrated strategic financial planning is essential. Initiatives that will require significant amounts of capital include new physician recruitment and employment, practice acquisitions, technology for ambulatory physician settings, physician joint ventures, and many other asset-based arrangements. Thorough market-based planning is required to quantify the market and financial impact of such initiatives on volumes, revenues, expenses, investment in fixed assets and working capital, and downstream contribution margin. Solid analytics, using proven planning tools, will help leadership assess the required level of investment relative to the risk assumed.
- Use a disciplined approach to practice acquisitions. This includes standardized activities that are completed at all stages of an acquisition, from the preliminary screen to the final due diligence. The timeline depends on the transaction complexity, availability of data and cooperation from the practice. In the current competitive environment, it can be challenging for organizations to take a long-term perspective about strategic goals and avoid reacting to immediate market pressures. Many organizations indicate that the most difficult part of physician acquisition and recruitment is having the discipline to say, "No."
- Specific specialties and geographic coverage goals in the context of organizational and service-line priorities.
- Existing volumes and potential incremental volumes associated with proposed acquisitions.
- Baseline quality metrics for selection.
- Baseline financial performance requirements.
- Strategic fit and sustainability analysis.
- Cultural fit with the hospital or health system. Organizations also should consider the following questions during their analysis: Will the acquisition support the plan for geographic distribution of services? Under what corporate operating structure will the new practice operate? What governance and operating structure will be used? Organizations should develop a complete list of questions for each acquisition opportunity.
- Structure effective physician compensation programs. This is the most important factor driving the future performance of a hospital's physician organization. Several common principles to be addressed as part of the program's design have emerged and recently have proved successful in supporting organizational goals and providing physicians a fair and stable income. The most important principle is to apply the same compensation standards and metrics consistently across physicians, locations and specialties. Standards should cover quality, work effort and productivity, patient access and support of the organization's nonclinical objectives.
- Create effective clinical-integration programs. Clinical integration is a structured collaboration among hospitals, physicians and other providers to improve the quality and efficiency of care and patient and provider satisfaction. To accomplish these goals requires the participation and support of a significant portion of an organization's medical staff. Most organizations do not have the capital to employ enough physicians to accomplish these objectives. Therefore, many institutions choose to pursue a clinical-integration strategy, which is based on a number of contractual arrangements to improve quality and reward participating physicians for their efforts, without large capital investments and substantial impact on operating performance.
- Manage employed physicians to achieve goals. Through connected planning and budget management, hospitals following the strategies recommended so far have assessed the revenue and costs associated with practice acquisition, determined the financial impact of growth strategies and developed compensation plans for employed physicians.
Organizations must achieve effective physician-hospital integration to sustain competitive performance into the future, but there is no one tried-and-true alignment plan that works for all organizations or all physicians. Physician needs are diverse; hospitals and health systems must be prepared to offer multiple engagement options, serving all physician constituencies. The common attributes of organizations most likely to gain and retain close integration with physicians are management expertise, shared hospital-physician leadership, and a well-developed integration infrastructure. Organizations that act early to build these attributes based on solid planning and monitoring are poised for future success in their markets.
Sidebar - Potential Partners