Provider physician alignment a collaboration to meet healthcare challenges

Provider-Physician Alignment: A Collaboration to Meet Healthcare Challenges August 2013 BLOG POST

Overview The structure of the healthcare business in the US is undergoing a sea change, with the healthcare delivery and financing moving from a volume-based to a value-based business model. This model will help providers achieve high-quality and low-cost care across patient treatment services and sites.

Improved hospital-physician alignment is an integral part of this evolving care delivery.

Hospitals look forward to achieve greater leverage on their growth strategy, secure access, transform care delivery and strengthen their financial position. Some of the drivers for hospitals to align are:1

Physicians on the other hand look forward to stabilize their income from declining reimbursement and secure patient referral network. Some of the drivers for physicians to align are:1

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Coker Group / Medical Associates, PLC: Physician-Hospital Models and Involving Physicians in the Alignment Process

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Alignment Models For a successful hospital-physician alignment, there are various types of models that can be adopted.

Some of the hospital-physician alignment models are represented below:

Co-management Co-management is a strategy adopted by hospitals to align with physicians to improve quality and lower costs. It is a quality-focused approach where the hospital and physicians partner to "co-manage" a defined set of services. Physicians are paid in the form of a fixed fee, an hourly rate to cover their monthly work activity by the hospitals to co-manage the patient experience in quality and efficiency.

There may also be a variable fee available as an incentive, if agreed upon goals are met. The agreement is then reviewed each year in terms of scope, participating physicians and goals for the year.

Hospital Employment Hospitals employing physicians is one of the most straight forward ways of managing healthcare market pressure and changes in the payment system.

The employment model allows hospitals additional leverage for integration to achieve their goals of implementing uniform best clinical practices, measuring clinical outcomes, developing pay for performance (P4P) payor contracting relationships, establishing unified Health Information Technology (HIT) solutions, and improving physician recruiting and retention, as well as obtaining higher reimbursement by billing the physician office and ancillary services as provider-based rather than as a standalone practice.

Physician Hospital Organizations Physician Hospital Organizations (PHOs) are formed by a hospital and one or more physicians or physician groups for negotiating and obtaining contracts with insurance plans and employers. PHOs include a payor submitting fee schedules to an agent or a third party, who transmit this schedule to the network physicians. Each physician then decides individually whether to accept or reject that fee schedule. The PHOs communicate the decisions to the payor, who then contracts with the physicians who have accepted the terms. There are numerous variations of this model and many PHOs are evolving into clinical integration programs.

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Example of a Successful Hospital-Physician Alignment2 Lee Memorial Hospital, one of four acute care hospitals operated by Lee Memorial Health System in Fort Myers, Fla., has a joint replacement program that ranks it among the top 5% in the nation, according to HealthGrades. The hospital owes much of that success to a three-year-old co-management agreement with 24 orthopedic surgeons from seven different practices as considered by Kevin Newingham, the system’s vice president for strategic services.

Memorial pays physicians for general management services and incentive bonuses for performance. In addition to saving USD1.5 million on implant costs in the past three years, co-management is responsible for reducing the readmission rate for total knee replacement patients by 25%. Also, firstcase on-time starts have risen to more than 90% and the hospital’s physician communication score on the HCAHPS patient satisfaction survey has improved.

Technology in Hospital-Physician Alignment The collaboration between hospitals and physicians requires technology support for processes such as clinical integration with the help of electronic health records (EHRs) to work from a common base of shared, updated, and accurate information. Technology used to connect with physicians includes clinical systems, contract management, data integration, customer relationship management among others for clinical, business and customer service. The sharing of information to meet alignment objectives is dependent on aligning factors of the EHR. A healthcare system needs to match up information between the hospital and physician offices.

Challenges of Hospital-Physician Alignment A hospital-physician alignment with a focus on managed care can face various challenges. Some of the major challenges can evolve from the following: Conflict of interest between the hospitals and physicians – Hospitals may be more interested in filling up beds for volume business, whereas physicians may focus on more specialization and their independence Cost of integration – Costs including practice acquisition, infrastructure development, and ongoing practice support may be more than for many hospitals, especially smaller hospitals Managing the transition – As most current reimbursement methods do not reward for efficiency in the overall care delivery, it is challenging for organizations to implement value-based payments without impacting the revenue negatively Cost of IT infrastructure – Cost of creating the information technology infrastructure required to collect and report data to manage care; while significant, informed decision making is required for choosing IT services and vendors

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HFMA: Successful Physician-Hospital Alignment

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Outlook Almost 83% of physician employment agreements in 2011 were with hospitals, according to the physician search firm, The Medicus Firm. In the US hospitals and larger systems compete to acquire the more sizable, successful, busy practices to maximize their referral base in strategic locations. The competition increases in metros and mid-sized communities where multiple large systems are present.

Moreover, the industry may observe decreasing physician private practices as physician employment reaches as high as 75% in 2014, according to the recruiting firm Merritt Hawkins. Hospitals strive to meet the objective of maximizing bed occupancy by employing physicians and physicians are not looking to deal with the rigors running a practice, thereby associating with hospitals. Again with the constrained supply of physicians per year (a difference of 124,000 baseline physician FTE in 2025, according to AAMC), the hospital-physician alignment would prove to be more beneficial to the US healthcare industry in the era of healthcare reform.

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