business

Hospitals seek best ways to achieve physician alignment

Physicians increasingly are looking to hospitals as employers. An uptick in physicians wanting to sell their practices to health systems is also being seen.

By Victoria Stagg Elliott — Posted April 12, 2010

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

More physicians want to work directly for hospitals, and hospital executives are happy to have them, according to health care industry officials.

Interest in hospital and health system employment, joint ventures, medical directorships and various management agreements is increasing. The shift has been attributed to physicians' increasing desire for a work-life balance as well as to the diminishing viability of small practices, experts said at the American College of Healthcare Executives' congress on health care leadership in Chicago. Physician alignment was the focus of several panels at the March conference.

For their part, hospital executives see this increased interest as an opportunity to strengthen ties between physicians and hospitals.

"We have got to partner and work together to make the system better, make patients safer, lower costs and retain the economic viability of both sides," said Chris Van Gorder, president and CEO of Scripps Health in San Diego and chair of ACHE.

Recent surveys have shown some smaller practices facing financial challenges and physicians looking for alternate means of employment. The Medical Group Management Assn., for example, released a survey on Oct. 1, 2009, showing practice revenues declined by 1.9% from 2007 to 2008. Bad debt increased by 13% over the same period. A November 2009 report by the American Hospital Assn. further said that 74% of hospital CEOs were being approached more frequently by physicians seeking employment. In addition, 36% of hospital CEOs noted an increase in the number of physicians asking them to buy their practices.

"We used to meet with doctors, and they would say, 'We want to increase our income and grow our practice.' In the last five years, doctors have been saying, 'I would like to try and maintain what I have,' " said Ken Mack, president of Mack/Voyten and Associates in Brecksville, Ohio, whose presentation was titled, "Physician alignment: the best growth strategy."

Both the recession and potential changes with the recently passed health system reform legislation have compelled health care executives to bring more physicians into the fold. For example, many executives believe there will be increased implementation of both bundling and the use of medical homes, as well as some forms of payment connected to outcome. Executives are preparing for accountable care organizations to play a larger role in the health care system as well, according to experts.

Physicians now are being perceived as bringing value to a hospital. A survey by Merritt Hawkins & Associates released March 17 indicated that each affiliated physician leads to an average of $1.5 million in annual revenue for the hospital, although this varies widely by specialty.

"We have to find ways to work together so patients get taken care of and we can all still stay in business," said Kenneth H. Cohn, MD, a general surgeon and CEO of HealthcareCollaboration.com in Boston, who presented on physician recruiting, contracting and retention strategies.

Health care executives say they are hoping to learn from the mistakes made in the mid-1990s, the last time health system reform became a big legislative issue and large numbers of physicians aligned in some way with hospitals.

Many primary care practices in that era were purchased outright, with bidding wars between hospital systems and physician practice management companies inflating prices. The majority of those deals unraveled before the decade was out. Experts now hope to do things differently. For example, specialty physicians are included in this renewed interest, and hospitals generally pay nothing for goodwill, the community reputation and other intangible assets of a practice, which had been a major factor in running up prices.

"It's really critical that hospitals get it right this time," said Todd Sagin, MD, national medical director of HG Healthcare Consultants in Laverock, Pa., and one of the authors of Creating the Hospital Group Practice: The Advantages of Employing or Affiliating with Physicians. "They didn't get it right the last time. They didn't provide good homes for physicians."

Employment contracts also are more closely tying compensation with the institution's performance, experts said.

"Rewarding people for productivity is not enough. Quality, safety and patient satisfaction incentives in one way or another are important," Dr. Cohn said.

Direct employment is not the only option being increasingly explored by health care executives, however. Officials from the Scripps Medical Foundation, which provides physician services to Scripps Health, presented their model of physician alignment. California law does not allow health systems to directly hire physicians, so the Scripps foundation contracts with physicians to provide professional services.

This still allows physicians to be aligned with this institution, but the financial relationship makes it easier to negotiate with health plans and allows for better care-coordination, according to Scripps officials. The arrangement requires constant communication and clear divisions of responsibilities. For example, the foundation handles much of the contracting, billing and strategic planning. The medical groups hire and fire physicians.

"We found that physicians are much harder on each other than we could ever be on them," said Larry Harrison, MPH, chief executive of Scripps Clinic.

But experts say that whatever the arrangement, the relationship is most likely to endure only if physicians maintain control of clinical issues.

"Physicians and hospitals don't always agree, but they are working together," Mack said. "There are lots of ways to partner, but physicians really have to manage clinical things for it to work."

Back to top


ADVERTISEMENT

ADVERTISE HERE


Featured
Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story


Read story

Goodbye

American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story


Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story


Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story


Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story


Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story


Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story


Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story