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Hospitals see alignment with doctors as boon to patient care

Executives say in a survey that the growth of physician employment eventually will lead to improved coordination of care, market share and better outcomes.

By Karen Caffarini — Posted July 15, 2013

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Hospital executives believe physician relationships are key to their success in the quickly developing accountable care environment.

Those relationships are expected to result in continued growth in physician employment by hospitals, co-management arrangements and other opportunities with independent practices.

But there will be growing pains: An overwhelming majority (76%) of 139 surveyed chief financial officers said they don't expect a return on their investment on physician employment in the first few years, according to a June 14 report on hospital-physician affiliation strategies. But most executives in the survey say the strategy will pay off later with improved coordination of care, market share and patient experience, among other factors.

The survey, conducted by Healthcare Financial Management Assn. and sponsored by the health care services and information technology company McKesson Corp., asked hospital executives about physician affiliation strategies to assess current and future trends and the impact changing care models have on employment. Fifty-four percent of respondents are with urban hospitals, and 46% work at rural hospitals.

The survey supports other research that indicates future physician compensation will be driven by value, not productivity and volume as in the current model. Cost-of-care or efficiency-related incentives in physician agreements are expected to grow from 16% to 67%, and quality-related incentives should increase from 65% to 85%. Productivity-related incentives, on the other hand, are expected to drop from 77% to 59%.

“The survey demonstrates the shift from the 'fill your beds' mentality of the past based on fee for service,” Janice Wiitalia, director of research for the HFMA, who led the research project, said in a statement. “Everyone is starting to realize that the focus in a value-based environment is keeping patients healthy, not the volume of care provided.”

Debra Williams, a marketing manager with McKesson, said the survey results show that the growth in physician employment will be steady, with 37% of respondents believing it will continue to grow at a rate of 10% to 24% a year. Meanwhile, 30% of hospitals will continue to pursue clinical relationships, directorships and co-management opportunities with independent practices.

“They want to align with physicians who want to remain independent,” Williams said.

Ashley Thompson, vice president of policy and deputy director of the American Hospital Assn., said the landscape is vastly different from the 1990s, when hospitals purchased a lot of practices and lost a lot of money in doing so.

“This time around there's more of a desire to improve patient care, and hospitals are working more closely with physicians to achieve this,” she said.

Thompson said hospitals are looking at different strategies to achieve a close physician alignment. Kaiser Permanente, for instance, employs many physicians, while Advocate Health Care has an expansive network of practices in the Chicago area.

“Advocate doesn't employ physicians. It works with them,” Thompson said.

Hospitalists in the boardroom

More physicians will find their way to the boardroom and executive seats as well, according to the survey and industry experts.

“You'll see more hospitalists in management positions,” said Larry Wellikson, MD, CEO of the Society of Hospital Medicine. “We already see many of them becoming CEOs and chief medical officers at hospitals.”

Williams said having physicians in key roles at the executive level will be critical for hospitals to understand the accountable care environment and to make decisions on the coordinated care level.

Dr. Wellikson said it's difficult to make money from physician services, but with care coordination there could be better outcomes and more efficient care for patients. He said in the accountable care environment, in which physicians and administrators would devise a strategy to reduce the number of patients with infections instead of just treating the infection, for instance, this would mean more money for the hospital and doctor.

While hospital CFOs reported more collaboration with physicians in an effort to improve care coordination, only 20% said they are “very prepared” and have the necessary infrastructure to support quality and outcomes-based management. Fifteen percent said they are very well-prepared to analyze and communicate physician-specific data, 14% are very prepared to manage case coordination and only 7% are very prepared in population health management.

Most practice functions, such as physician IT and billing, report to hospital/system leadership or are co-located, the survey found. Most hospitals are somewhat or completely satisfied with these functions of their employed physician groups. And they are more satisfied with hospital- or system-based billing, coding and collections than those by group practices.

Nervousness about ACOs

Williams said McKesson has held several briefings on the survey's findings with hospitals and found anxiety on executives' parts concerning the transition to an accountable care environment, including how to report on the metrics they collect and how to educate physicians on the difference between incentives for quality and for fee for service.

“Overall, we got the general sense of executives asking, 'Should we do this, and are we ready to do this?' ” Williams said of the move to accountable care. “The overall consensus was: We're moving in this direction, so we better be prepared.”

Williams said companies like McKesson can help hospitals work their way through the rigorous transition process to become an accountable care organization by doing some legwork for them and providing a revenue management analysis, among other aids.

Dr. Wellikson said CFOs tend to be a cautious group, but that change is moving fast in this case.

“Hospitals in Southern California started doing this [transition to accountable care] in the '90s,” he said. “It took 15 years to do. Now this is happening in the blink of an eye. It's going to be a very bumpy ride.”

But Thompson said many hospitals have been steadily moving in the direction of accountable care during the past four to five years. She said there are more than 250 accountable care organizations.

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