Service lines vs employed physicians: How to live symbiotically within an organizational ecosystem

Regional and community-based health systems are acquiring physician practices at an increasingly rapid rate as they aim to increase market share and geographical footprint, improve patient experience across the continuum of care, reduce costs and variation in practice, and achieve better population health outcomes.

As the size and medical breadth of health systems expand, it becomes increasingly apparent to executive leadership that changes to the organizational structure are necessary to foster integration across services. Often service line structures, with physician and administrative leadership, are designed to help drive accountability across modalities, services, and traditionally siloed department structures.

As service lines are being implemented, health systems are simultaneously growing their employed medical groups and ambulatory footprint. The operations, strategies, and spans of control of service lines and medical groups overlap; if roles and responsibilities are not clearly defined and globally supported, the health system can face confusion, conflict, and ultimately, a deterrent to providing world-class patient care.

In the first of two discussions, Jessica Turgon, Principal and co-leader of the Operations Improvement and Technology Division at ECG Management Consultants, and Whitney Haller, Senior Manager at ECG and subject matter expert in service line strategy and operations, delve into the ways that service lines and employed medical groups can live symbiotically within an organizational ecosystem. In a follow-up post, they will look more closely at how the groups can partner as change agents to drive a value-based care strategy, align to achieve KPIs, and reduce physician burnout.

For organizations that have both service lines and employed medical groups, how are decisions made around workforce and strategic planning?

Whitney: It requires a balance between service line strategic goals, regionalization within the healthcare system, and financial ROI of the physician investment. The up-front investment lies with the medical group, but the downstream revenue impact hits the hospital budget; thus, it takes alignment and transparency of goals between hospitals, medical groups, and service lines to have an effective plan.

Jessica: There must be coordination between service line planning and medical group workforce planning. When the groups are aligned in the process, there is constant feedback between service line governance and medical group leadership that ensures a consistent strategic planning effort. If the timing is off between those two groups, it can impact overall financial support, given position recruitment and the need for placing physicians in certain markets.

How does this differ from decisions around performance improvement and operations management?

Whitney: Historically, the overarching goal of a service line was focused on strategic growth in patient volume and financial ROI. As we enter an era of value-based payment, more of the onus of performance improvement falls within the service line structure for execution from a financial and operational perspective.

Jessica: Fascinatingly, what we typically see is the medical group structure setting overarching access, revenue, cost, and quality key performance indicators (KPIs), and the service lines internalizing those targets and determining what is truly needed to improve performance in their area. One must consider, however, that while one decision-making structure may set the KPIs for the entire organization, each service line must adapt those KPIs to fit the unique needs of their patient population.

For organizations that have both service lines and employed medical groups, who has budget accountability and responsibility for staffing decisions?

Jessica: Sometimes service line leadership is really only held accountable for strategy, managing expectations related to programmatic initiatives, and developing physician relationships. The medical group in this scenario has accountability for operational performance.

Whitney: I would add that it largely depends on the type of service line management structure the system has in place. In a more influential type of structure, if service line leadership’s role is expected to be strategic, it can’t necessarily assume budget accountability because it doesn’t manage the resources to implement change. In that scenario, leadership’s role is to be an internal consultant for strategy. In an ownership type of governance structure, where there’s more of a solid line to operations versus a dotted line or more of a solid structure versus a matrix, more of that budget accountability might fall on service lines. Normally staff recruiting functions within the medical group organizational structure, but service line leadership and medical staff leadership both interview candidates for fit within the medical group and service line. So although budgeting accountability lies within the medical group, service line leadership is a partner in vetting those candidates.

How do service line councils and medical group leadership committees coexist in a health system structure?

Whitney: The main premise behind service line councils is to eliminate silos across both the health system and the continuum of care. With a system of hospitals, regions, medical groups, and service lines, it takes an active focus on transparency and alignment to ensure everyone is rowing in the same direction and targeting the same goals. It’s critical to have physician and administrative members from each major entity along with multidisciplinary participation driving consistent care across the continuum.

Jessica: It is then incumbent upon the medical group or ambulatory leadership to appropriately link into those structures and have service line leaders represented in their own decision-making structures—on both the operational and governance sides. This ensures a closed loop of communication among all operators.

Whitney: The biggest risk in having two separate groups meeting and coexisting is the breakdown of communication between the councils. You could have the greatest of intentions, but if they’re not aligned and transparent, forward momentum while collectively working toward the same goals is impossible.

Jessica: The medical group is likely in charge of setting standards across all councils for revenue cycle, access, and cost-related initiatives. Each service line may be tracking additional specific initiatives to make sure their population is receiving the best-of-class service. The medical group has to be supportive of those targets; there must be conversations between the groups for a clear understanding of targets and timelines to ensure system-wide alignment.

Whitney: Both the service line and medical group goals and structures should also inherently follow overarching system goals. If the system has global quality targets, both groups target those goals within their span of control. This will allow improvements to their specific subpopulation of patients and support the system as a whole.

How should internal resources be allocated between service lines and medical groups?

Jessica: There is always a push-pull for resources between service lines and medical groups, and the challenge lies in digging into the cost and expense structures between the two. Typically, health systems choose to allocate resources into certain service lines to separate the organization’s brand in the marketplace, display high-quality services for their consumers, and showcase collaboration between multiple providers and entities. On the other hand, medical groups are typically the providers of physician resources and bear the cost burden for the system. In that context, service lines are usually resourced better to optimize the growth and marketing opportunity rather than resources being allotted to the overarching medical group structure.

In reality, it shouldn’t be an adversarial relationship. Rather, it should be a collective view between the groups to determine the drivers of the organization’s performance and an agreement of what investments will move the brand and increase market share for the system as a whole. Once that is determined, a decision can be made about the appropriate resources for each entity.

Whitney: It is important for service lines to remain transparent and aligned with each other to prevent competition for those resources. There’s often a debate between service lines regarding the parity of investments in staff, budgets, and equipment, and the driving forces behind those decisions must be understood and supported by all entities. Some decisions are driven by market share or ROI, and others are made to support population health initiatives across the continuum. Some years will see a heavy investment in cardiology; other years it might be in pediatrics or neurosciences. Regardless of the strategy, the key is realizing that any investment is going to benefit the entire system by providing the best care for the patient across the board.

By collaborating and eliminating strategic and operational silos, service lines and medical groups can execute on a physician enterprise transformation that reduces cost, improves access, and enhances population health capabilities in every market. In our next piece, we will go through the specifics of how service lines and employed medical groups can work together to pursue value-based care strategies.

Click here to read Part 2: Service Lines vs Employed Medical Groups: How to Partner as Change Agents to Build Accountability, Achieve Health System Goals, and Improve Outcomes >>

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