The Next Iteration of Hospital-Physician Alignment: Making Medicare Profitable

The idea of aligning physicians with hospitals and health systems is not new. In fact, it has been experimented with since the 1990s and the rise of managed care. In many cases those relationships crashed and burned, and the idea of physicians as hospital employees faded. Then, several years ago, the idea resurfaced, in part because of observations that systems with closely aligned and integrated physicians provided some of the best care at some of the lowest costs.

Today, most hospitals employ or at least contract with physicians in some way. Unfortunately, these relationships are often guided first by fear — fear of losing market share — and second by quality and efficiency objectives. In fact, quality and efficiency goals often aren't specific at the onset of a hospital's relationship with a group of physicians. For example, a hospital doesn't generally employ physicians with a stated goal of reducing congestive heart failure readmissions by a specific percentage — these goals are developed in concert with physicians.

However, according to Quint Studer, founder of the Studer Group, there is one goal that should drive future hospital-physician relationships from the onset: breaking even on Medicare.

"When hospitals look at their future, one reality is that they will have to reduce costs by about 20 percent over the next eight or nine years," he says. "But that's not all. A recent article in New England Journal of Medicine argues that lowering costs is not enough. It's also necessary to increase volume. It's this two-pronged need that is bringing hospitals and physicians together."

The article Mr. Studer is referencing is "The Savings Illusion — Why Clinical Quality Improvement Fails to Deliver Bottom-Line Results," by Stephen S. Rauh, Eric B. Wadsworth, PhD, and William B. Weeks, MD. According to Mr. Studer, the article is a good starting point for leaders to get familiar with the healthcare system's cost layers — something that is outlined in the article.

"Understanding that many costs are fixed certainly doesnt mean organizations should give up their efforts to reduce costs and increase quality," clarifies Mr. Studer. "It's essential to do both. Value-based purchasing is a reality, and hospitals want to create great patient experiences so people will come back and refer others to [them]. But it's also important to work with physicians to put in tactics aimed at increasing volume, like lowering no-show rates and cross-referring other appropriate services."

Mr. Studer provides four steps for hospital leaders to work collaboratively with physicians toward this aim.

1. Explain and align goals. Help the physicians understand what the goals of the healthcare system are and, to the greatest extent possible, align their physician organization's goals with those of the system. This generally means sharing elements of the hospital's strategic plan in a straight forward manner with physicians.

"It may not be necessary for physicians to understand every detail of a balance sheet or how bond ratings work," explains Mr. Studer. It is important to help them better understand how great of a profit margin the hospital needs to make in order to reinvest back into the hospital. And it's important that they have a solid grasp of why cost-saving and volume-creating tactics need to co-exist."

2. Gain physician input. After the physicians understand the goals, ask them for their thoughts on how to reach them. It is critically important to take a "shared governance" approach rather than expecting physicians to bend to the organization's will.

"The great majority of physicians want the healthcare system to do well," explains Mr. Studer. "They know what the barriers and frustrations are and can identify some of the first things that can be tackled to make care more efficient and effective. It would be a shame not to tap into their expertise."

3. Give them feedback. Just as physicians should give input to hospitals, so should hospitals give feedback to physicians. According to research by Studer Group, anywhere from 1 in 3 to 1 in 5 physicians don't get good feedback on their performance. Sure, they can look at their own productivity and collections, but in an era of accountable care, physicians need feedback on the quality of the care they provide.

"Physicians want to do well, and they're very good at moving their performance if they can see and understand data on it," says Mr. Studer. "Data must be accurate in order to gain physician trust, though."

He recommends hospitals commit to mining this data and sharing it through "data guides." In his opinion, referring to such feedback as a "report card" could be seen as negative. "You don't want to punish people; you want to make them better," he says

4. Watch care improve. Then, once data is shared, hospital leaders should provide resources, as needed, to help physicians make sense of it, and more importantly, gain feedback on any hospital-controlled barriers that may have led to lower scores.

Leaders don't necessarily need to formally guide physicians through how they might improve their scores, says Mr. Studer. In fact, they may be surprised to find physicians often get data and run with it.

"Doctors are very self-motivated," says Mr. Studer. "They will seek out other doctors with better outcomes and discover what they could do better."

While these four steps are just starting points for in-depth and specific clinical process changes, they are the ones that are likely to most closely involve hospital leaders.

"That's because clinical process improvements should be lead by physicians, with support from administrators and not the other way around," says Mr. Studer.

More Articles Featuring Quint Studer:

The Ladder of Employee Engagement: 5 Can't-Miss Steps for Hospital Leaders
Employee Engagement No Longer a "Soft" Science: 3 Steps to Cultivate More Committed Employees
The Seasoned Employee Skill Set: 10 Things Experienced Employees Know That Make Life So Much Better

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