A physician strategy that changed 5 times in 8 years left one health system losing $100M+ annually: 7 ideas to prevent this at your organization

Molly Gamble (Twitter) - Print  | 

When rationale for hiring physicians is a moving target, health systems find themselves employing seas of physicians with hundreds of millions of dollars in annual losses. The way around this dilemma? Leaders with Navigant Consulting propose a few ideas in Harvard Business Review.

Here are seven key takeaways from the HBR article, which can be read in full here. It is authored by Jeff Goldsmith, PhD, national adviser to Navigant and associate professor of public health sciences at Charlottesville-based University of Virginia; Alex Hunter, managing director with Navigant; and Amy Strauss, managing consultant with Navigant.

1. The system that changed its physician strategy five times in eight years bounced from rationales to (1) grab market share, (2) respond to competitive acquisitions, (3) bail out loyal independent physicians, (4) increase bargaining power with payers and, finally, (5) position itself for value-based care. In the end, its group included more than 700 physicians and losses exceeding $100 million per year.

2. The authors suggest many of the losses health systems face from physician employment stem from the lack of a firm strategy with expected returns and hosting rather than effectively managing practices.

3. Rather than building a strategy upon moving targets, systems must establish clear strategic goals and quantify and budget the expected return on the operational loss of employing a group. Done this way, the physician group may end up either a lot smaller or with a more defensible specialty and/or geographic distribution.

4. Too many systems bulk up their medical groups without standardizing staffing and operational support functions, such as centralized office locations, effective scheduling systems or revenue cycle provisions, to rule out inconsistent coding. "Seeing that encounters are adequately documented and translated into a fair and timely bill that patients are willing to pay is not rocket science," the authors wrote. "The return on investment for getting the revenue cycle right is often 3X to 5X."

5. The Trump administration may scrutinize Medicare's policy for paying employed physicians, meaning health systems ought to be ready to revisit employment contracts with vigor when they come up for renewal. Systems must also ensure incentives align with health system goals. Volume-based incentives for physicians employed by a health system operating under performance-based contracts — that equation spells trouble.

6. Review and prune value-based contracts or renegotiate them for more adequate rates from payers. "Treating physician group losses and CIN expenses as loss leaders for value-based contracts and then losing yet more money on those contracts, as is happening in many places, doesn't make sense," the authors wrote. They note that concessions health systems made in entering narrow network or performance-based contracts with private payers often exceeded the potential incentives. The authors urge health systems to adopt a physician strategy around reality-based payments.

7. Don't forget independent physicians. The authors encourage health systems to ask what would motivate nonemployed physicians to work with the organization over the long term. Physician strategies cannot be built solely around the employed clinical workforce — doing so neglects the two-thirds of physicians who are contracted, independent participants in clinically integrated networks or in part-time administrative roles. 

 

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