Hospital-Physician Alignment: 8 Core Thoughts

1. Increased consolidation. We are seeing increased consolidation at the hospital, physician and payor level. Hospitals are consolidating with other hospitals and/or acquiring practices. Payors have already greatly consolidated with other health plans and are now increasingly seeking to own and operate providers. Here, payors do so as a hedge against a dominant provider or as an expansion of their business line.

2. Physician employment. Employment of physicians seems to be the preferred method of engagement for health systems if they can afford it. It tends to work in a fee-for-service environment and provides the control/alignment the systems are seeking if and when the world shifts to more of a shared-risk/shared-losses environment.

3. Alternatives to employment. Systems which are not highly focused on employment are examining other models of engagement such as joint ventures, gain sharing, professional services agreements, co-management, call coverage, medical directorships and other approaches.

4. Financial relationships. Increasingly systems cannot afford to not have financial relationships with their physicians. Close to 80 percent of physicians have a financial relationship with a hospital, and hospitals are at significant risk if a material number of their admitters in a fee-for-service world are "free agents" and don't have a financial relationship with them. The larger the system, the more it can remain stable despite the loss of a few key admitters.

5. Losses on physician practices. Hospitals reportedly still seem to lose substantial dollars per physician on the employment/professional side. This seems to have gotten worse as more physicians have become employed and productivity has regressed to the norm. Even with productivity requirements, the cost of running a practice compared to reimbursement can fall short for many specialties.

6. Physician autonomy. Successful hospital-owned group practices have a culture that is physician positive and tolerates a good deal of autonomy and independence but not outrageous behavior. Hospitals that successfully operate group practices are also highly competent in handling all of the non-clinical aspects of operating a practice and pay fairly. Physicians must not feel disrespected regarding their compensation and must enjoy working in the group.

7. Sustainability. A key question is whether hospitals will be able to maintain the huge investment in employing physicians as the reimbursement world substantially changes.

8. Consolidation and regulatory issues. Consolidation often raises antitrust, antikickback and Stark Act issues.

More Articles on Hospital-Physician Relationships:

5 Questions for Building Physician Engagement
Physicians on Capitol Hill Discuss Concerns Over Hospital Employment
10 Major Findings on ACOs: Most Common Patient Populations, Reimbursement and Leadership Models

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