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Co-Management Agreements: Real-Life Lessons and Key Concepts

At the Becker's Hospital Review Annual Meeting in Chicago on May 9, Dean Thomas, vice president of clinical service lines for Scottsdale (Ariz.) Healthcare, and Robert Minkin, senior vice president with The Camden Group, discussed key considerations for co-management arrangements between hospitals and physicians. Virginia Tyler, vice president of The Camden Group, moderated the session.

A co-management agreement is a mechanism for hospitals and physicians to jointly manage a service. "It's also a stepping stone to physician integration," said Mr. Minkin, and an approach hospitals often opt for as they begin to transition from fee-for-service to value-based care.

Physicians form a management LLC and strike a co-management service agreement with the hospital. Typically, co-management agreements focus on a particular service line, such as orthopedics or cardiovascular services. The arrangement is analogous to hospitals "outsourcing the management of a clinical service line to a group of physicians," said Mr. Minkin, and it's also a strategy to engage physicians and give them more control to achieve greater operational cost efficiencies and improved outcomes.

In these models, service lines are typically directed through joint operating committees. The hospital maintains reserve powers, including approval of budgets, marketing and expenditures, and personnel issues. Mr. Minkin said co-management arrangements are not risk-free, passive investments or gainsharing arrangements. "There will be incentive payments for improving performance, but typically it's not addressed in gainsharing methodology, such as bundled payments or the MSSP program," said Mr. Minkin.

Mr. Thomas talked about Scottsdale Healthcare's co-management program for cardiology services, which began in 2009.  Scottsdale first sought feedback from physicians on what integration model they most preferred, finding the most consensus around co-management. "So we executed agreements after using an RFP process," said Mr. Thomas. "We started with three groups. The first group became employed in 2010. The second group imploded and we had to terminate the agreement, and the third group actually sought employment. We've been in negotiations with them for the past year."

Throughout the co-management agreement, Scottsdale has saved $6 million in cardiology supply expense reduction, more streamlined cardiology emergency call process and improved quality metrics. Mr. Thomas also recommended that hospitals put extra effort into the RFP process: Spell out performance metrics and the improvement vision; spell out collaboration expectations; spell out meetings and report review expectations; and incorporate the RFP into the final agreement. Finally, Mr. Thomas also recommended that hospitals anticipate the potential of c0-management agreements to migrate to employment.

More Articles on Co-Management Agreements:

4 Common Clinical Integration Mistakes
7 Features Cardiologists Look for in Hospital Cardiology Service Lines
Hospital-Physician Alignment: 8 Core Thoughts

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