How to Assess the Financial Implications of Different Physician Alignment Strategies

In a session at the Becker's Hospital Review Annual Meeting in Chicago on May 18, Luke Peterson and Kate Lovrien of Health System Advisors and Chris Jones, vice president of strategy and business development at Catholic Health Initiatives, discussed how to assess the financial implications of various physician alignment strategies.

The presentation began by discussing the financial implications of two types of alignment: a fee-for-service model and a future risk-based model.
Alignment under the fee-for-service model consists of the following factors:

•    Productivity and insourcing creating the majority of the financial returns
•    Improvements in operational efficiency, particularly around supply
•    Employment typically generates significant professional fee losses
•    Primary service areas are additive costs

In a fee-for-service environment, physicians with economic, activity and purpose alignment are dramatically more financially beneficial to a health system, said Ms. Lovrien. Under this model, employment is an inefficient tool from a hospital-based perspective, she said, with employed primary care physicians in many markets typically performing at 50 to 65 percent of a full time productive physician.

In a fee-for-service model, physicians with strong activity alignment do much better on volume metrics but often don't meet quality, operational or other metrics, she said. "Physicians with multiple forms of alignment perform dramatically better with both volumes, operational, and strategic contribution," she said.

The financial implications of a future risk-based model include the following:

•    Attribution creates the revenue
•    Reduced utilization, including rationing, insourcing and the use of lower cost environments, creates the savings
•    Shared savings and "incentives" still come from the hospital

The most successful risk-based models have a strong common purpose, a culture for standardized practice and economic incentives that mirror the contracts, said Ms. Lovrien.

Overall, the market is undergoing a significant shift from fee-for-service to risk-based population health reimbursement, said Mr. Jones. "Physicians and hospitals must be in alignment to succeed in a risk-based environment," he said. "Together they need to change the utilization patterns, improve operations, move patients to low-cost care models and improve prevention and chronic care management. They must have an agreement on the future vision and economic models that allow adaptation of the day-to-day activities as the market changes."


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How to Assess the Financial Implications of Different Physician Alignment Strategies

In a session at the Becker's Hospital Review Annual Meeting in Chicago on May 18, Luke Peterson and Kate Lovrien of Health System Advisors and Chris Jones, vice president of strategy and business development at Catholic Health Initiatives, discussed how to assess the financial implications of various physician alignment strategies.

The presentation began by discussing the financial implications of two types of alignment: a fee-for-service model and a future risk-based model.

Alignment under the fee-for-service model consists of the following factors:

· Productivity and insourcing creating the majority of the financial returns

· Improvements in operational efficiency, particularly around supply

· Employment typically generates significant professional fee losses

· Primary service areas are additive costs

In a fee-for-service environment, physicians with economic, activity and purpose alignment are dramatically more financially beneficial to a health system, said Ms. Lovrien. Under this model, employment is an inefficient tool from a hospital-based perspective, she said, with employed primary care physicians in many markets typically performing at 50 to 65 percent of a full time productive physician.

In a fee-for-service model, physicians with strong activity alignment do much better on volume metrics but often don't meet quality, operational or other metrics, she said. "Physicians with multiple forms of alignment perform dramatically better with both volumes, operational, and strategic contribution," she said.

The financial implications of a future risk-based model include the following:

· Attribution creates the revenue

· Reduced utilization, including rationing, insourcing and the use of lower cost environments, creates the savings

· Shared savings and "incentives" still come from the hospital

The most successful risk-based models have a strong common purpose, a culture for standardized practice and economic incentives that mirror the contracts, said Ms. Lovrien.

Overall, the market is undergoing a significant shift from fee-for-service to risk-based population health reimbursement, said Mr. Jones. "Physicians and hospitals must be in alignment to succeed in a risk-based environment," he said. "Together they need to change the utilization patterns, improve operations, move patients to low-cost care models and improve prevention and chronic care management. They must have an agreement on the future vision and economic models that allow adaptation of the day-to-day activities as the market changes."

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