Considering key factors for hospital-physician alignment

As an increasing number of physicians are employed by hospitals, communication is extremely important to achieve quality outcomes and cut costs, according to experts at the Healthcare Financial Management Associationinancial-managemen" target="_blank" class="directory-item-link">Financial Management Association’s June ANI conference in Las Vegas.

“The (new) reimbursement structures are going to force everyone to communicate better,” said David A. Gregory, executive vice president for Prescott Associates in Avon, Conn. “It will be uncomfortable for a few years. We’re going to be talking to entities that we wouldn’t normally.”

He defined quality as “meeting or exceeding expectations at a cost that represents value to the customer.”

“There needs to be quality and it leads to cost (increases),” Gregory said. “To be successful in providing quality healthcare, hospitals and physicians need to work together.”

According to Gregory, barriers to hospital-physician collaboration on quality include:

  • 70-80 percent of hospital admissions and patient visits are influenced by individual physician’s recommendation, yet only 59 percent of physicians are loyal to the hospitals where they practice;
  • Hospitals do not have extensive control over physicians who practice in their facilities, other than hospital-based or employed physicians;
  • Tenuous relationships between physicians and hospital administrators;
  • Hospital and physician incentives and reimbursement are not aligned.

“If you don’t know what your physicians want, survey them,” said Gregory. “They are pulling their hair out with all the (reform) changes. If you’re able to help them with that aspect of their life, then you’ll get their attention.”
While hospitals are hiring more physicians than ever and trying to align clinical strategies and compensation, keeping costs down is an important goal. Avoiding excessive subsidies can be tricky.

“Employment is just one approach to hospital-physician alignment,” said Craig E. Holm, senior vice president at Health Strategies and Solutions in Philadelphia. He noted that other approaches include independent physicians and independent partnerships.

Influences on physician employment can include competition between hospitals and physicians, the desire of physicians for security, soured relationships between physicians and hospitals, and regulations constraining the options for formal business relationships other than employment.

“We’re (also) starting to think about quality and outcomes incentives,” said Louis Glaser, Partner at Katten Muchin Rosenman in Chicago. Production should correlate with compensation, added Holm.

A national survey shows that primary care physicians make up 11 to 50 percent of those physicians employed by hospitals and compensation is often RVU-based. Annual physician subsidies average $76,000 to $100,000. This is up from $70,000 in 2008-2009.

In order to improve performance and avoid excessive subsidies, hospitals have to “stop thinking about WRVUs and how to achieve that,” according to Glaser.

To avoid excessive subsidies when hiring physicians, Glaser and Holm suggest that organizations be careful with their selection of top-tier, professionally compatible physicians that are committed to clinical integration and look at acquisition costs that exclude excessive goodwill.

They also suggest that hospitals use productivity-based compensation and short-term (one-to-two-year) contracts. There should be a strong focus on adding incremental practices, they said, as incremental downstream revenue offsets practice deficits.

Some practice deficits are inevitable, however, due to ramp-up, rich hospital benefits and removal of ancillary revenue from practices.