Marc Halley, founder, president and CEO of Westerville, Ohio-based Halley Consulting Group, has been working with hospitals and physician practices since 1984. He saw the onset and outcomes of managed care in the 1990s and took some of those lessons to develop more competitive models for healthcare providers to boost their physician ranks and gain market share. Mr. Halley is an advocate for a retail-savvy, consumer-oriented approach to capture market share that is built on two major principles.
The first is that primary care physicians are the point of access to the healthcare system. More simply, "primary care equals market share," in Mr. Halley's words. PCPs affect patients' use of specialty services and which hospitals they visit. These physicians are a truer measure of a hospital's market share than admissions and discharges, which Mr. Halley says are merely measures of throughput. Building a retail strategy around a solid primary care base is one of the most essential tasks for hospitals to thrive in a competitive market.
The second part of Mr. Halley's competitive model is this: Hospitals need to become more consumer-savvy, treat the patient as the center of the universe and get better acquainted with their demands and priorities. "Gone are the days of patients patiently waiting to see a physician. Gone are the days of blind compliance with the counsel of a trusted medical adviser," Mr. Halley wrote in his book, The Primary Care-Market Share Connection.
Here, Mr. Halley shares some of the trends he's observed in the past five years, why hospital leaders need to modernize their physician-liaison programs and how healthcare reform and its focus on collaboration may not change the value of referrals.
Question: What have you found to be the largest shift in hospitals' physician workforce strategies within the past five years?
Marc Halley: For a variety of reasons, the physician employment model has really taken hold around the country. That is partially a function of physician preference. Many of those in private practice see a need to change, especially those whose reimbursement is negatively impacted. Hospitals have also realized that, in order to capture market share and keep it, they need strong affiliations with primary care physicians who have market share and strong affiliations with what we call "specialists of choice" to attract that market share and preserve service lines.
We don't see a time when there will be another mass practice divestiture, like in the late 1990s. We don't think that'll happen again. I personally think these changes are here to stay and that employment will be one of many strategies, but a key one.
It's time for folks to face the reality of current trends — not even counting healthcare reform. Reimbursement continues to drop and costs continue to rise. A significant trend most people don't talk about today is Baby Boomers descending on the healthcare industry. They are living longer and will place more demands on the system. We're going to have to rely on the integration of physicians and hospitals to make this work, just to survive these trends.
Q: Some hospital leaders have mentioned a change in strategy in which they'll place less emphasis on referrals and more on partnerships between providers. Do you think hospitals can ever really lessen the importance of referrals in their strategy?
MH: I think that healthcare providers — both physicians and executives — understand this is a referral business. Even under [capitation models of the late 1980s and early 1990s], organizations that were able to capture populations amassed the largest revenues and capital. Under capitation, the largest risk pool is sitting in the hospital. Consequently, the biggest chance to generate capital is in the hospital.
Hospitals will be the capital-generating engines for integrated systems, even under a capitation model. The issues of volume and referrals will remain critical under healthcare reform. That's the way to make money under capitation.
Q: Why should hospital CEOs need to pay attention to the relationships between PCPs and specialists?
MH: Generally, hospital CEOs don't pay enough attention to managing relationships between PCPs and specialists, and hospital-physician relationships in general. We call the new generation of CEOs "market managers." They have a different mindset. They realize that PCPs are the physicians who patients sign up for even when they're healthy. Those PCPs hold this market share for hospitals and affiliated specialists.
Given the success of most hospitalist programs, PCPs don't come to the hospital anymore. They don't need to. So, it is more important that we don't leave referral relationships to chance, because specialists don't have opportunities to run into PCPs on the floors. Wise market managers realize that the relationship between PCPs and specialists has become digitized and very vulnerable. We don't have face-to-face relationships anymore.
A smart market manager will be out in the offices of PCPs and specialists and linking them. They'll understand what's working and what's not in those all-important referral relationships. How are hospital departments performing? Is it easy to refer to services? How do patients feel when they're admitted? Those are all relationships that have to be maintained routinely. They can't be left to chance.
Q: If hospitals do employ physician liaisons, what would you recommend they do to ensure more effective and successful relationship management?
MH: Successful CEO/market managers realize that they cannot maintain multiple referral relationships alone. They engage other executives who have assignments to go out, meet physicians and get a feel for their needs, wants and priorities. We call them "business development officers," and they are out there trying to maintain those [physician] relationships as well.
We need professional marketing executives who really understand the needs of "customers" — who are physicians, in this case — and make sure their practices are successful and that referral relationships are intact. These business development officers are as concerned as the CEO about making sure affiliated PCPs are succeeding to make this integrated model really work.
Referral and relationship management is key. Referrals follow relationships, and all relationships atrophy over time. Market managers have to facilitate maintaining those relationships between PCPs, specialists and the hospital. I think hospital leaders in most markets are adopting the market manager concept. Sometimes it's market-driven, and CEOs have been forced to be more alert to what's going on. Otherwise, there are competitors in their market who will eat their lunch.
Q: Are there any other traditional understandings about hospital-physician relationships that you see evolving under healthcare reform?
MH: Everyone is worried about healthcare reform mechanics. We're certainly going to have to respond to those changes, but the underlying trends are even more important. What's going to happen if Pres. [Barack] Obama ends up in the White House again? [Reimbursement] is going to go down. What if he's not in the White House? Reimbursement is still going to go down. Regardless of what happens, we have to get ready to do more with less. That's the bigger concern to me than exactly how we get paid.
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The first is that primary care physicians are the point of access to the healthcare system. More simply, "primary care equals market share," in Mr. Halley's words. PCPs affect patients' use of specialty services and which hospitals they visit. These physicians are a truer measure of a hospital's market share than admissions and discharges, which Mr. Halley says are merely measures of throughput. Building a retail strategy around a solid primary care base is one of the most essential tasks for hospitals to thrive in a competitive market.
The second part of Mr. Halley's competitive model is this: Hospitals need to become more consumer-savvy, treat the patient as the center of the universe and get better acquainted with their demands and priorities. "Gone are the days of patients patiently waiting to see a physician. Gone are the days of blind compliance with the counsel of a trusted medical adviser," Mr. Halley wrote in his book, The Primary Care-Market Share Connection.
Here, Mr. Halley shares some of the trends he's observed in the past five years, why hospital leaders need to modernize their physician-liaison programs and how healthcare reform and its focus on collaboration may not change the value of referrals.
Question: What have you found to be the largest shift in hospitals' physician workforce strategies within the past five years?
Marc Halley: For a variety of reasons, the physician employment model has really taken hold around the country. That is partially a function of physician preference. Many of those in private practice see a need to change, especially those whose reimbursement is negatively impacted. Hospitals have also realized that, in order to capture market share and keep it, they need strong affiliations with primary care physicians who have market share and strong affiliations with what we call "specialists of choice" to attract that market share and preserve service lines.
We don't see a time when there will be another mass practice divestiture, like in the late 1990s. We don't think that'll happen again. I personally think these changes are here to stay and that employment will be one of many strategies, but a key one.
It's time for folks to face the reality of current trends — not even counting healthcare reform. Reimbursement continues to drop and costs continue to rise. A significant trend most people don't talk about today is Baby Boomers descending on the healthcare industry. They are living longer and will place more demands on the system. We're going to have to rely on the integration of physicians and hospitals to make this work, just to survive these trends.
Q: Some hospital leaders have mentioned a change in strategy in which they'll place less emphasis on referrals and more on partnerships between providers. Do you think hospitals can ever really lessen the importance of referrals in their strategy?
MH: I think that healthcare providers — both physicians and executives — understand this is a referral business. Even under [capitation models of the late 1980s and early 1990s], organizations that were able to capture populations amassed the largest revenues and capital. Under capitation, the largest risk pool is sitting in the hospital. Consequently, the biggest chance to generate capital is in the hospital.
Hospitals will be the capital-generating engines for integrated systems, even under a capitation model. The issues of volume and referrals will remain critical under healthcare reform. That's the way to make money under capitation.
Q: Why should hospital CEOs need to pay attention to the relationships between PCPs and specialists?
MH: Generally, hospital CEOs don't pay enough attention to managing relationships between PCPs and specialists, and hospital-physician relationships in general. We call the new generation of CEOs "market managers." They have a different mindset. They realize that PCPs are the physicians who patients sign up for even when they're healthy. Those PCPs hold this market share for hospitals and affiliated specialists.
Given the success of most hospitalist programs, PCPs don't come to the hospital anymore. They don't need to. So, it is more important that we don't leave referral relationships to chance, because specialists don't have opportunities to run into PCPs on the floors. Wise market managers realize that the relationship between PCPs and specialists has become digitized and very vulnerable. We don't have face-to-face relationships anymore.
A smart market manager will be out in the offices of PCPs and specialists and linking them. They'll understand what's working and what's not in those all-important referral relationships. How are hospital departments performing? Is it easy to refer to services? How do patients feel when they're admitted? Those are all relationships that have to be maintained routinely. They can't be left to chance.
Q: If hospitals do employ physician liaisons, what would you recommend they do to ensure more effective and successful relationship management?
MH: Successful CEO/market managers realize that they cannot maintain multiple referral relationships alone. They engage other executives who have assignments to go out, meet physicians and get a feel for their needs, wants and priorities. We call them "business development officers," and they are out there trying to maintain those [physician] relationships as well.
We need professional marketing executives who really understand the needs of "customers" — who are physicians, in this case — and make sure their practices are successful and that referral relationships are intact. These business development officers are as concerned as the CEO about making sure affiliated PCPs are succeeding to make this integrated model really work.
Referral and relationship management is key. Referrals follow relationships, and all relationships atrophy over time. Market managers have to facilitate maintaining those relationships between PCPs, specialists and the hospital. I think hospital leaders in most markets are adopting the market manager concept. Sometimes it's market-driven, and CEOs have been forced to be more alert to what's going on. Otherwise, there are competitors in their market who will eat their lunch.
Q: Are there any other traditional understandings about hospital-physician relationships that you see evolving under healthcare reform?
MH: Everyone is worried about healthcare reform mechanics. We're certainly going to have to respond to those changes, but the underlying trends are even more important. What's going to happen if Pres. [Barack] Obama ends up in the White House again? [Reimbursement] is going to go down. What if he's not in the White House? Reimbursement is still going to go down. Regardless of what happens, we have to get ready to do more with less. That's the bigger concern to me than exactly how we get paid.
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