In Jan. 2010, St. Luke's Hospital in Cedar Rapids, Iowa, acquired the practice Cardiologists LC. In March 2010, however, the executive administrator of CLC left. To ensure integration efforts between the hospital and practice did not stall, Paragon Health was called in to provide an interim manager for CLC. Tom Johnston, vice president of Paragon, and Todd Langager, MD, an electrophysiologist and senior physician in CLC, explain how integration was achieved and why gaining efficiency should not be the only consideration when two organizations partner.
Culture
Mr. Johnston says the biggest challenge in hospital-physician integration is aligning the cultures. "Getting [physicians] to understand what the other's culture is and how they could fit into that, and how each of them could work closely together within those cultures, is the most difficult [part]," he says. Even with St. Luke's, which CLC had worked with for years, the physicians and hospital did not fully understand the other's perspective or culture, Mr. Johnston says.
For example, CLC, like most physician practices, used a cash-based accounting system. In contrast, St. Luke's, like most hospitals, did accounting based on accrual. In an effort to increase efficiency, the hospital wanted the cardiology practice to change to accrual-based accounting. However, the physicians weren't familiar with that system and thus were originally opposed to the idea. "The hospital originally didn't even think about it because [the hospital has] always been on an accrual system," Mr. Johnston says. He says the hospital needed to explain to the physicians what accrual accounting means, what it looks like and how they would transition. The hospital took the time to "crosswalk" the financials from accrual back to cash accounting. "This is one of those little tiny things that can end up becoming a big issue if the physicians don't understand why the hospital is doing it that way," Mr. Johnston says.
This example illustrates a theme in Paragon's strategies to help the two groups integrate: strong communication is essential to successful integration. "Helping us understand the hospital's perspective was the best and biggest change we've seen," Dr. Langager said in a case study prepared by Paragon about the integration. "That was a crucial step in enabling us to accept some of the operational changes that were required for the integration effort to continue to evolve."
More than efficiency
Another example in which Paragon served as a "translator" between the physician practice and hospital was when the hospital wanted to incorporate the practice's billing and collection office in the hospital's office. CLC opposed this idea because their office was small, which allowed patients to get used to the office staff and have access to the physicians when explanations about the procedures and fees were needed. Once Mr. Johnston explained to hospital leaders the physicians' reasoning for wanting to retain their office, the hospital permitted the CLC office to continue operation.
Mr. Johnston says hospitals tend to view integration strictly from an efficiency perspective and focus on eliminating duplication of services, such as billing and collections. "It can't always be about efficiency on day one," however, he says. To successfully integrate, the hospital and practice need to compromise on certain issues, even if the final decision does not produce efficiencies right away. In the end, CLC was able to make some changes in their billing and collection that boosted their efficiency. "We were able to integrate some of the efficiency methodologies that the hospital wanted us to adopt, so all parties were happy," Dr. Langager said.
"Of course the hospital as well as the physician practice wants to gain efficiencies wherever they can, and they do become more efficient if the hospital manages in the correct manner," Mr. Johnston says. "[But] it can't be done overnight." Instead, he suggests following a strategy he used with St. Luke's and CLC: Bring the two groups together to communicate and align goals on what efficiencies they want to achieve; then, create a timeline for implementing changes gradually.
Heart clinic
One product of St. Luke's and CLC's discussions was the dissolution of the practice's heart failure clinic and growth of the hospital's clinic. The cardiologists agreed to participate in the hospital's clinic instead of rebuilding their own principally because of the added benefits to patients, according to Mr. Johnston. For example, the hospital could offer additional services, such as social services and dietary resources, that the practice did not have. "It was a little bit hard for [CLC cardiologists] to give up their clinic, but it was the right thing for integration to have one strong heart failure clinic," Mr. Johnston says. "The physicians realized that they weren't going to lose complete control of the patient, the hospital was doing a good job in the clinic and the patients were still going to be well taken care of."
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Culture
Mr. Johnston says the biggest challenge in hospital-physician integration is aligning the cultures. "Getting [physicians] to understand what the other's culture is and how they could fit into that, and how each of them could work closely together within those cultures, is the most difficult [part]," he says. Even with St. Luke's, which CLC had worked with for years, the physicians and hospital did not fully understand the other's perspective or culture, Mr. Johnston says.
For example, CLC, like most physician practices, used a cash-based accounting system. In contrast, St. Luke's, like most hospitals, did accounting based on accrual. In an effort to increase efficiency, the hospital wanted the cardiology practice to change to accrual-based accounting. However, the physicians weren't familiar with that system and thus were originally opposed to the idea. "The hospital originally didn't even think about it because [the hospital has] always been on an accrual system," Mr. Johnston says. He says the hospital needed to explain to the physicians what accrual accounting means, what it looks like and how they would transition. The hospital took the time to "crosswalk" the financials from accrual back to cash accounting. "This is one of those little tiny things that can end up becoming a big issue if the physicians don't understand why the hospital is doing it that way," Mr. Johnston says.
This example illustrates a theme in Paragon's strategies to help the two groups integrate: strong communication is essential to successful integration. "Helping us understand the hospital's perspective was the best and biggest change we've seen," Dr. Langager said in a case study prepared by Paragon about the integration. "That was a crucial step in enabling us to accept some of the operational changes that were required for the integration effort to continue to evolve."
More than efficiency
Another example in which Paragon served as a "translator" between the physician practice and hospital was when the hospital wanted to incorporate the practice's billing and collection office in the hospital's office. CLC opposed this idea because their office was small, which allowed patients to get used to the office staff and have access to the physicians when explanations about the procedures and fees were needed. Once Mr. Johnston explained to hospital leaders the physicians' reasoning for wanting to retain their office, the hospital permitted the CLC office to continue operation.
Mr. Johnston says hospitals tend to view integration strictly from an efficiency perspective and focus on eliminating duplication of services, such as billing and collections. "It can't always be about efficiency on day one," however, he says. To successfully integrate, the hospital and practice need to compromise on certain issues, even if the final decision does not produce efficiencies right away. In the end, CLC was able to make some changes in their billing and collection that boosted their efficiency. "We were able to integrate some of the efficiency methodologies that the hospital wanted us to adopt, so all parties were happy," Dr. Langager said.
"Of course the hospital as well as the physician practice wants to gain efficiencies wherever they can, and they do become more efficient if the hospital manages in the correct manner," Mr. Johnston says. "[But] it can't be done overnight." Instead, he suggests following a strategy he used with St. Luke's and CLC: Bring the two groups together to communicate and align goals on what efficiencies they want to achieve; then, create a timeline for implementing changes gradually.
Heart clinic
One product of St. Luke's and CLC's discussions was the dissolution of the practice's heart failure clinic and growth of the hospital's clinic. The cardiologists agreed to participate in the hospital's clinic instead of rebuilding their own principally because of the added benefits to patients, according to Mr. Johnston. For example, the hospital could offer additional services, such as social services and dietary resources, that the practice did not have. "It was a little bit hard for [CLC cardiologists] to give up their clinic, but it was the right thing for integration to have one strong heart failure clinic," Mr. Johnston says. "The physicians realized that they weren't going to lose complete control of the patient, the hospital was doing a good job in the clinic and the patients were still going to be well taken care of."
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