As hospitals and health systems across the country work toward coordinated and integrated care, most will need to alter their relationships with physicians. How a health system aligns its priorities with physicians is critical. That's because physicians have such an impact on cost and quality of care — both of which are the key goals of the Patient Protection and Affordable Care Act.
"Across the country, there are very few healthcare markets where the relationships between physicians and hospitals aren't in some type of change process," says Quint Studer, founder of Studer Group. "Closer clinical integration is achieved by a number of different models, including employment. What we're finding, however, is no matter what strategy you pick, the real challenge is the execution of the strategy — not only in the first year but the years thereafter."
Over the past few years, the fear of significant reimbursement changes has caused many physicians to "run for shade" by seeking hospital employment, explains Mr. Studer. Hospitals, in return, have welcomed them — often because of an overarching integration strategy.
Yet, there are certain hurdles that need to be overcome before the relationship between healthcare organizations and physicians can be optimized.
Misaligned incentives
Lessons of the 1990s taught hospitals they must achieve certain levels of performance from physicians in an employment model. As a result, the majority of physician contracts today are productivity or collection based. In contrast, the future of healthcare delivery is value-based — and the shift from one compensation model to another cannot happen overnight.
"When most physicians are brought into employment by a hospital, the hospital isn't totally at risk," explains Mr. Studer. "Physicians' salaries are determined by a productivity model based on either relative value units (RVUs) — i.e., productivity — or percent of total collections. Yet, the heart of the Patient Protection and Affordable Care Act challenges that type of reimbursement."
While it is true that a growing number of systems do provide incentives for meeting certain quality and/or patient satisfaction goals, these measures often impact only a small portion of the total compensation a physician receives.
Therefore, the biggest challenges in physician integration could lie ahead. When hospitals bring physicians on board they do so hoping to eventually achieve lower-cost, higher-quality care. Unfortunately, the contract they forge with physicians doesn’t incentivize them to prioritize these goals. It incentivizes quantity, not quality. This situation creates a gap that hospital leaders must find a way to bridge.
So how can leaders bridge the gap? The answer involves educating physicians on the coming shift, providing them with a mechanism for feedback and using a tiered approach to introducing new payment structures.
Do physicians know where the organization is headed?
Hospitals leaders should first make sure all physicians understand the shift toward value-based care and how it will impact the health system's overarching strategy. "They need to truly understand what goals — both clinical and financial — the organization must meet in order to be successful," says Mr. Studer.
For example, if the organization has set a certain HCAHPS score or utilization rates as overarching goals, physicians need to understand what the goal is, why it has been set and their role in helping to achieve it.
Traditionally, physicians have trained to have an individual mindset. This mindset, combined with physician contracts that reward individual productivity, may create a situation in which physicians are not aligned with the organization’s larger goals. Leaders must help physicians to understand that they will soon have to move away from the old paradigm and into a new one--and to understand how it will translate to the system's goals as well as their individual performance goals.
Leaders, however, have to be careful not to dictate these goals to physicians. "Physicians want to have input into and influence on decisions," says Mr. Studer.
This means a hospital should involve the physicians — through committees or other avenues — in helping set new performance measures. For example, if an organizational goal is to receive a specific HCAHPS score, a certain percent of each individual physician's compensation could be determined by his or her scores on the physician communication measure.
"Give the physicians a menu of metrics and let them select which metrics they need to see regularly to meet performance expectations,” suggests Mr. Studer.
When introducing these performance-based measures into compensation, Mr. Studer recommends a step-wise approach: introducing a few new measures each year and expanding that as value-based payments become more prevalent. As the organization grows more sophisticated, it can begin to weight the most important measures to ensure they are a core focus of the physicians.
Provide feedback
Next, the organization needs to provide feedback to physician on how they are performing — before it impacts their pay. Physician leaders or an administrator can track physician performance on all indicators that align with organizational goals and regularly provide reports on how each physician stacks up compared to the benchmark as well as to other physicians.
Mr. Studer recommends this feedback be provided in a one-on-one meeting, so the physician doesn't feel publicly shamed if performance falls below the standard. During this meeting, the administrator or physician leader should also solicit feedback from the physician on what barriers may be keeping him or her from achieving those results. If those barriers are operational, leaders should be prepared to quickly address them.
He also recommends healthcare leaders be prepared to provide skill development and training to physicians. "Once they know they're evaluated and data is transparent, they become very hungry to improve their skill sets in those areas," he says.
In the end, the transition from fee-for-service to pay-for-performance is about finding the right speed of change and explaining why this shift is beneficial.
"Value-based payment is actually much more balanced for doctors," explains Mr. Studer. "Items most important to the doctors — patient care and access, for example — begin to more greatly influence how they are compensated for the work they do."
Assessing Leadership in the New Era of Healthcare Delivery: 5 Key Questions to Ask
Mastering the Fine Art of Follow-Up
"Across the country, there are very few healthcare markets where the relationships between physicians and hospitals aren't in some type of change process," says Quint Studer, founder of Studer Group. "Closer clinical integration is achieved by a number of different models, including employment. What we're finding, however, is no matter what strategy you pick, the real challenge is the execution of the strategy — not only in the first year but the years thereafter."
Over the past few years, the fear of significant reimbursement changes has caused many physicians to "run for shade" by seeking hospital employment, explains Mr. Studer. Hospitals, in return, have welcomed them — often because of an overarching integration strategy.
Yet, there are certain hurdles that need to be overcome before the relationship between healthcare organizations and physicians can be optimized.
Misaligned incentives
Lessons of the 1990s taught hospitals they must achieve certain levels of performance from physicians in an employment model. As a result, the majority of physician contracts today are productivity or collection based. In contrast, the future of healthcare delivery is value-based — and the shift from one compensation model to another cannot happen overnight.
"When most physicians are brought into employment by a hospital, the hospital isn't totally at risk," explains Mr. Studer. "Physicians' salaries are determined by a productivity model based on either relative value units (RVUs) — i.e., productivity — or percent of total collections. Yet, the heart of the Patient Protection and Affordable Care Act challenges that type of reimbursement."
While it is true that a growing number of systems do provide incentives for meeting certain quality and/or patient satisfaction goals, these measures often impact only a small portion of the total compensation a physician receives.
Therefore, the biggest challenges in physician integration could lie ahead. When hospitals bring physicians on board they do so hoping to eventually achieve lower-cost, higher-quality care. Unfortunately, the contract they forge with physicians doesn’t incentivize them to prioritize these goals. It incentivizes quantity, not quality. This situation creates a gap that hospital leaders must find a way to bridge.
So how can leaders bridge the gap? The answer involves educating physicians on the coming shift, providing them with a mechanism for feedback and using a tiered approach to introducing new payment structures.
Do physicians know where the organization is headed?
Hospitals leaders should first make sure all physicians understand the shift toward value-based care and how it will impact the health system's overarching strategy. "They need to truly understand what goals — both clinical and financial — the organization must meet in order to be successful," says Mr. Studer.
For example, if the organization has set a certain HCAHPS score or utilization rates as overarching goals, physicians need to understand what the goal is, why it has been set and their role in helping to achieve it.
Traditionally, physicians have trained to have an individual mindset. This mindset, combined with physician contracts that reward individual productivity, may create a situation in which physicians are not aligned with the organization’s larger goals. Leaders must help physicians to understand that they will soon have to move away from the old paradigm and into a new one--and to understand how it will translate to the system's goals as well as their individual performance goals.
Leaders, however, have to be careful not to dictate these goals to physicians. "Physicians want to have input into and influence on decisions," says Mr. Studer.
This means a hospital should involve the physicians — through committees or other avenues — in helping set new performance measures. For example, if an organizational goal is to receive a specific HCAHPS score, a certain percent of each individual physician's compensation could be determined by his or her scores on the physician communication measure.
"Give the physicians a menu of metrics and let them select which metrics they need to see regularly to meet performance expectations,” suggests Mr. Studer.
When introducing these performance-based measures into compensation, Mr. Studer recommends a step-wise approach: introducing a few new measures each year and expanding that as value-based payments become more prevalent. As the organization grows more sophisticated, it can begin to weight the most important measures to ensure they are a core focus of the physicians.
Provide feedback
Next, the organization needs to provide feedback to physician on how they are performing — before it impacts their pay. Physician leaders or an administrator can track physician performance on all indicators that align with organizational goals and regularly provide reports on how each physician stacks up compared to the benchmark as well as to other physicians.
Mr. Studer recommends this feedback be provided in a one-on-one meeting, so the physician doesn't feel publicly shamed if performance falls below the standard. During this meeting, the administrator or physician leader should also solicit feedback from the physician on what barriers may be keeping him or her from achieving those results. If those barriers are operational, leaders should be prepared to quickly address them.
He also recommends healthcare leaders be prepared to provide skill development and training to physicians. "Once they know they're evaluated and data is transparent, they become very hungry to improve their skill sets in those areas," he says.
In the end, the transition from fee-for-service to pay-for-performance is about finding the right speed of change and explaining why this shift is beneficial.
"Value-based payment is actually much more balanced for doctors," explains Mr. Studer. "Items most important to the doctors — patient care and access, for example — begin to more greatly influence how they are compensated for the work they do."
More Articles Featuring Quint Studer:
EMR Implementation: An Opportunity To Strengthen Physician RelationshipsAssessing Leadership in the New Era of Healthcare Delivery: 5 Key Questions to Ask
Mastering the Fine Art of Follow-Up