Relationships between hospitals and physicians have grown closer — or rather, more closely aligned — in recent years. The primary impetus for this trend? Reimbursement pressure. Physician fees in many specialties have been reduced, pushing physicians to consider employment or other financial arrangements with hospitals.
At the same time, hospitals are struggling. Medicare and Medicaid reimbursements often do not cover costs. What's more, private payors — who have traditionally been relied upon to cover these losses — are increasingly concerned with containing their own costs.
All of this means that physicians and hospitals will be forced to work together to hammer out mutually beneficial solutions to these challenges.
"If you look at bundled payments, it's, 'Here's the money, you guys figure it out,'" says Quint Studer, founder of Studer Group. "And if you look at lower reimbursement, it's, 'You're going to get a lot less, you guys figure it out.' The bottom line in both scenarios is physicians and hospitals can't look to someone else for the solutions. They have to find their own solutions."
No best approach when it comes to structures for alignment
So how should health systems best work with physicians to develop these solutions? Mr. Studer says that there is no perfect structure.
"The most appropriate alignment strategy and structure is dependent on each system's market and its unique characteristics," he says. "What might work for one system in a market may not be the best approach for another system in the same market."
"Everyone loves the idea of a one-size-fits-all solution — a single, proven 'best' approach — but that just doesn't work in healthcare," he adds.
Mr. Studer encourages leaders to test various structures that allow them to achieve alignment. At the same time, they need to focus on a few universal elements of "good integration strategy," described below.
1. Good basic operations. In order to have successful integration, it is essential that physicians have confidence in the health system, says Mr. Studer. While many systems attempt to build up confidence by sharing their vision and strategic plan, most physicians are more likely to judge a health system on its everyday operations.
"Sharing how you're moving in the right direction might be good for a new doctor, but most integration depends on physicians already on the medical staff," he says. "To gain their confidence you need good basic operations. If a physician's experience with a hospital system has been positive — the registration works, the clinical quality works, the billing works, and so forth — he or she is more likely to want to align with it."
2. Physicians who understand the healthcare landscape. Integrated health systems should take an active role in ensuring their aligned physicians understand a) the overall healthcare landscape and b) how the organization's strategy positions the system for success inside that landscape, says Mr. Studer.
Integration with physicians will, of course, be part of this strategy, he adds. It's important that physicians understand their role in helping the health system prepare for future challenges.
"Healthcare costs cannot keep going up; it will bankrupt America," says Mr. Studer. "Organizations have got to bring spending under control and, at the same time, improve quality — and they will need the help of physicians to do so. After all, physicians are the ones who actually direct care."
In the past, employment or other forms of financial alignment were often solely about growing or protecting market share, he points out. Now, alignment additionally offers a collaborative structure for improving care.
3. Informed physician input. In order to truly improve care, hospital executives will need physician input in decision making for both strategic and operational decisions.
"Hospital executives have to be willing not just to allow physician input but to proactively seek it out and take action on it," says Mr. Studer.
However, in order for physician input to successfully drive efficiency and quality, physicians need to understand not only the healthcare landscape but also management and operations. That means providing them with a thorough education.
"Just because someone is a good clinician doesn't mean he or she is a good strategic thinker," says Mr. Studer. "Hospitals need to invest in good development and training."
4. Financial incentives. Finally, integration efforts will increasingly include physician financial incentives for reaching quality improvement and efficiency goals. Many integration structures already do this, and in the future, such financial arrangements will only become more prevalent. Employed physicians' compensation will be increasingly dependent on outcomes, as will bonus opportunities for independent physicians who are financially aligned.
"Three to five years down the road, almost every contract will reflect outcomes," says Mr. Studer. "Now the salary structure is most often based on a productivity model, either RVUs or collections. The challenge with this model is it isn't going to get us where we want to go. Doctors need to be on a payment plan that rewards them for better clinical quality and lower costs."
These four elements are key in positioning a health system's integration strategy for success. The challenge moving forward is working out the structure.
"Nine different CEOs may have nine different strategies and structures, and that's not wrong," says Mr. Studer. "They're looking at two things: their market and themselves. The key is not to get frustrated but to keep working until you find the solution that fits your unique situation. Your organization, your physicians, and of course, your patients are worth the effort. "
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At the same time, hospitals are struggling. Medicare and Medicaid reimbursements often do not cover costs. What's more, private payors — who have traditionally been relied upon to cover these losses — are increasingly concerned with containing their own costs. All of this means that physicians and hospitals will be forced to work together to hammer out mutually beneficial solutions to these challenges.
"If you look at bundled payments, it's, 'Here's the money, you guys figure it out,'" says Quint Studer, founder of Studer Group. "And if you look at lower reimbursement, it's, 'You're going to get a lot less, you guys figure it out.' The bottom line in both scenarios is physicians and hospitals can't look to someone else for the solutions. They have to find their own solutions."
No best approach when it comes to structures for alignment
So how should health systems best work with physicians to develop these solutions? Mr. Studer says that there is no perfect structure.
"The most appropriate alignment strategy and structure is dependent on each system's market and its unique characteristics," he says. "What might work for one system in a market may not be the best approach for another system in the same market."
"Everyone loves the idea of a one-size-fits-all solution — a single, proven 'best' approach — but that just doesn't work in healthcare," he adds.
Mr. Studer encourages leaders to test various structures that allow them to achieve alignment. At the same time, they need to focus on a few universal elements of "good integration strategy," described below.
1. Good basic operations. In order to have successful integration, it is essential that physicians have confidence in the health system, says Mr. Studer. While many systems attempt to build up confidence by sharing their vision and strategic plan, most physicians are more likely to judge a health system on its everyday operations.
"Sharing how you're moving in the right direction might be good for a new doctor, but most integration depends on physicians already on the medical staff," he says. "To gain their confidence you need good basic operations. If a physician's experience with a hospital system has been positive — the registration works, the clinical quality works, the billing works, and so forth — he or she is more likely to want to align with it."
2. Physicians who understand the healthcare landscape. Integrated health systems should take an active role in ensuring their aligned physicians understand a) the overall healthcare landscape and b) how the organization's strategy positions the system for success inside that landscape, says Mr. Studer.
Integration with physicians will, of course, be part of this strategy, he adds. It's important that physicians understand their role in helping the health system prepare for future challenges.
"Healthcare costs cannot keep going up; it will bankrupt America," says Mr. Studer. "Organizations have got to bring spending under control and, at the same time, improve quality — and they will need the help of physicians to do so. After all, physicians are the ones who actually direct care."
In the past, employment or other forms of financial alignment were often solely about growing or protecting market share, he points out. Now, alignment additionally offers a collaborative structure for improving care.
3. Informed physician input. In order to truly improve care, hospital executives will need physician input in decision making for both strategic and operational decisions.
"Hospital executives have to be willing not just to allow physician input but to proactively seek it out and take action on it," says Mr. Studer.
However, in order for physician input to successfully drive efficiency and quality, physicians need to understand not only the healthcare landscape but also management and operations. That means providing them with a thorough education.
"Just because someone is a good clinician doesn't mean he or she is a good strategic thinker," says Mr. Studer. "Hospitals need to invest in good development and training."
4. Financial incentives. Finally, integration efforts will increasingly include physician financial incentives for reaching quality improvement and efficiency goals. Many integration structures already do this, and in the future, such financial arrangements will only become more prevalent. Employed physicians' compensation will be increasingly dependent on outcomes, as will bonus opportunities for independent physicians who are financially aligned.
"Three to five years down the road, almost every contract will reflect outcomes," says Mr. Studer. "Now the salary structure is most often based on a productivity model, either RVUs or collections. The challenge with this model is it isn't going to get us where we want to go. Doctors need to be on a payment plan that rewards them for better clinical quality and lower costs."
These four elements are key in positioning a health system's integration strategy for success. The challenge moving forward is working out the structure.
"Nine different CEOs may have nine different strategies and structures, and that's not wrong," says Mr. Studer. "They're looking at two things: their market and themselves. The key is not to get frustrated but to keep working until you find the solution that fits your unique situation. Your organization, your physicians, and of course, your patients are worth the effort. "
More Articles Featuring Quint Studer:
It’s Time for CEOs and Boards to Come Together on Compensation Issues to Ensure ProfitabilityThe Next Iteration of Hospital-Physician Alignment: Making Medicare Profitable
The Ladder of Employee Engagement: 5 Can't-Miss Steps for Hospital Leaders