Healthcare reform is driving efforts to develop integrated delivery models, enhance physician-hospital alignment and collaboration and explore formation of Accountable Care Organizations. As part of this discussion, the concept of "clinical co-management" is often raised. This happens, generally, in one of three contexts: 1) as a component of an integrated delivery model; 2) as a strategy to align with physicians; and/or 3) as an alternative to forming an ACO. The reality is it can be all of these things.
Physicians and hospitals often make reference to "co-management" without knowing exactly what they mean. What exactly is CCM? What does it look like? What can it do? When does it make sense?
A definition
In its broadest sense, we are talking about some form of collaborative relationship between a hospital and a group of independent (non-employed) physicians, where they will jointly manage some component of hospital operations (often a particular service line or program) to their mutual benefit.
Options
This collaborative effort can take many forms, and there is no widely accepted nomenclature so the name is less important than the structure itself. None of these are mutually exclusive – hybrid models can work, as well. One way to group the various models follows:
1. The new entity joint venture. The most complex and evolved form of a CCM agreement, it is often sold by consultants as "the" solution. (Perhaps because the complexity leads clients to believe they need extensive, and expensive, consulting assistance?) This model requires the hospital and a group of physicians to form a joint venture business entity (usually an LLC) which then contracts with the hospital to provide defined management services and leadership. The entity has a joint governance structure representing the physicians and the hospital. The hospital and physicians make a small (sometimes as low as $5,000) investment to capitalize the new entity. The physicians' return on their investment comes from the management fees paid by the hospital to the new entity, along with incentive fees tied to performance. Under developing rules about sharing savings incentives with physicians, the payment could include a portion of savings from initiatives led by the new entity.
2. Management services agreement. Rather than creating a new joint venture entity to provide the services to the hospital, in this model, the hospital simply contracts directly with a group of physicians. Multiple groups of physicians could form an entity to contract with the hospital. In either case, the hospital is not involved in forming a new business entity. Like the new entity joint venture, the contract reimburses the physicians for management time and incentives for achieving certain goals.
3. Service line council, advisory board or collaborative. Here, the hospital designates a few key administrators to sit on a council, or board, with select physicians. The group defines the requirements for participation and the roles and responsibilities. Participating physicians may or may not be paid for their time and efforts. The group defines service line or program goals and initiatives and helps to lead and coordinate hospital resources in achieving the objectives. Under the broad definition, hospital leadership and physicians are working collaboratively to achieve mutually beneficial objectives.
4. Medical directorships. Another option is to identify key physician leaders, and put in place, highly incentivized medical directorships. For instance, within the orthopedic service line, you might name physician directors or "clinical leads" (or any other name that works) for joint replacement, spine and sports medicine. These could then coordinate efforts as part of a service line council, board or collaborative. These would differ from traditional medical directorships in that the responsibilities, initiatives and goals would be specifically defined (as opposed to the vague, general responsibilities in traditional agreements) and a significant portion of the physicians' remuneration would be tied to performance goals for quality, patient satisfaction, operational efficiency and the like.
A practical approach to choosing a model
Here are seven considerations for selecting a model for clinical co-management.
1. Simple is Better. Choose the simplest structure that will accomplish the goals.
2. Define the goals. What the physicians, and the hospital, hope to accomplish, should drive the structure — not the other way around. Do not become enamored with a particular structure before considering all of the variables listed here. Specific goals might include:
For the Hospital:
• Reduce the cost of care
• Gain cooperation for quality efforts
• Participate in bundled payment programs
• Increase patient volume
• A stepping stone toward an ACO Alignment, but avoiding employment
For the Physicians:
• Increase patient volume
• Long-term practice security
• Increase control over the service line
• Improve their own productivity
3. The relationship. The more complex and comprehensive structures only work if there is a good working relationship between the hospital and physicians. If they have not, historically, been able to collaborate in any meaningful way, it is imprudent to embark on a joint business venture or an overly ambitious vision. Trust and a solid working relationship will only come by working together and meeting goals. The model can evolve as the relationship does.
4. Politics. This is particularly important if there are multiple physician groups providing services. Less complex, less formal models are unlikely to intimidate groups who are leery of favoritism in the structure. It may be difficult to bring diverse groups together under certain structures. How will each group be involved? Alternatively, choosing a particular structure may provide a way to determine which groups are sincerely interested in a long term collaborative effort.
5. Medical staff. The traditional medical staff does not, generally, work on the type of initiatives managed under a CCM model. Still, we must consider how the traditional medical staff leadership groups will respond to the new structure. A relatively inactive medical staff will likely not be concerned. A more structured, academic medical staff may balk at some new structure infringing on its responsibilities.
6. Control. How much control will the hospital grant the physicians? On one end of the spectrum, a new entity JV may be asked to manage an entire hospital within a hospital operation, including managing financial performance and staffing. On the other end, the group may serve in merely an advisory capacity. In between the two, we define specifically what level of control will be afforded.
7. Physician leadership. Consider the physicians that will be involved. Do they have a history of effective leadership and collaboration? If not, the structure should be less formal and the hospital should retain a great deal of control. Allow the physicians to develop their leadership skills and THEN move to a more complex, shared control, model.
8. Legal. All of these structures, particularly if they involve any sort of payment to physicians, have legal implications, including Stark and Anti-kickback laws. Each can be structured to fit within the regulatory framework. If it involves creating a new entity and physician investment, then there are securities issues, as well. Again, simpler is better for a number of reasons, including delays created by complex legal issues.
Keys to Success
Form is irrelevant if no real progress is made and this will, certainly, be the case if the following aren’t in place:
• Infrastructure. The co-management group is made up of administrators and physicians. They can lead, prioritize, and analyze, but they have little time to do actual detailed work. The new entity or the hospital should provide at least one person dedicated to managing the project with sufficient accountability, and assign multi-disciplinary teams to do the work
• A plan. Do not expect physicians to do a complete analysis of what is needed, and develop a work-plan to get it done. It is best to provide them with, at least, the framework of a plan to get started.
• Tools. Similarly, do not expect them to perform on-going data and performance evaluation without the right tools. Ideally, the hospital provides the management group with a service line-specific decision support tool that presents data in a consistent, and easy to use, format. Deciding what data is needed, then asking the financial team to produce reports on request is inefficient at best and will eventually frustrate the group’s efforts.
• Physician leadership. Finally, this cannot be forced upon physicians. Regardless of the form you choose, it will fail if a few key physicians don’t appreciate the value and commit a reasonable amount of their time and energy.
Top 10 Lessons Learned from "Mature" Co-management Arrangements
Physicians and hospitals often make reference to "co-management" without knowing exactly what they mean. What exactly is CCM? What does it look like? What can it do? When does it make sense?
A definition
In its broadest sense, we are talking about some form of collaborative relationship between a hospital and a group of independent (non-employed) physicians, where they will jointly manage some component of hospital operations (often a particular service line or program) to their mutual benefit.
Options
This collaborative effort can take many forms, and there is no widely accepted nomenclature so the name is less important than the structure itself. None of these are mutually exclusive – hybrid models can work, as well. One way to group the various models follows:
1. The new entity joint venture. The most complex and evolved form of a CCM agreement, it is often sold by consultants as "the" solution. (Perhaps because the complexity leads clients to believe they need extensive, and expensive, consulting assistance?) This model requires the hospital and a group of physicians to form a joint venture business entity (usually an LLC) which then contracts with the hospital to provide defined management services and leadership. The entity has a joint governance structure representing the physicians and the hospital. The hospital and physicians make a small (sometimes as low as $5,000) investment to capitalize the new entity. The physicians' return on their investment comes from the management fees paid by the hospital to the new entity, along with incentive fees tied to performance. Under developing rules about sharing savings incentives with physicians, the payment could include a portion of savings from initiatives led by the new entity.
2. Management services agreement. Rather than creating a new joint venture entity to provide the services to the hospital, in this model, the hospital simply contracts directly with a group of physicians. Multiple groups of physicians could form an entity to contract with the hospital. In either case, the hospital is not involved in forming a new business entity. Like the new entity joint venture, the contract reimburses the physicians for management time and incentives for achieving certain goals.
3. Service line council, advisory board or collaborative. Here, the hospital designates a few key administrators to sit on a council, or board, with select physicians. The group defines the requirements for participation and the roles and responsibilities. Participating physicians may or may not be paid for their time and efforts. The group defines service line or program goals and initiatives and helps to lead and coordinate hospital resources in achieving the objectives. Under the broad definition, hospital leadership and physicians are working collaboratively to achieve mutually beneficial objectives.
4. Medical directorships. Another option is to identify key physician leaders, and put in place, highly incentivized medical directorships. For instance, within the orthopedic service line, you might name physician directors or "clinical leads" (or any other name that works) for joint replacement, spine and sports medicine. These could then coordinate efforts as part of a service line council, board or collaborative. These would differ from traditional medical directorships in that the responsibilities, initiatives and goals would be specifically defined (as opposed to the vague, general responsibilities in traditional agreements) and a significant portion of the physicians' remuneration would be tied to performance goals for quality, patient satisfaction, operational efficiency and the like.
A practical approach to choosing a model
Here are seven considerations for selecting a model for clinical co-management.
1. Simple is Better. Choose the simplest structure that will accomplish the goals.
2. Define the goals. What the physicians, and the hospital, hope to accomplish, should drive the structure — not the other way around. Do not become enamored with a particular structure before considering all of the variables listed here. Specific goals might include:
For the Hospital:
• Reduce the cost of care
• Gain cooperation for quality efforts
• Participate in bundled payment programs
• Increase patient volume
• A stepping stone toward an ACO Alignment, but avoiding employment
For the Physicians:
• Increase patient volume
• Long-term practice security
• Increase control over the service line
• Improve their own productivity
3. The relationship. The more complex and comprehensive structures only work if there is a good working relationship between the hospital and physicians. If they have not, historically, been able to collaborate in any meaningful way, it is imprudent to embark on a joint business venture or an overly ambitious vision. Trust and a solid working relationship will only come by working together and meeting goals. The model can evolve as the relationship does.
4. Politics. This is particularly important if there are multiple physician groups providing services. Less complex, less formal models are unlikely to intimidate groups who are leery of favoritism in the structure. It may be difficult to bring diverse groups together under certain structures. How will each group be involved? Alternatively, choosing a particular structure may provide a way to determine which groups are sincerely interested in a long term collaborative effort.
5. Medical staff. The traditional medical staff does not, generally, work on the type of initiatives managed under a CCM model. Still, we must consider how the traditional medical staff leadership groups will respond to the new structure. A relatively inactive medical staff will likely not be concerned. A more structured, academic medical staff may balk at some new structure infringing on its responsibilities.
6. Control. How much control will the hospital grant the physicians? On one end of the spectrum, a new entity JV may be asked to manage an entire hospital within a hospital operation, including managing financial performance and staffing. On the other end, the group may serve in merely an advisory capacity. In between the two, we define specifically what level of control will be afforded.
7. Physician leadership. Consider the physicians that will be involved. Do they have a history of effective leadership and collaboration? If not, the structure should be less formal and the hospital should retain a great deal of control. Allow the physicians to develop their leadership skills and THEN move to a more complex, shared control, model.
8. Legal. All of these structures, particularly if they involve any sort of payment to physicians, have legal implications, including Stark and Anti-kickback laws. Each can be structured to fit within the regulatory framework. If it involves creating a new entity and physician investment, then there are securities issues, as well. Again, simpler is better for a number of reasons, including delays created by complex legal issues.
Keys to Success
Form is irrelevant if no real progress is made and this will, certainly, be the case if the following aren’t in place:
• Infrastructure. The co-management group is made up of administrators and physicians. They can lead, prioritize, and analyze, but they have little time to do actual detailed work. The new entity or the hospital should provide at least one person dedicated to managing the project with sufficient accountability, and assign multi-disciplinary teams to do the work
• A plan. Do not expect physicians to do a complete analysis of what is needed, and develop a work-plan to get it done. It is best to provide them with, at least, the framework of a plan to get started.
• Tools. Similarly, do not expect them to perform on-going data and performance evaluation without the right tools. Ideally, the hospital provides the management group with a service line-specific decision support tool that presents data in a consistent, and easy to use, format. Deciding what data is needed, then asking the financial team to produce reports on request is inefficient at best and will eventually frustrate the group’s efforts.
• Physician leadership. Finally, this cannot be forced upon physicians. Regardless of the form you choose, it will fail if a few key physicians don’t appreciate the value and commit a reasonable amount of their time and energy.
Related Articles on Co-Management:
Co-Management Agreements 101: Basic Principles to KnowTop 10 Lessons Learned from "Mature" Co-management Arrangements