Mergers, acquisitions, partnerships, affiliations, co-management agreements, joint ventures, service line agreements, leasing arrangements and strategic partnerships. Sometimes it seems as though the world of healthcare has turned into a Baskin Robbins, with 31 flavors of hospital transactions out in various shapes, sizes and scopes. To get back to basics, this article is one of a three-part series dedicated to one of those models. There are no dumb questions here — this is co-management agreements 101.
Two experts from Surgical Care Affiliates, which operates a national network of ambulatory surgical centers and surgical hospitals, discuss the ins and outs of co-management agreements. The series will focus on the beginning, middle and end goals for these arrangements, and share best practices for each. In part one, Gerry Biala, senior vice presidents of perioperative services, and Matt Kossman, senior director, explain the benefits of co-management agreements and what best practices can help ensure their successful formation.
Q: Can we start off by explaining how co-management is different from other forms of affiliation, such as joint ventures or partnerships?
Gerry Biala: A co-management agreement is different from hospital employment of a physician because it's with a group of physicians and focused on a team-based approach to managing specific aspects of patient care delivery.
Matt Kossman: Most co-management agreements are centered in the hospital. A typical agreement involves a scenario where the hospital and physicians have shared involvement in the daily operations of a particular service line. An example is a group of orthopedic surgeons focusing on quality indicators. The idea is that those surgeons will team up with hospital leadership and jointly manage the delivery of care with the goal of positively impacting quality outcomes.
Co-management is a magnificent tactic for health systems to put in place to align with physicians in managing quality and operational outcomes. They create a mechanism by which hospitals can partner with physicians, which falls nicely in line with the current industry trends of hospital consolidation and accountable care organizations.
Q: How are compensation arrangements generally structured?
Mr. Kossman: When it comes to payment, all compensation must be based on fair-market value for the services provided. What makes these agreements unique is that compensation can be structured such that a portion is "at-risk" and based on the achievement of predetermined outcomes and a second portion is for the provision of administrative duties. If the outcome goals are achieved, physicians receive the associated compensation, and if they are not achieved, they do not receive the compensation. In certain instances, the "at-risk" compensation amount cannot exceed the fixed compensation amount.
Q: Are there different shades of co-management agreements? If so, can you explain one from each end of the spectrum?
Mr. Biala: The most common type of co-management agreement is generally focused on one specialty and the specific quality measures and management expectations for these patients. For example, we're looking at an orthopedic arrangement right now that includes one physician practice at one hospital and is specifically focused on quality outcomes at that hospital.
However, we see a trend emerging towards more extensive co-management agreements including multiple specialties at multiple inpatient and outpatient locations across the community. The objective of these "second-generation" co-management agreements is to impact outcomes across the entire continuum of care.
Mr. Kossman: An example of this is a surgical hospital we are currently working with that is interested in setting up a co-management agreement with approximately 20 physicians. The surgeons represent multiple specialties in non-affiliated practices. The objective is to have the physicians paired with hospital management and participating in daily operations. The proposed agreement covers quality initiatives and also branches out into operational areas focused on efficiency measures, supply chain, strategic planning, etc. Physicians will be actively involved in driving the agenda and ongoing initiatives.
Q: In your experience, what are the largest drivers behind co-management agreements?
Mr. Kossman: The desire to partner with physicians in achieving improved quality outcomes is probably the number one reason. Second to that, I would say shared involvement in the operational components of managing the delivery of healthcare. I've seen several instances where hospitals examined their marketplace position and desired to differentiate themselves as a center of excellence. A clinical co-management agreement creates a mechanism for hospitals to partner with physicians with a goal of jointly improving outcomes and ultimately becoming recognized as the market leader.
Q: If you were to craft a "co-management checklist," what would be critical traits that a hospital should possess before it strikes any sort of co-management agreement?
Mr. Biala: Senior administration has to be ready to do two things. One: to culturally create an atmosphere of complete transparency. In the past, physicians may have been suspicious about information not being shared. That culture has to transition from one of limited sharing to openness for an agreement to be successful.
Two: the hospital needs to have the ability to deliver on the agreed upon changes to processes or resources that have been identified by the co-management entity. Expectations and timelines need to be set realistically or there is a risk of frustrating and alienating the physicians. In addition, leadership and staff have to be aligned and empowered to implement the recommended changes to achieve the improved outcomes. The co-management agreement will require the managers and staff to work in close collaboration with physicians while implementing changes and any deviations to the change need to be discussed with their new co-management team. In this way, physicians feel like they're taking a more active role in changing the way care is delivered.
Mr. Kossman: I can't emphasize transparency enough. Trust between hospitals and physicians is paramount.
Q: Some leaders are struggling to makes ties with providers outside of their hospital's walls. What are the first steps providers should take if they want to develop co-management relationships?
Mr. Kossman: The first step is a thorough understanding of the hospital's strategic plan and specific goals over the next few years. Hospitals need to identify what areas they want to focus on. The next step is creating an environment of trust were information becomes transparent between hospital leadership and physicians. Hospital leaders must be willing to engage in honest conversations with physicians to share their thoughts on clinical goals and how the hospital wants to differentiate itself from other healthcare providers in its market area.
Mr. Biala: In those initial meetings, it becomes more than just, "This is what we want and see." Hospitals need to translate that message to the physicians' practice and ask how that practice aligns with the hospital's goal. Ask physicians what common goals they have and how they can both reach them in the strategic and operating plan.
Q: Are there any other best practices hospitals/physicians should be cognizant of right off the bat?
Mr. Kossman: One area I'd emphasize here is service-line management. When setting up a co-management agreement, it's important to have a service line expert focused on the day-to-day activities of the co-management agreement. The manager should act in an objective manner focused on building consensus between the hospital and physicians, monitoring progress and supporting the objectives through an actionable plan designed to ensure success.
Mr. Biala: I'd add that it's critically important to establish realistic expectations early on. There will be a tendency to move quickly to see solutions implemented. Hospital administrators should plan to begin an education process with physicians on the management process and how it works within the hospital environment. A dedicated co-management service line leader can assist with coordinating these and other activities.
Physician-Hospital Joint Ventures; Alignment of Physicians With Hospitals
Oregon's Legacy Health Strikes Co-Management Deal With Two Cardiology Groups
Two experts from Surgical Care Affiliates, which operates a national network of ambulatory surgical centers and surgical hospitals, discuss the ins and outs of co-management agreements. The series will focus on the beginning, middle and end goals for these arrangements, and share best practices for each. In part one, Gerry Biala, senior vice presidents of perioperative services, and Matt Kossman, senior director, explain the benefits of co-management agreements and what best practices can help ensure their successful formation.
Q: Can we start off by explaining how co-management is different from other forms of affiliation, such as joint ventures or partnerships?
Gerry Biala: A co-management agreement is different from hospital employment of a physician because it's with a group of physicians and focused on a team-based approach to managing specific aspects of patient care delivery.
Matt Kossman: Most co-management agreements are centered in the hospital. A typical agreement involves a scenario where the hospital and physicians have shared involvement in the daily operations of a particular service line. An example is a group of orthopedic surgeons focusing on quality indicators. The idea is that those surgeons will team up with hospital leadership and jointly manage the delivery of care with the goal of positively impacting quality outcomes.
Co-management is a magnificent tactic for health systems to put in place to align with physicians in managing quality and operational outcomes. They create a mechanism by which hospitals can partner with physicians, which falls nicely in line with the current industry trends of hospital consolidation and accountable care organizations.
Q: How are compensation arrangements generally structured?
Mr. Kossman: When it comes to payment, all compensation must be based on fair-market value for the services provided. What makes these agreements unique is that compensation can be structured such that a portion is "at-risk" and based on the achievement of predetermined outcomes and a second portion is for the provision of administrative duties. If the outcome goals are achieved, physicians receive the associated compensation, and if they are not achieved, they do not receive the compensation. In certain instances, the "at-risk" compensation amount cannot exceed the fixed compensation amount.
Q: Are there different shades of co-management agreements? If so, can you explain one from each end of the spectrum?
Mr. Biala: The most common type of co-management agreement is generally focused on one specialty and the specific quality measures and management expectations for these patients. For example, we're looking at an orthopedic arrangement right now that includes one physician practice at one hospital and is specifically focused on quality outcomes at that hospital.
However, we see a trend emerging towards more extensive co-management agreements including multiple specialties at multiple inpatient and outpatient locations across the community. The objective of these "second-generation" co-management agreements is to impact outcomes across the entire continuum of care.
Mr. Kossman: An example of this is a surgical hospital we are currently working with that is interested in setting up a co-management agreement with approximately 20 physicians. The surgeons represent multiple specialties in non-affiliated practices. The objective is to have the physicians paired with hospital management and participating in daily operations. The proposed agreement covers quality initiatives and also branches out into operational areas focused on efficiency measures, supply chain, strategic planning, etc. Physicians will be actively involved in driving the agenda and ongoing initiatives.
Q: In your experience, what are the largest drivers behind co-management agreements?
Mr. Kossman: The desire to partner with physicians in achieving improved quality outcomes is probably the number one reason. Second to that, I would say shared involvement in the operational components of managing the delivery of healthcare. I've seen several instances where hospitals examined their marketplace position and desired to differentiate themselves as a center of excellence. A clinical co-management agreement creates a mechanism for hospitals to partner with physicians with a goal of jointly improving outcomes and ultimately becoming recognized as the market leader.
Q: If you were to craft a "co-management checklist," what would be critical traits that a hospital should possess before it strikes any sort of co-management agreement?
Mr. Biala: Senior administration has to be ready to do two things. One: to culturally create an atmosphere of complete transparency. In the past, physicians may have been suspicious about information not being shared. That culture has to transition from one of limited sharing to openness for an agreement to be successful.
Two: the hospital needs to have the ability to deliver on the agreed upon changes to processes or resources that have been identified by the co-management entity. Expectations and timelines need to be set realistically or there is a risk of frustrating and alienating the physicians. In addition, leadership and staff have to be aligned and empowered to implement the recommended changes to achieve the improved outcomes. The co-management agreement will require the managers and staff to work in close collaboration with physicians while implementing changes and any deviations to the change need to be discussed with their new co-management team. In this way, physicians feel like they're taking a more active role in changing the way care is delivered.
Mr. Kossman: I can't emphasize transparency enough. Trust between hospitals and physicians is paramount.
Q: Some leaders are struggling to makes ties with providers outside of their hospital's walls. What are the first steps providers should take if they want to develop co-management relationships?
Mr. Kossman: The first step is a thorough understanding of the hospital's strategic plan and specific goals over the next few years. Hospitals need to identify what areas they want to focus on. The next step is creating an environment of trust were information becomes transparent between hospital leadership and physicians. Hospital leaders must be willing to engage in honest conversations with physicians to share their thoughts on clinical goals and how the hospital wants to differentiate itself from other healthcare providers in its market area.
Mr. Biala: In those initial meetings, it becomes more than just, "This is what we want and see." Hospitals need to translate that message to the physicians' practice and ask how that practice aligns with the hospital's goal. Ask physicians what common goals they have and how they can both reach them in the strategic and operating plan.
Q: Are there any other best practices hospitals/physicians should be cognizant of right off the bat?
Mr. Kossman: One area I'd emphasize here is service-line management. When setting up a co-management agreement, it's important to have a service line expert focused on the day-to-day activities of the co-management agreement. The manager should act in an objective manner focused on building consensus between the hospital and physicians, monitoring progress and supporting the objectives through an actionable plan designed to ensure success.
Mr. Biala: I'd add that it's critically important to establish realistic expectations early on. There will be a tendency to move quickly to see solutions implemented. Hospital administrators should plan to begin an education process with physicians on the management process and how it works within the hospital environment. A dedicated co-management service line leader can assist with coordinating these and other activities.
Related Articles on Co-Management Agreements:
Top 10 Lessons Learned from "Mature" Co-management ArrangementsPhysician-Hospital Joint Ventures; Alignment of Physicians With Hospitals
Oregon's Legacy Health Strikes Co-Management Deal With Two Cardiology Groups