The Case for an Advanced Physician Enterprise Approach

Health System Successes and Key Strategies for Physician Alignment

For hospitals and health systems today, the message is clear: Success in a value-based world requires more fully aligned and accountable physician relationships that support healthcare delivery and payer performance requirements.

In response to this, as well as concerns about market movement to capitation and other forms of managed care reimbursement, many systems have expanded entry into physician employment. A recent analysis showed an 86 percent increase from 2012-2015 in the number of hospital-owned physician practices, yielding a 50 percent jump in physicians employed by hospitals. Furthermore, 2016 marked the first time that the majority of physicians did not own their medical practices, according to the American Medical Association.

But the emphasis for conducting such deals was — and often is — to develop critical mass and address immediate needs, instead of focusing on balanced tactics for long-term success. As a result, providers have developed or inherited fragmented, duplicative physician relationships, often with poor cultural dynamics and operating results. They’re also managing a range of other hospital-physician affiliation relationships, with concerns growing regarding reliance on the employed model and related support requirements. 

Key Steps to an Aligned PE Approach


Step #1: Define the PE Framework to Assess and Manage Physician Affiliation Relationships

First, it’s important to define what an advanced PE approach entails. The framework starts with a health system’s recognition that the PE is not focused on any single box, but includes new structures, accountabilities, and consistent performance terms to address physician relationships across the enterprise.

Step #2: Assess Current PE Approach and Needs

Rather than completing separate assessments, the PE approach requires more sophisticated and coordinated reviews of physician services and organizational requirements. The following analytic framework has helped multiple systems develop a cohesive PE approach.


Step #3: Develop and Implement Revised Compensation Arrangements

Further development of consistently deployed core performance expectations and at-risk stretch goal incentives for value-based performance can improve enterprisewide alignment with key service line delivery and payer initiative requirements. Under an advanced PE approach, these components will be included within revised compensation arrangements for all respective physician alignment
models utilized by the system, as depicted below.

Step #4: Expand Joint System Oversight and Physician Engagement to Advance the PE Approach

Efforts to improve quality, efficiency, and the patient experience, as well as reduce clinical variation, will be less successful without enhanced physician engagement and empowerment in the co-management of key service lines. Therefore, the developed PE governance and management structures require greater physician input and leadership opportunities, as well as willingness to hold
colleagues accountable for needed behaviors and support for more consistent performance results.

Concluding Observations

Some provider executives believe divesting or reducing support for financially and operationally challenging physician employment is the proper strategy. However, this method may not offer the certainty that the resulting, less-aligned PSA physician relationships will perform better or remain supportive of the system and its affiliates’ delivery and payer initiatives. Rather, in an increasingly complex value-based reimbursement world, an advanced PE approach can produce a framework for optimizing selection and management of essential physician relationships — which will continue to include a mixed-model approach of enhanced employment and PSA relationships.

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