The True Meaning of Physician Alignment

November 12, 2014
Gregory Mertz

Physicians, at least those who find private practice attractive, should develop proposals and present those to hospital leaders when it comes to partnerships.

When hospital CEOs are surveyed about their major concerns, relationships with physicians always appears close to the top, along with concerns about financial viability. Since the care decisions made by physicians related to hospital-based care influences institutional operating costs, maybe these two concerns are really just one: how to engage physicians in addressing hospital issues.

Similar surveys that address alignment models reveal that the top reported option is physician employment. A 2013 survey conducted by HealthLeaders ("Physician Alignment in the Shared Risk Environment," Sept. 2013) found that 87 percent of CEOs expected employment rates to increase in the years ahead.

It seems clear, at least in the minds of hospital leadership, that the path to alignment is through employment. Put physicians on the payroll and alignment will be yours. Is this true? What is the goal of alignment beyond employment and is are there other ways to engage physicians? Another question should be: "What's in it for the physician?"

Goals of Alignment

Curiously, I can find no surveys of physicians related to what they want out of the alignment process. It would seem, then, that the alignment process is really a hospital-centric process. The 2014 HealthLeaders alignment survey asked about what were the expected outcomes of alignment. The results seem to support this theory:

• Improve clinical and financial performance: 68 percent

• Physician buy-in to quality initiatives: 56 percent

• Engage physician in care redesign: 45 percent

Only 23 percent reported that supporting physicians was an expected benefit.     

A major national hospital consulting company is advising their clients that operating costs will need to be reduced by 15 percent to 25 percent to assure continued viability in the value environment. This isn't going to be achieved by simply reducing the cost of surgical sponges. Physicians are the drivers of the cost and are the major partner needed to reduce those costs. If hospital costs go down and margins improve do physicians benefit? Perhaps not directly.

Years ago there was a financial model that was quickly attacked by federal regulators called "gain share." This process would have allowed physicians to directly benefit from the cost reductions that they were able to achieve. The feds called this "pay-for-referrals" and prosecuted when they found the opportunity. That has now evolved to "co-management" and adding a quality component has resulted in a federal blessing. Physicians should insist that their efforts be tied to some model that will benefit both the hospital and the physicians.

Alternatives to Employment

I've written before about excellent physicians that truly enjoy private practice and have no desire or intent to be on hospital payrolls. If hospital leadership assumes that control or beneficial outcomes can only be achieved through the paycheck then, it would seem, there is the potential for lost opportunity.

While the allure of a regular paycheck is certainly attractive to many physicians, innovative hospitals need to develop alternatives so that they can engage the private community. Programs like co-management and risk-friendly physician-hospital organizations allow hospitals to share the financial benefit that results from engaging physicians in the alignment goals listed above. While it is possible that some CEOs will perceive this revenue sharing as an example of greedy physicians it is really recognition that, without the active and creative support of talented physicians, the hospital will not get where the consulting company suggests they need to be.

Where Do We Go from Here?

The redesign of the care process and foundational changes to the financial model of care are not experiments that will pass into history. How we do it might be open to debate but the fact that we need to do it is a given. All value-based care models, like accountable care organizations, tie incentives to reduced cost and improved quality and those can only be achieved through the efforts of physicians. It is time hospital CEOs recognize this critical role.

My experience is that alignment discussions are initiated by hospitals. They develop the model, perhaps with the help of that consulting company, and present it to physicians; occasionally, as a take-it-or-else option. I recently met with a group of physicians that indicated the local health systems, rather than engage them in discussions, simply increased their employment efforts. Recruiting physicians from outside the market and increasing competition. Partnering with the local physicians, in a collaborative financial model, would help the hospital attain their goal while strengthening the financial health of their voluntary staff.

Physicians, at least those who find private practice an attractive option, should begin to develop their own proposals and present those to hospital leaders. Perhaps the outcomes will be more physician-friendly.