Beyond Costs: The Value of Comanagement Agreements

As Medicare reimbursements decrease and many smaller group practices struggle to maintain their margins, more than a few physicians have begun to seek the financial shelter afforded them by hospital employment. Not all physician practices, however, are interested in giving up their independence to join their local hospital or health system, and in some rural settings physicians aren’t interested in a long-term commitment to the area. Clinical comanagement agreements offer physicians and hospitals an opportunity to thrive, but the structure may vary, especially as accountable care organizations take seed.

Generally, clinical comanagement agreements are contracts written to compensate physicians for the management of a hospital department or service line. The contract is typically for both fixed and incentive compensation, which is adjusted annually. Incentive compensation is usually based on mutually agreed-upon goals for operational process improvements, quality indicators, satisfaction measures, and program development. Incentives must also be structured in a way that doesn’t reward physicians for increased volumes (a violation of the anti-kickback statute) and the contract length is generally between one and four years, though parties could agree to extensions.

Clinical comanagement agreements tend to fall in the middle of the contract spectrum. On one end is an affiliation arrangement that calls for cooperation between the hospital and physician for some mutual benefit, and virtually all control is maintained by both parties. At the other end is a full acquisition of a group practice, and all control is surrendered to the acquiring facility. In between these two lie clinical comanagement agreements, clinical affiliations, lease transactions, and partnerships with legal and financial commitments required of all participants.

“With clinical comanagement agreements you have to set some agreed-upon goals with the physicians on the clinical care delivery, and to the extent possible you need to set goals around how you want these to change,” says John Katsianis, vice president and CFO for Christian Hospital, part of BJC HealthCare, in St. Louis. The 300-staffed-bed nonprofit facility with a 2010 annual net revenue of nearly $260 million uses clinical comanagement agreements for its oncology group and pulmonary specialists.

“Comanagement agreements allow you to focus on noncost-related metrics that you want to improve on. ... For example, with our pulmonary agreement, we wanted to change some of our clinical outcomes,” explains Katsianis. Another goal was to increase participation in clinical trials, so physician participation was set as a goal.