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Alignment Assessment

Rick Johnson, for HealthLeaders News, September 20, 2007

Independent practice. Joint ventures/clinical co-management. Full employment. Hospitals and health systems are opening up a number of options to align with physicians. All of this can leave a busy physician to wonder: "Which is the right type of business relationship for me?"

Partnerships can create significant windfalls, not just for your business but also for the patients you serve. At a high level, it comes down to reviewing the pros and cons of each business model, notes John McHugh, a Washington, DC-based consultant with Navigant. Whether the hospitals in your region have an appetite for investment will determine if these options are available to you.

"And a physician needs to consider which option meets the goals for the group practice," says McHugh. "A physician nearing retirement might enter into an employment model as an exit strategy or a way to transition the business. A younger physician, on the other hand, might see employment as a way to focus on patient care without making the long-term investment into an independent practice."

McHugh put together this list of pros and cons for each alignment model:

Independent practice

  • Pros
    • Preserves entrepreneurial potential of independent practice
    • Limits capital infusion requirements
  • Cons
    • Willingness of independent groups to fund excess capacity during start-up
    • Sustainability in a heavily "supported" market
    • Attractiveness as a recruitment vehicle
Joint ventures/clinical co-management
  • Pros
    • Preserves entrepreneurial potential of independent practice
    • Joint assumption of risk and reward
  • Cons
    • Legal complexities and risks
    • Physician group willingness to capitalize?
    • Sustainability
Full employment
  • Pros
    • Potential for greatest impact--quality cost and growth
    • Greatest opportunity for rationalization and standardization
    • Attractive recruitment vehicle
  • Cons
    • Difficulty of execution
    • Highest cost of implementation (time and dollars)
    • May open door to other sub-specialists seeking employment

Following the wave of alignment around hospital-based physicians, (e.g., radiology, anesthesiology), neurosurgery and cardiac surgery are areas that have sparked recent investment interest from hospitals and health systems, says McHugh.

"Many hospitals tend to be risk adverse so they need to figure out their level of investment risk and the desired ROI of each investment prior to moving forward," he says.


Rick Johnson is a senior editor with HealthLeaders Media. He can be reached at rjohnson@healthleadersmedia.com.

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