Line it up! Getting Physician Alignment Straight Isn't Easy

I've always found the expression, "You shouldn't let the inmates run the asylum" amusing. It has so many applications, not the least of which applies to quality patient care and hospital-physician alignment. Let me throw in a disclaimer here, I'm not calling patients mentally handicapped nor hospitals mental facilities—but what I'd like you to think about is the idea that in some way or another your patients really should be running your hospital and by doing so you will end up with better hospital-physician alignment.

With the American Hospital Association reporting in late 2009 that 74% of hospital CEOs are being approached more frequently by physicians seeking employment, the recession coupled with healthcare reform is ushering in a rebirth of the 1980s physician employment boom-but this time around everyone is wiser. All providers-hospitals, physicians, and payers-recognize that they must work together to position themselves for bundled, performance-based payments for care delivery. Working together offers everyone involved the greatest opportunities to succeed.

However, this time, both hospitals and physicians have learned what works for them, and equally important, what does not work. In some instances hospitals are employing doctors, in other cases they are using joint ventures or other management agreements to employ them, but in all instances, the goal is ultimately the same: to bring the physician and the administration to an agreement that unites and aligns everyone toward achieving the same strategic, financial and leadership goals—the biggest goal of all being patient satisfaction.

Over the years several structural and economic physician-hospital alignment models have evolved, including:

1. Organizational structures (e.g., physician-advisory councils)
2. Economic models (e.g., joint ventures and employment of physicians by hospitals)
3. Emerging models (e.g., the anticipated growth of "super groups," the changing roles of physician-hospital organizations, and the potential for gainsharing).

Rather than concentrate on the variety of models out there, this week I'd like to share with you the story of how one system is successfully approaching hospital-physician alignment by putting the patient's needs first.

Seattle's Virginia Mason Medical Center, is an integrated health system that employs 440 of the 900 physicians that work there. Suzanne Anderson, Virginia Mason's senior vice president, CIO and CFO, says the physicians and the hospital work together to create their strategic goals for the year-an inclusionary process, which unfortunately, some hospitals forego during their strategic planning process and that can result in a misalignment between the administration and the physicians.

One of the reasons Virginia Mason approaches the process this way is a longstanding cultural philosophy that started with the hospital itself, which was founded by physicians pooling their energies and resources to build an 80-bed hospital. While over the years more administration has been added, the system continually recognizes the need for physician input and the role these doctors play in the hospital's success. In fact at one point, the physicians had such a strong voice that Virginia Mason was referred to as a physician-led organization, instead of a patient-led one. "Physicians had a dominant voice in direction setting, but now we've moved beyond them to really focus on the patient, and using their needs to set our direction. That's our true North now-what's the right thing to do for our customer base," notes Anderson.

Now when the system goes through their annual goal-setting process, the executive team is comprised of administration and key physician leaders, all of whom collectively determine what the most important areas of focus will be for the coming year in terms of quality, patient satisfaction, staff satisfaction, economics, and integrated information systems. Once they've determined the goals, they line up the resources to achieve them and then work toward implementation, Anderson explains.

"Everyone feels like they own the goals for the hospital; that we are all one," she says.

Aside from the physician's participation in the goal setting process, perhaps one of the most unique pieces of Virginia Mason's hospital-physician alignment is the division of money—which is often where many hospitals find their greatest challenges-Virginia Mason operates with a single bottom line for all the physicians and the hospital.

"When we do contracting with commercial insurers we have one contract office that negotiates contracts for our whole system-we don't have physician and hospital contracts and we have a single bottom line," she explains.

This single bottom line has been in place since the late 1980s, Anderson says, which is when the hospital started employing even more physicians. Though they had been employing and partnering with practices since the 1920s, their employed physician model really took shape in the eighties and early 1990s. As their vision of a patient-led environment took shape, they decided a single bottom line would help everyone achieve that focus.

"When you have an organization that's splitting the bottom line, yet anything left over is going to one component at the organization, you create groups of haves and have nots—that leads to infighting," Anderson says. "Our goal was to optimize the performance of the health system as a whole—not to optimize any one component."

To further that end, their physician compensation model is part productivity-based, but it also has incentive components that encourage professional activities and reward physicians for group efforts and contributions. The idea is to encourage physicians who may be, for example, leading a quality effort, to be able to comfortably do so without concerns about missing out on their own personal earning opportunities.

"Some people look at our model and say we are successful because of our employment components. I'd say it's more than the employment; it's how we manage the health system and engage all of your employees whether physicians or not. That requires constant vigilance," she says.

So while no hospital should let the patients actually run the hospital, by allowing the patients to guide goals and strategies, both the physicians and hospitals can unite and work from common ground to achieve success.