What Physician Practice Ownership Really Means

Financial incentives are finally forcing hospitals and physicians to work more closely than ever. In many cases, that means the hospital or health system buys the practice. But that doesn't equal alignment, as we've written many times here and elsewhere.

In fact, physician autonomy and alignment are far from mutually exclusive. Physician practice autonomy is still possible. It just requires a different kind of ownership.

This month, I wrote the cover story in HealthLeaders magazine, in which we took a look at the rapidly changing dynamic in physician and executive relationships.  Those relationships have always been important, but in the past have been driven by a culture of suspicion and distrust.

As one of my key sources for the story put it to me, the cultures historically could be described thusly: One has corporate, bureaucratic, top-down governance, and the other a professional, collegial, familial culture that is very informal.

"Those two structures are at opposite ends of the business spectrum. As a consequence, even the sheer decision-making process between the orgs is misunderstood and often portrayed as being untrustworthy," says Ed Brown, chief executive officer of The Iowa Clinic, one of the few remaining independent physician group practices in the state.

"Iowa is probably the most integrated state in the country, as it relates to physician practices," he says.

But one of the key points from my story is that integration doesn't always equal alignment. The reverse is also true: Alignment doesn't have to be achieved through hospital or health system ownership of physician practices.

Brown and his board, as well as, presumably, Iowa Clinic's 140 providers in 37 specialties, are staunchly independent simply because they place a high value on autonomy, and don't see any reason they can't remain financially viable far into the future. But the independent streak at Iowa Clinic only runs so far—its relationship with the health system to which it refers the majority of their inpatients, Iowa Health System, is extremely collaborative.

A few years ago with IHS, "we were very open and candid with one another about the future we faced," Brown says, which was a future that meant even though Iowa Clinic would remain independent, it would have to develop an interest in Iowa Health System's long-term survival and success. The reverse was also true.

"We looked at it from a perspective that we needed a strong health system to have a strong clinic," he says. "It was as much in our interest to help reduce costs as it was theirs."

Over the past 10 years, the two organizations have developed a foundation to work together in care coordination and cost reduction strategies, first in cardiovascular services, and then in oncology and outpatient services.

"Both of those have been the foundation to help us work together," Brown says.

Also facilitating that close relationship have been joint ventures and strategic business alliances.

"Over the course of the past 10 years, we have developed joint outpatient services, including an outpatient surgery center, a sleep center, and they even have a durable medical equipment company housed in our clinic," he says. "The other thing we do very well together is working strategically on physician resource needs, particularly in specialty services."

He's careful to stress that these haven't been defensive joint ventures from either side. Rather, one of their key purposes was to develop that attitude that what is good for one organization is often good for the other. In other words, their interests are aligned. Certainly, they've had help through changes already under way in the payment system that reward quality outcomes and align as closely as possible reimbursement to those outcomes.

So much has the relationship paid dividends, that Brown caught himself when he spoke about Iowa Health System as "our health system."

"Our health system, that is, IHS, has a doc who serves as COO, and who I interface with primarily, and the past chair of our clinic serves on the board of directors at the health system and on their executive committee," he says. "Our current chair is involved with managed care strategies, and they have engaged a number of our physicians in various strategic initiatives. We've embraced that to do what we can."

Key to the successful collaboration, it appears, is that The Iowa Clinic was able to enter into partnership strategies with its dominant health system from a position of strength.

In the recent past, Brown concedes, the clinic has been able to thrive based on its reputation and its commitment to embracing innovation. It was the first clinic in the state to implement an electronic medical records system, and was the first to develop a physician leadership institute, self-funded, that now helps health systems develop physician leaders. It was also the first, as far as Brown knows, to implement a clinic-wide customer service initiative.

"All those things identify a certain ownership of culture that has allowed us to be successful," he says.

Ownership can mean many things. In this case, its cultural ownership helped Iowa Clinic keep from becoming owned by someone else.