Innovative Strategies for Physician-Hospital Alignment

What new strategies can be pursued?

In the next year, the industry will experience the unraveling of relationships, such as "under arrangements" and some per-click leases. The unwinding of these arrangements combined with pressure for new models will create opportunity for existing arrangements to be re-examined and restructured to incorporate new quality and joint governance standards. Providers that move decisively now to unwind difficult joint ventures, yet deal with physicians fairly, will maximize the long-term benefits of preserving physician relationships.

The industry will likely experiment with many models in different contexts rather than looking to a small group of models that function in a "cookie cutter" fashion. The greatest and most effective joint venture activity will likely incorporate innovative strategies that further quality and governance goals. To the extent hospitals have looked at joint ventures for increased patient revenue, the new focus is to expand and improve quality of patient care. A current example is the OIG's approval in January 2008 of two gainsharing arrangements with physicians-one a group of anesthesiologists; the other cardiac surgeons. Although this model is not a "typical" gainsharing arrangement, most gainsharing arrangements exhibit the following characteristics:

• Hospital-based physicians or physicians in hospital-controlled outpatient setting identify cost savings opportunities-for example, controls over use of disposable supplies.
• Physicians share in percentage of cost reductions.
• Specific performance and quality measures are implemented to protect clinical care and prevent inappropriate underutilization.

Some of the specific features of the approved arrangements include:

• A limited number of specific cost-saving opportunities (to clarify the task undertaken and get buy-in)
• Data gathering to benchmark cost, quality and utilization on a national basis (guessing and estimating are discouraged)
• Physician and hospital joint review of less costly products and supplies that are considered for use (cooperative efforts to achieve patient quality goals are paramount)
• Limitations on the dollars that reach the gain-sharing pool if utilization drops below established objective measures (in order to suppress any urge to skimp on supplies or products)

Each gainsharing arrangement would entail its own specific features, but all gainsharing arrangements should consider including these and other safeguard measures to ensure that innovative strategies further quality and governance goals instead of establishing structures that foster a "minimum necessary" approach. The discussions around formation should not center on whether the safeguards are sufficient to sanction the arrangement from a fraud, waste and abuse perspective, but whether the safeguards are sufficient to further quality and governance goals.

These gainsharing arrangements demonstrate complex and thoughtful structures that create incentives for physicians to control costs that benefit the provider, but include safeguards for preventing fraud, waste and abuse. Further, they should improve the quality of patient care.

The OIG's approvals of these gainsharing arrangements contrast markedly with the position first taken by the OIG in its Special Advisory Bulletin of July 1995. Although the OIG opinions address anesthesiologists and cardiac surgeons, there is no reason that gainsharing arrangements will be limited to these types of specialties. In fact, the future trend may be to implement gainsharing arrangements beyond these narrow (and other specifically approved) specialties and into other practice and business settings, perhaps even large multispecialty physician primary care groups.

In today's environment, healthcare providers must enter into new relationships cautiously, with a clear understanding of potential changes in law and predetermined exit strategies. Where is the good news in all of this? That the joint ventures crafted today will increasingly focus on quality of care and shared governance, which more closely align the interest of the provider, the physicians and patients. Sound advice for providers is to follow your facilities' and your physicians' needs, not necessarily the market.

Beth Conner Guest is a partner at Waller Lansden Dortch & Davis in Nashville and co-manages the firm's corporate and commercial transactions practice. She can be reached at Beth.Guest@wallerlaw.com.

James S. Mathis is senior regulatory counsel for Omnicare Inc., a provider of pharmaceutical care for the elderly. He can be reached at JamesSMathis@yahoo.com.

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