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Physician-Hospital Alignment Isn't Just About Playing Good Defense

Dennis Kennedy, for HealthLeaders Media, March 30, 2009

Categorize and match opportunities

Not all opportunities are alike, and this fact has important implications on the types of physician-alignment vehicles used to pursue them. Not every type of opportunity lends itself to every physician-alignment vehicle, and vice-versa.

Most opportunities will fall into one of four general "buckets:"

  • Opportunities to grow existing inpatient and outpatient services by re-positioning yourself vis-à-vis local hospital competitors in your existing markets and services
  • Opportunities to develop new services
  • Opportunities to expand into new geographic markets
  • Opportunities to capture volumes lost to third-parties and/or physician competitors

When trying to grow existing services in existing markets, particularly in more competitive markets, the focus is generally on winning over physician "splitters." In these cases, pursuing non-economic alignment vehicles can be very beneficial. Using communication and technology vehicles to address issues or obstacles and tighten linkages with physicians, enhancing ease of use to improve physician productivity, and developing centers of excellence that deliver superior quality of care can all be effective vehicles for increasing market share. Economic vehicles can also be very effective, with the caveat that organizations must be careful not to buy back what they already have.

When looking to develop new services, non-economic vehicles can be very effective in identifying services and communicating the "whys and hows" of service development. Existing non-economic vehicles, such as technology and centers of excellence, can often be leveraged to provide the platform/infrastructure to facilitate internal development of a new service. Economic vehicles can also be effective. To the extent a service/capability is truly new, incremental market position can be achieved through both joint ventures (even after "splitting the pie") and employment.

When trying to develop new markets, non-economic models are more limited in effectiveness. With the exception of developing true centers of excellence that can pull patients into the hospital, non-economic models are often insufficient because distance will most often trump convenience for the physician and for the patient. Many economic models are also limited. In our experience, employment and placement of physicians in new markets yields mixed results, as there is often inadequate local infrastructure to support employed physicians (e.g., physicians see patients but use competing imaging centers because there is no local hospital presence). The classic strategy for growing in new markets is a joint venture. Healthcare organizations access new markets without cannibalizing existing volumes or threatening current relationships, and physicians gain access to the hospital's capital.

When trying to capture volumes and market share from non-hospital third-parties and/or physician competitors, economic alignment vehicles are much more likely to succeed. While it is true that focusing on communication and improving ease of use will help maintain relationships and may have some beneficial impact on referred volumes, they ultimately do not address the real issue, which is economics. It is the potential for needed revenue streams to augment real or perceived declines in their practice income that lies at the heart of physician competition with hospitals. Pursuing economic alignment vehicles, such as real estate investment, joint-venturing, and/or employment, is not only necessary, it is the only way to realistically capture these volumes.

Implement, monitor, and report on ongoing performance

The final step, once the appropriate growth opportunity/alignment vehicles are pursued, is to monitor ongoing performance. Most healthcare organizations do not adequately optimize their investment in growth by demanding tracking of these results and reporting them to the physicians involved. Healthcare organizations that achieve growth through physician alignment are much more likely to monitor and benchmark the performance of their joint ventures, even if they are not the majority owner or managing partner.

When it comes to growth and physician-hospital alignment strategies, one size generally does not fit all. Successful healthcare organizations match opportunities with the most appropriate vehicles. While some vehicles lend themselves better to some opportunities, and vice-versa, the most effective vehicles will always be the ones that the hospital and the physicians learn to mutually trust by recognizing the mutual benefits provided to both parties.


Dennis Kennedy is a senior principal with the Noblis Center for Healthcare Innovation in Falls Church, VA. He may be reached at dennis.kennedy@noblis.org.
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