2 Pitfalls of Physician-Hospital Alignment

While it may not always be possible to set up incentives that encourage better quality while hauling in greater fee-for-service revenue, Ping says, other prizes await hospitals that set up strong alignments now in preparation for the fee-for-value environment. They improve the odds of winning more physician referrals and increasing downstream revenue, and they should lead to higher-quality outcomes that will translate into value-based purchasing dollars, reduce 30-day readmission rates, and potentially improve patient satisfaction HCAHPS scores.

Ping adds that for Health Quest, getting proper physician-hospital alignment right is also a step toward an ACO and a "baby step toward working with our doctors on bundled payments. Also, we want to be sure they want to practice at our hospital and not at another."

When drafting hospital-physician arrangements, Jensen says financial leaders should ask four questions:

• Are the incentives truly large enough to drive the desired physician behavior?
• Has the organization "seriously thought through 'the law of unintended consequences'?"
• Is the clinical and financial data accurate and transparent?
• Do the goals align with the culture of the organization?

There are numerous physician-hospital alignment models that can be adopted, and which one is best will depending on the service lines it's applied to, as well as the organization's larger goals. Jensen recommends that leaders borrow a model from a similar-sized, successful institution, and then test and prototype it before full launch.

Health Quest uses three models for its alignment agreements:

• Employment—for its 180-plus employed physicians, the organization starts with a work relative value unit (RVU) calculation coupled with quality and patient satisfaction score bonuses
• Employment "lite"—a revenue expense approach with some incentives built in for patient satisfaction and quality
• Non-employed physicians—a new approach, piloted just six months ago with 15 oncologists, that targets specific service lines for development as "institutes"