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ACOs Shine Spotlight on Physician Employment

 |  By cvaughan@healthleadersmedia.com  
   May 10, 2011

There is a major movement toward not only alignment, but real integration ­between hospitals and physicians nationwide. Unfortunately, the transition to an employed physician model is not always a smooth conversion. Or a risk-free one.

Many physicians and healthcare organizations are still unsure about physician employment and can't forget the failure of ­employment models in the '80s and '90s. Others believe closer alignment and ­integration is the key to providing patients with ­better healthcare; improving quality, outcomes, and ­efficiency; and reducing healthcare costs.

Not gatekeepers anymore
The good news is physician ­employment is no longer based on the gatekeeper model, which is what the '80s and '90s under ­capitation and HMOs were supposed to be, says Brett Hickman, a Chicago-based national leader of the health industries strategy and planning practice at PricewaterhouseCoopers. Once patients had to leave the primary care ­environment for specialty care, there were no controls. It was a ­fee-for-service environment.

"We really didn't have true alignment across the whole spectrum," Hickman says, ­adding that the three biggest lessons healthcare ­organizations learned from that experience was that they overpaid for the value of a practice, didn't incentivize physicians to remain ­productive, and didn't realign incentives toward institutional goals.

The driving forces today are different. With the passage of the Patient Protection and Affordable Care Act of 2010, there is pressure from the government to build accountable care organizations. The belief is that entities such as hospitals, physician practices, and long-term care will deliver better care if it is coordinated and if financial rewards go to those organizations producing better outcomes.

In addition, physician practices that have been dependent on ancillary revenues to ­support physician compensation are being ­negatively impacted by reimbursement changes, says Hickman. These practices, such as ­cardiology and oncology groups, are looking at how they can ­realign with healthcare systems.

"We need to reorganize ourselves in a way to really tackle community health from a quality, cost, and efficiency perspective," says Stephen Moore, MD, senior vice president and chief medical officer (CMO) at Catholic Health Initiatives (CHI).

To that end, CHI, a nonprofit health system with 73 hospitals and 40 long-term care, ­assisted- and residential-living facilities, ­announced in March the appointment of T. Clifford Deveny, MD, to the newly created position of senior vice president of physician practice management. The Englewood, CO-based organization's goal is to significantly expand the number of employed physicians from approximately 1,500 to more than 3,000 in the next two to three years.

"We need to have a secure base of physicians from an employment perspective as well as a cadre of community doctors through other contractual arrangements in order for us to align all the incentives from a regulatory to legal and compliance standpoint," Moore says.

The health system plans on having 65% of its net patient service revenue come from outside the acute care hospital and be able to fully manage the risk of community populations-with the help of data analysis tools-by 2020.

Small physician practice gives up the reins
Endocrinologist Karl David McCowen, MD, founded Tacoma, WA-based Endocrine Consultants Northwest in 1980 and became part of Franciscan Medical Group (FMG) nearly 30 years later in 2009. There was a perfect storm of conditions that led the practice, which included three ­endocrinologists and one nurse practitioner, to seek employment, McCowen says-namely, the diabetes epidemic, difficulty recruiting, and pressure to adopt EMRs.

"Some of our staff was getting a bit older, and if we wanted to decrease the practice load, it was not financially sustainable," says McCowen. "We thought about the options. One was to close the doors and walk away, but I have single mothers working for me and we love our employees, and the impact to the community and our patients would have been profound because we are the largest group locally."

So McCowen made some inquiries at Tacoma, WA-based Franciscan Health System along with another local health system that was ruled out early on because of cultural fit.

"It was a difficult decision after 30 years, but if we were going to survive to continue to serve the community and our patients, we had to do something," he says.

First, FMG, which is part of Franciscan Health, ­presented a compensation model based on national ­standards, McCowen says, explaining that there is no point in going through the process if the ­compensation model doesn't work. ­McCowen's practice also wanted to know the fair market value of its hard assets and whether its employees would have jobs.

In the end, any employee who wanted a job received a ­position, the practice received fair market value for hard assets, and the doctors were fairly compensated for the ­workload, says McCowen, who now has a role in the leadership and governance of FMG.

One of the major benefits of an employment model is zero administrative stress. "I have a lot of confidence in my level as an endocrinologist, but the [business] landscape has changed and it is a tough place," says McCowen.

And now that he is no longer burdened with administrative issues, McCowen says he has a new lease on what it means to be a doctor. "I love the practice of medicine, and it has allowed me the chance to rejuvenate my practice."

Medical group focuses on improving patient care
The driving factors behind Integrated Healthcare Associate's (IHA) decision to merge with Saint Joseph Mercy Health System, part of Novi, MI-based Trinity Health, differ substantially from many other physician practices that are choosing employment based on financial concerns.

"We started out whole-as a strong financial performer with a strong drive to grow, the ability to recruit providers, and great quality scores," says Mary Barton Durfee, MD, IHA's executive vice president and CMO. "The driver was improved patient care. We thought we could do an even better job by having partners."

IHA, an Ann Arbor, MI-based multispecialty practice with more than 200 providers, including physicians, nurse practitioners, and physician assistants, was approached by Trinity Health about developing something different than a referring relationship.

"We were flattered by the approach and request, but initially decided that we'd pass," says Cindy Elliott, MHA, IHA's executive vice president and COO.

But after further review by the board, IHA determined that it was in the best interest of the group and its patients to enter into the strategic partnership with Trinity, which was completed in December 2010. "We had been very focused on the quality outcomes of our patients, but so many of those outcomes are systemwide," says Durfee. "To get better outcomes and care coordination and keep people from being readmitted in the hospital, we felt that a partnership was in the best interest of our patients."

The whole process took about nine months, with IHA becoming a wholly owned subsidiary of Saint Joseph's, says ­Elliott. "Our physicians are still employed by IHA, and our name, brand, and the way we present to the public is still IHA."

Key to the partnership's success is that IHA's CEO and CMO now have seats on Saint Joseph's board, and vice versa. It is important to be able to evaluate all the opportunities that come up on a daily basis, says Elliott. "It is really helpful having those folks around the table who can listen to those discussions and be helpful in directing the next steps."

Tips for a seamless transition to an employment model
Transitioning to an employment model is not without its ­hazards. Take this advice from executives and physicians:

  • Don't lose yourself in the transition. Know what is important to you and stay close to your mission and values.
  • Be meticulous. Keeping patients first and preserving the culture were top priorities, says Mary Barton Durfee, MD, executive vice president and CMO of IHA. "Everything we did reinforced that approach. It was thoughtful and we spent a huge amount of time on the details. It was well worth the time invested."
  • Determine cultural fit. It is important to understand the organization's corporate mission and culture. "Make it a point to talk with current and past provider employees with permission of the system," says endocrinologist Karl David McCowen, MD. "If the system doesn't give permission, then get up and walk away."
  • Know the expectations. Read the organization's provider handbook.

  • Realize that you are no longer the boss. You will now have to comply with corporate policies and HR standards.
  • Review separation and termination policies. Joining a group is a lot like getting married-easy to do, but tough to undo.
  • Understand the value of your practice in today's market. There is no true goodwill anymore ­associated with practices because if that doctor is not there, there is no income stream or profit stream to assign to goodwill, explains Brett Hickman, a Chicago-based national leader of the health industries strategy and planning practice at PricewaterhouseCoopers.

Making physician employment work
These elements are key to successful physician employment:

  • Restructure governance. Give physicians a voice and role in the organization. "Nine times out of 10 when these things fail, leadership at institutions say, ‘We got the financial deal done and took care of them, and they are still unhappy,' " says Brett Hickman. But those organizations didn't have an effective way of engaging physicians in the leadership of the institution, he says.

  • Realign financial incentives. Physicians should actively participate in the success of the institution and legally be accountable for quality, efficiency, and access, says Hickman. For example, Catholic Health Initiatives (CHI) plans to change its payment model to focus more on quality, population management, and reduced hospitalizations rather than office visits and procedures. Before physicians come on board, they need to understand how the current compensation model differs from theirs and where CHI is ultimately going, says Stephen Moore, senior vice president and CMO.

  • Engage physicians. The physicians-primary care included-have to be involved in establishing the care delivery process or the institutions are going to be at risk, Hickman says. "You have to make sure the physicians are engaged in [managing patient care] or they won't change their behavior to deliver care in a more cost-effective way."

 

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Carrie Vaughan is a senior editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.

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