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Dialing Up Physician Networks

 |  By jcantlupe@healthleadersmedia.com  
   November 02, 2012

This article appears in the October 2012 issue of HealthLeaders magazine.

Fiscal changes in healthcare delivery over the years have driven a continuous evolution of physician-hospital relationships. Physicians have joined groups, left groups, and become independent again, spurred by alterations in payment models and competition.

As the nation moves from pay-for-performance to value-based care, there has been a rush of independent physician practices joining larger groups and hospital systems for security and reimbursement.

Indeed, physicians and hospitals have been effectively shuffling a deck of healthcare affiliation cards, looking for a handsome payoff through the creation of primary care physician networks.

With physicians eager for hospital positions, and hospitals trying to align their clinical care with an eye toward medical homes and accountable care organizations, the two sides are increasingly joining forces in primary care physician networks. These networks are seen as providing a significant foundation for improving care and efficiency, while bolstering programs that include employed physicians and independent providers.

But as hospitals integrate physicians into their systems, managing such networks is both fiscally challenging and an intricate dance requiring precise coordination. Hospitals are carrying out primary care acquisition strategies that include a focus on patient demographics while seeking improved market share. For greater efficiency, hospitals are also partnering with other healthcare organizations to enhance IT development, considered crucial to buttress physician networks.

With the uncertainty of new payment models, the stakes are higher than ever. In running a business, there's always the part that is a gamble, and physician networked hospitals are taking a calculated risk with money-losing initial investments and counting on an eventual payoff, in profits and medical outcomes, when all the cards are dealt and the players show their hands.

Developing or expanding physician networks is not instant made-money for hospitals. Hospital officials concede that initially there are often financial losses, but despite that, such networks may become a boon not only for improved patient care but also for developing programs such as medical homes.

"The reality is when you recruit new providers and are building a vibrant network of primary care physicians and you try to grow those networks, you will have operating losses," says Donald Martin, vice president of physician enterprises for St. Peter's Health Partners, which runs the 432-staffed-bed St. Peter's Hospital in Albany, N.Y.

Although they may stumble over low fiscal returns early in the game, hospital officials say improving and initiating primary care physician networks is a crucial piece of any proposed innovation, such as an ACO or a medical home. "It's like a house of cards, and you require every card to stand up," Martin says of the fiscal issues facing healthcare leaders. "The reality is you need a vibrant network of primary care physicians, especially as the government ratchets down what it pays physicians. Survival is in partnership."

At the University of Pennsylvania Health System, whose flagship hospital is the 772-bed Hospital of the University of Pennsylvania in Philadelphia, leaders agree. "Very few people start physician networks looking for a profit," says Ronald Barg, MD, executive  director for Clinical Care Associates of the University of Pennsylvania Health System. "It is estimated that the average healthcare delivery system that employs physicians loses about $50,000 to $70,000 a year per doc when they start out. These are not profit centers, but they make strategic sense. You can't take care of patients if you don't have docs. If you don't develop a physician network, you are unable to recruit and your options are limited." Successful networks need to have broad coverage, include a wide array of specialists, and have a "plethora of formal contractual relationships" with physician groups, employing physicians, or both, he says.

The University of Pennsylvania Health System, with a 2011 operating revenue of $4.3 billion, has been ahead of the curve regarding physician alignment. Twenty years ago, the system launched a physician network and not only stuck with it, but expanded. Other physicians and organizations around the country shuffled in and out of such arrangements, often in uncertain directions, depending on healthcare financing, Barg says. "A lot of health systems developed these networks, and they found they had a gap in terms of ability to manage those networks. Healthcare didn't move in the direction that everybody anticipated. And most of them wound up divesting themselves of networking. We were one of the few groups that really maintained a significant place in that market."

As a result, the network was expanded "to make it geographically diverse" Barg says, referring to physician groups and specialties. "No doubt, it's important with the hiring of primary care that has heated up in the past year."

Success key No. 1: Geographic strategies

Over the past decade, Metro Health Hospital has invested heavily in developing its network of primary care sites, integrating physicians and implementing IT, says Mike Faas, president and CEO of the 208-staffed-bed facility in Wyoming, Mich. It has worked to find the right balance of primary care and specialists, with recruitment of geographically distributed practices being key for physician coordination, he says.

Metro Health has a 50% share in a physician hospital organization that represents both employed and independent physicians. Like many hospitals, Metro Health is considering an ACO plan, but developing its physician networks is paramount. "No matter what happens with an ACO, physician groups will be responsible for a population of patients, either by default or having patients assigned to them," Faas says. "More people will have coverage of care, and hospitals will be responsible for managing that care. If you don't get your arms around managing that care, it's not sustainable financially."

Gradually, the hospital has been adding to its physician network with an eye on spreading its demographic base, Faas says.

Metro has been developing its physician network, now known as Metro Health Medical Group, since the 1990s, Faas says. "We got into that curve and were able to build a solid foundation, with a conscious effort to grow primary care access and keep that focus. It has helped recruiting and garnering referrals, building our relationships with primary care docs, other providers, physician assistants, and nurse clinicians. We started and never stopped."

Metro owns and operates 12 ambulatory care facilities, neighborhood outpatient centers with dozens of primary care providers distributed across its service area. Physicians employed by Metro Health Medical Group staff
10 sites.

According to a 2011 American Hospital Association–sponsored report that examined hospitals suitable for ACOs, for the fiscal year ending in 2010, Metro Health's revenues were $286 million and operating income was $7.3 million, with a 3% operating margin. The Metro Health revenues were reduced by investments in Metro Health Medical Group, the physician group, as well as a startup ambulatory center. Metro Health invests roughly $30,000 per year per physician in the Metro Health Medical Group physician group, the AHA report states. Overall, "Metro Health leaders believed the employed physician group has been a very positive investment that positions the organization for a future of accountable care," it adds.

To maintain its ROI and clinical scale, Metro has consistently pursued alliances with other hospitals and medical practices to manage larger, more geographically dispersed populations. 

"There's no doubt that working with a tightly aligned physician group is essential and not a roadblock. Networks will only be more important with the rolling out of healthcare reform," Faas says.

As part of its alliance to bolster its physician networks, Metro Health has joined with Trinity Health and the 880-licensed-bed University of Michigan Health System, based in Ann Arbor, to form the Pennant Health Alliance to improve primary care acquisition strategies as well as revenue cycle management programs. Trinity Health, based in Novi, Mich., operates 49 acute care hospitals in 10 states. Under the organization plan, Pennant is expected to coordinate and provide "high-quality" physician groups for the member hospitals. It also is expected to be a support network for quality and cost improvements overall, according to Faas, who also serves as CEO of the Pennant Health Alliance. An integrated IT strategy is built into the plan to spread and reduce costs. The arrangement calls for Trinity Health's supply chain and support network to provide for a more favorable cost structure for independent medical practices.

Success key No. 2: Governing the physician network

When the Henry Ford Health System—a Detroit-based integrated system with revenue of $4.2 billion and net income of $21.5 million—began its physician alignment with regional physician groups, it considered metrics and governance to improve clinical outcomes. But it was important that the program was essentially "physician directed," according to Charles E. Kelly, DO, president and CEO of the Henry Ford Physician Network, which was formed in 2010.

The Henry Ford Physician Network includes the Henry Ford Medical Group of 1,300 employed physicians, as well as approximately 550 regional physicians in private practice. Overall, Henry Ford includes 2,000 physicians within the system's six hospitals and 32 primary care centers.

Hospital officials are reaching out to physicians, telling them they can maintain their existing business models as private, employed or medical group physicians, but also have access to the Henry Ford services and resources when joining the network, according to Kelly. They work with payers on value-based contracting to improve outcomes under proposed ACO structures, he says. The network also offers physicians a malpractice insurance program, discounted group purchasing rates, as well as electronic health records to support the practices and connectivity to the Henry Ford Health Information Exchange, a secure platform that shares clinical information and results through the system.

By coordinating care, Henry Ford has been able to "break down the silos on the farms," he says, referring almost satirically to the oft-used phrase about separation of work environments. The physician network has improved communication among the Henry Ford Medical Group, the self-funded insurance plan, as well as the continuing care and home health agencies. "None of them were talking to each other satisfactorily," Kelly says. "If you are going to be successful, you've got to get these supportive functions coordinated."

Among the important elements are the committee structures that the Henry Ford group has established to maintain cooperation with physician networks, Kelly says. A 15-member board of trustees, which includes equal representation from independent physician groups and Henry Ford's own medical practices, oversees
the committees.

Those committees include areas that focus on finance and payer relations, as well as clinical integration and informatics. Each committee also has balanced representation from independent and hospital physicians, including primary care physicians and various specialists.

The groups are "equally populated by employed docs and independent groups and very much engaged in clinical integration and quality," he says. The journey toward coordination is not easy, Kelly acknowledges. When hospital officials initially talked with doctors about joining the network, some physicians had their arms stiffly folded and scoffed at the idea. But through effective persuasion and collaboration, they have won over 500 independent physicians, including  one group practice with 52 family internal medicine physicians who signed up two years ago, he says.

The hospital system is focusing on population management tools that "identify areas we need to prioritize and focus on, with medical management and direction of strategy and tactics to address those issues." Those areas include heart failure, constrictive lung disease, diabetes, and end-stage renal disease. "We're looking at a centralized system for delivering medical management and case management and analytics" to make inroads in the care continuum, he says.

Preliminary data shows the Henry Ford Physician Network is "bending the cost curve," Kelly says. Early results show costs decreased as much as 15%, he says, although he did not disclose exact figures. Kelly also cites clinical care improvements that he attributes, in part, to the physician network.

Success key No. 3: The medical home

The Memorial Hermann Physician Network is a clinically integrated physician organization composed of  more than 3,500 doctors throughout the Houston area. It has contracted with Memorial Hermann Healthcare System to carry out a medical home program involving independent and employed physicians representing a variety of specialties, which led to Memorial Herrmann's receiving its ACO designation in July.

The doctors are not employed by a single entity, but encompass various practices. In addition, only physicians who agree to the medical home concept are brought into the ACO, according to Shawn P. Griffin, MD, chief quality and informatics officer at the Memorial Hermann Physician Network, associated with the 3,514-bed Memorial Hermann Healthcare System.

In effect, under the Memorial Hermann medical home initiative, known as Advanced Primary Care Practices, physicians must practice evidence-based medicine and report their performance on nationally accepted and validated clinical and satisfaction metrics, Griffin says.

Memorial Hermann is selective about the physicians who join the network, but also provides incentives for those who do, Griffin says. "We're a physician-led organization, and when we look at physicians who want to participate we're willing to subsidize some of the practices to get on the [electronic medical records]" for instance, he says.

"The group of doctors will have incentive metrics that they share and organize, and look at quality and finances," he adds. "We'll provide  doctors with some reporting tools for them to track how they are doing. We also supplement whatever we can legally provide in their practice to facilitate and track referrals."

Memorial Hermann collects data from its provider network, effectively acting as "our own type of health information exchange," Griffin says. Within a few years, more than 200 medical practices are expected to be involved in medical home programs, he adds. The network will be initially focusing on specific disease types, such as diabetes and colorectal cancer, to improve coordination of patient care. 

Primary care physician networks showing greater efficiency may attain better contracts with payers, he adds. At Memorial Hermann, most primary care physicians requested the hospital system's Advanced Primary Care Practices program, says Griffin, with most doctors saying "it was important for their future."

Memorial Hermann's medical home program includes a team of physicians, nurses, and other caregivers who treat acute and chronic medical conditions and oversee wellness programs. A key element is the embedding of an innovative information technology into the care registry exchange, which is designed to enable physicians in the Advanced Primary Care Practices program to share clinical data with each other in a privacy-protected manner that will help avoid unnecessary duplication of medical services, according to the hospital system.

Physicians can be prompted to order and schedule needed tests and vaccinations, or be alerted to changes in medications made by other physicians. They also can be notified of abnormal lab values and prompted to intervene appropriately.

"Primary care is the future," Griffin says. "They are critical to the success of the medical home and coordination of care; it's giving patients the right care and access to care."

Success key No. 4: Overcoming conflicts

As hospitals establish relationships with physician groups to bolster physician networks, they must overcome the obstacle of potential conflicts and competition among the physician groups themselves, says Julie Manas, CEO of the 344-licensed-bed Sacred Heart Hospital and president of the HSHS Western Wisconsin Division.

In its highly integrated managed care market, Eau Claire, Wis.–based Sacred Heart has negotiated with two physician groups, a medical network, and independent and employed physicians. There are complicating factors that must be overcome to ensure a smooth working environment, including an overlap of specialties, competing interests, and direct competition, she says.

Sacred Heart Hospital is an affiliate of the Hospital Sisters Health System, a 13-hospital system based in Springfield, Ill. It is associated with the Marshfield Clinic, an organization of 730 physicians in 80 medical specialties and subspecialties located in 40 centers throughout Wisconsin. It is also affiliated with the OakLeaf Medical Network, a physician-directed health services network that includes 150 medical professionals in 41 physician offices.

Manas, who joined the hospital system within the past year, noticed early on that improved relations among physician groups were essential. Depending on the area of care, such as cardiology, "they are competitors against each other" in the hospital, Manas says. "I spend a lot of time meeting with executives and physicians. They see me as Canada or Switzerland, someone who is neutral. The point is developing integrated care," she says. These professionals work through any conflicting issues they may have with each other. "It has to be put aside, and they are doing that. It's about the patient, and when they are with the patients at the bedside, it's about all of us. That's what I have discussed with them, and it's working," Manas says.

A primary care physician network plays an essential role in improving those relationships and cooperation among groups, she adds. It was only  in the past few years that the hospital expanded its network by adding independent physicians to employed doctors, according to Manas. "We now have employed physicians as well as independent doctors in the network, called the Physician Integration Network LLC." At least 200 physicians were involved in the program.

Earlier this year, the Sacred Heart Hospital and the Marshfield Clinic announced plans to jointly purchase and operate a local hospital and nursing home, with a local entity operating the nursing home for cost-cutting and overall quality improvements, Manas says. That plan could be traced to improved coordination established through the physician network, she adds.

"With primary care as the driver of care integration in our system, it is our belief we can do a better job," Manas adds. "We're not satisfied with just doing a good job. We want stellar."


Reprint HLR1012-7


This article appears in the October 2012 issue of HealthLeaders magazine.

Joe Cantlupe is a senior editor with HealthLeaders Media Online.
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