After being president and CEO of the Medical Group Management Association for 12 years, William F. Jessee, MD, FACMPE stepped down last October, which gives him the chance to spend more time examining the landscape of physician and hospital integration.
From his vantage point it's a rocky landscape.
Few hospitals and physicians are yet up to the challenge of properly aligning themselves, even though the pace of hospitals acquiring physician practices is accelerating across the nation, Jessee tells HealthLeaders Media.
Since leaving MGMA, Jessee has been senior vice president and senior advisor for Integrated Health Strategies, of Minneapolis, a consulting firm for physicians and hospitals with alignment and performance issues.
Discussions with hospital clients are showing that too many "don't have organizational goals or strategies for their physician practices. Hospitals simply bring in (physician) practices because they are out there," Jessee says. After a contract is signed, he adds, "now they are trying to figure out: what do I do next?"
It's not only hospitals stumbling in alignment strategies, Jessee says. Many physicians expect large payments, but they should lower their expectations of hospital employment and not be "greedy" when it comes to anticipated incomes, he adds.
"I think what the doc must to do is to step back from the prospect of short-term economic gain and ask themselves, 'how can I do a deal with the hospital that is a win, win for both of us?'' Jessee says. "If they are both happy with the deal, they are more likely to have a lasting relationship than if a (doc) felt after a deal was made, 'Boy, did I really sucker the hospital administration.'"
Jessee discussed some of his best-of-alignment ideas in an interview:
1. Hospital CEOs should ask: Why do you want this physician?
Too often, hospital systems are merely bringing physicians on board for employment because they believe competing systems are courting them. Too often hospitals haven't done the necessary homework to do a good job, says Jessee. In seeking physicians, he says, hospital CEOs often are standing alone and not soliciting input from their management or physician leadership, or doing enough analysis of fiscal returns, or raising other potential deal-breaker issues.
Hospitals need to have a strategic objective first and foremost in acquiring physician practices. "If you can't answer that question, all the other stuff becomes kind of irrelevant," he says. CEOs may be excited about it, but there is no buy-in from hospital boards or physician leaders.
To hospital leaders, "The first questions I ask are, 'Why did you acquire this practice? What was your objective?'" Jessee says. Often, he hears that "the reason a hospital or health system enters into a practice acquisition is because the physician wants to sell or because if we don't buy it, our competitor will."
"Those are hardly what I would call good strategic reasons," he says.
2.Hospitals should establish strategic objectives in hiring physicians:
Jessee says the board, management team, and physician leaders must clearly support and gain buy-in for strategic objectives. That is an "essential prerequisite to a successful transition," he says.
Jessee tells the story of one hospital CEO who brought in a cardiology practice that failed to deliver business the hospital sought, yet gave the physicians guaranteed incomes.
The CEO hired an outside cardiologist to drive patient referrals. When that faltered, the CEO sought to hire one of the local cardiology practices. None were interested. So he went to another town 25 miles away and hired four cardiologists who hadn't used the hospital.
"I started thinking to myself, how many ways can you screw something up?" Jesse asked.
The scenario underscored the need to have board and physician buy-in to the plans. "How does your board and physician leadership feel about this?" Jessee asks. In the case he discussed, "the board was really angry because we were losing so much money over this and they weren't brought in to discuss it. And the physician leadership believed the hospital was bringing in outsiders to compete with them. They've been longtime supporters (of the CEO) and now they are out to get the CEO."
3.Hospitals must examine the overall fiscal picture
When hiring physicians, hospital executives should examine an array of fiscal possibilities. That includes benchmarks, payer-mix incentives, and total revenues collected. In addition, total revenues collected as well as efficiency of the physician practices should be reviewed. Finally, specialist referral patterns and potential litigation issues as well as physician performance should be evaluated, Jessee says. And they must eyeball the fine print: Does a doc have a potential conflict such as ownership in a pharmaceutical company?
"Before purchasing a practice, be sure you understand how cost-effective its physicians are," Jessee wrote in a report for Integrated Health Strategies. "If their cost-per-case (usually driven significantly by physician choice of drugs, supplies, devices etc.) is higher than the hospitals' revenue for those cases, additional volume will only make the problem worse."
4. Physicians must evaluate their goals
Jessee says that physicians must forsake short-term gains and be flexible in relationships with hospitals.
As physicians, "you are obligated to change your mode of decision-making. It is no longer management who will decide what is best. As a doctor, if you want those (management) guys to be on your side, and for an integrated system to work, you've got to be part of the decision-making process."
Over the years, "docs have historically done a very good job of playing one hospital against the other," he says, noting that a trustworthy relationship is essential.
Indeed, for both doctors and hospitals, it is essential that they really do their homework before entering an integrated model to avoid regrets and ultimately asking consultants like Jessee, "Now what do I do to get out of this mess?"
Underlying it all is the need for foundational trust.
"Building a trust relationship and learning the behaviors of one another are what either firms up a relationship or it can destroy trust. It's a lot easier to destroy trust than to build it."
"It's a matter of getting physicians to realize that if they see their future as having a closer relationship with a hospital—and more and more docs are seeing that—they have to all be trustworthy partners," Jesse says.
Joe Cantlupe is a senior editor with HealthLeaders Media Online.
