In the New Value Economic Model, Co-Management is a Must - Part 1

Tuesday, December 8, 2015 | Joel Sauer

It has almost become cliché to talk about the move to the value market in health care. However, the transition is happening much quicker than anyone could have believed. In January 2014 the Centers for Medicare & Medicaid Services (CMS) announced that in 2018, 90 percent of its total fee for service payments will be tied in some form to value (Figure 1) with commercial carriers quickly following suit. With the recent passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) we are getting more details on how this transition will impact the professional fee schedule as well.

This is a very short amount of time for provider institutions to reorganize themselves away from volume, the historical currency, to this new reality. While the exact definition of value remains to be seen, we know for certain that physicians, who control or influence nearly 100 percent of health care’s costs, need to be actively involved in this transformation. Unfortunately, engaging physicians in a meaningful way is not simply a matter of flipping a switch; it takes time to create the right leadership architecture and build enough trust to achieve results.

Co-management, as defined below, provides an ideal platform to engage physicians, create an effective value-oriented leadership model, align economic incentives to promote rapid adoption of value, and eliminate resistance to change. This model is available to both private groups as well as employed physicians and, when needed, can bring together multiple disparate groups under a single agreement. Co-management provides a framework for physicians and administrators to work together on common objectives, build trust and learn together to achieve positive results.

Co-Management Defined

As the name implies, co-management is leveraging the wisdom of two groups—physicians and administrators—to help manage all or parts of a clinical service line. Historically, medical directorships, where physicians are asked for clinical guidance within very specific areas (such as cardiac rehabilitation or the echo lab) have been the most prevalent and basic form of co-management. With these directorships physicians were rarely provided financial data and the execution of their clinical guidance was left to the administrative structure with no real accountability back to the director. According to a 2013 survey by MedAxiom, the median cardiology group had 4.2 of these directorships with 93 percent of compensation coming from hourly time performance. 

While certainly still evolving, today’s co-management is taking this directorship concept much further, not only in terms of compensation, but

also with respect to scope and responsibility. In growing numbers, programs are employing this dyad leadership model to manage their entire cardiovascular service line (Figure 2), pairing a physician and administrative executive together to oversee the entire enterprise. This transformative service line model takes the formerly disparate departments and clinical areas—including the physician practice element—and wraps them together as a single business unit under a unified governance and financial infrastructure.

Unlike historical directorships where compensation is solely time based, physician compensation within the co-management model includes two elements:  time and incentives. The time component is for attending meetings (such as the councils shown in Figure 2), reviewing data, researching problems and other activities that take real time. Incentive compensation is at-risk and is based on agreed-upon improvements within the clinical area or for the program overall. These improvements are often centered on quality, cost and service, now commonly referred to as the Triple Aim and the focal point for Medicare’s value agenda.

To be successful, it is critical that co-management contain both compensation elements. Time without improvement has no intrinsic value, but improvement will require time. Whether private or employed, the majority of today’s physician compensation is still derived from work, often measured in wRVUs, but certainly dependent on volume of activity. To ask a doctor to step away from these compensated efforts for meetings and other non-compensated activities is almost always met with resistance, which is appropriately predictable. On the other hand, to only pay for time provides no accountability for results.

Co-Management Process Development Tips

  • “How” is more important than “what,” so just get started
  • Inventory opportunities & prioritize by organizational impact
  • Engage physicians in the process
  • Choose a structure/complexity that fits your current culture
  • Don’t let perfect be the enemy of good enough with the data
  • Give the process time to mature

Check in next week for Part 2 of this blog post.


Joel Sauer is Vice President, Consulting at MedAxiom Consulting. He works with organizations across the country in the area of physician/hospital partnerships. His work includes full-service line development, co-management arrangements, and integration transactions. Joel may be reached at



Illustration: Lee Sauer

About the Author

Joel Sauer Joel Sauer, MBA, is Executive Vice President of MedAxiom Consulting. Joel consults around the country in the area of value-oriented physician/hospital partnerships preparing health organizations for the value economy. His work includes vision and strategy setting, creating and implementing effective governance and leadership structures, co-management development, joint venture and other innovative partnerships, and provider compensation plan design. Beyond the above, Joel has a wealth of experience in service line development, clinical strategy development, provider workforce planning ? including care team creation and physician slow-down policies, MACRA and bundled payment planning, and operational assessments.

Contact Joel at

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Founded in 2001, MedAxiom is the nation’s leading cardiovascular performance community focused on providing expert consulting, networking and membership services including data analytics, program excellence tools and educational events to improve business and patient care outcomes. MedAxiom is an American College of Cardiology Company. For additional information, visit:

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