Out of Alignment: Are health systems making a big mistake with their physicians?

Thursday, November 5, 2015 | Joel Sauer

More and more these days I see health systems moving their physician enterprises farther away from the hospital operations and governance structures.  While this might make sense for specialties that never enter an inpatient facility, it certainly doesn’t make sense for cardiovascular physicians who still perform a significant portion (often the majority) of their services in the hospital. 

My hunch is that as health systems continue to expand their physician employment ranks, the artificial losses from the practices continue to mount–thus the attention these enterprises receive. This heightened attention may be leading to quick fixes. 

I believe that strengthening the separation between hospital operations and those of the physician practice will lead to disastrous consequences, particularly as reimbursement moves to consider total beneficiary cost.  This new global view will require tight synchronization of the hospital and practice resources.  While a link exists with executives at the very top of the organization, this high (and often insulated) level view of the organization regularly misses the front line needs on both ends.

Here are three examples of this growing chasm and the resulting consequences I see regularly in my travels: 

  • The physician enterprise is solely responsible for physician employment agreements, including compensation. Without a connection back to the organizational needs of the hospital, the result is often compensation plans that create financial disincentives for the physicians to address these essentials.    
  • Physician office operations and budgets are contained and controlled solely within the physician enterprise. Value-based reimbursement is forcing healthcare organizations to carefully watch transitions and the consumptions of both inpatient and outpatient resources.  What happens after a patient is discharged now matters from a financial standpoint and the practice plays a major role in success.  Severing or insulating these two environments at the operational level will lead to big misses. 
  • Governance exists in distinct and disconnected structures at both the hospital service line and within the practice. Further, the practice governance for cardiology and CVT surgery are also separated.  As an organization, MedAxiom has long espoused a true service line model for governance where leadership includes physicians and is organized and empowered around the entire product spectrum—not based on tax IDs or locations.  This includes vision, strategy, quality and outcomes, patient experience and, yes, financial performance.  Even if we do everything in 1 and 2 right, without a consolidated governance structure the product will suffer.

Medicare and other third party payors are moving very quickly to new payment models.  All of these changes will require providers to think much more globally about their products and to expertly manage patient handoffs and transitions between component parts.  And let’s face it, we’ve been pretty lousy at these transitions in the past.  Now it’s going to start hurting us financially. 

In this environment, I believe health systems need to make changes that bring the physician and hospital components into tighter alignment.  My fear is that many are moving in the opposite direction. 

What are your thoughts?  Please leave us your comments.

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 jsauer@medaxiom.com.

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.

To contact, email: jsauer@medaxiom.com



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