Making Oil and Water Work: keys to physician alignment

Fee for service medicine is headed the way of the Dodo bird. Extinction.  Regardless of what model will take its place we can be certain that it will be based on incentives for lowering cost and increasing quality.  These goals can only be reached with the committed support of physicians and the open cooperation of hospitals and related agencies, such as home care.  Intellectually this is easy to understand, realistically it is difficult to accomplish.  Hospitals and physicians need to move past the issues that have divided them and create a new environment where each can benefit from these new incentives.


Some History


In the Time Before, the distant past, life was good.  Hospitals were paid based on the cost of care and physicians on their charges.  Then things changed.  Hospitals were paid on fixed amounts tied to days or diagnoses and physicians on national or regional fee schedules, regardless of what they charged.  Hospitals needed to control costs and physicians needed to do more to maintain income expectations.  These goals were often at odds.


Physicians looked at hospitals as the bank that could make up their revenue deficits through call pay, directorships, and some creative cost supports.  Unfortunately the government took a dim view of some of these arrangements.  Hospitals began to think of their physicians as having unrealistic expectations.  The relationship showed the strain of divergent expectations.  Physicians and hospitals were left to struggle with their challenges alone and collaboration was rare.  Hospitals responded by aggressively increasing the number of employed physicians, thinking this was an easy way to control behavior, and they were surprised when losses per physician approached or exceeded $200,000 per year. Physicians saw employment as way to achieve attractive incomes with minimal risk.  Again, these were not compatible goals. Then things changed again.


Today’s Challenges


We, as an economy, can no longer support the cost of the care that we demand.  Medicare and Medicaid are not sustainable at current levels and employers cannot shift additional insurance costs to employees.  Attempts at cost control, such as preauthorization and utilization review, have failed because of the difficulty in second guessing care decisions.  This meant that the providers of care needed to have more incentives to control what is delivered.  While this could be called rationing the politically expedient term is value.  This also meant that the quality of care needed to be monitored and best-practices needed to be adopted.


Success under this new value paradigm demands that hospitals and physicians create a meaningful and progressive dialogue.  This culture change is a huge challenge.  This dialogue, and the resulting actions, is called alignment.  It matters not if physicians are employed or private.  The goal of alignment is to leverage the knowledge and skills of the physicians to streamline the care process and to monitor and improve the quality of that process.  The hospital contribution typically is the capital needed to improve the data environment, fund the collaborative dialogue, and work with payers to create meaningful financial incentives.


Matching Alignment Models To Markets


Not every organization needs to be, or should be, part of an Accountable Care Organization.  Understanding what care model is right for the marketplace is key to developing a realistic, and financially rewarding, approach to managing patients and assuring quality.  Moving from volume to value is not a single step process. Deciding to pursue population management does not mean that the necessary resources are in place or that the medical community has the knowledge needed to achieve success.  A phased approach, while less dramatic, may offer a better chance of achieving the goal.


            Step 1-Educate


Hospital leadership is typically more aware of the need for value-based care models and the financial foundations for adopting them.  Physicians are busy in their volume world with only limited exposure to the new initiatives.  Taking the time to provide the background related to the move to value and the various care models (case pricing, gain share, population management, etc.) is key to having physicians engaged as partners in the value process.


Step 2- Evaluate


Physician readiness, data availability, service area demographics, and financial resources are keys to developing a viable care model.  Developing an inventory of foundational elements is critical to future success.  Issues such as service line dominance, DRG cost concerns, availability of ancillary services, and current outcomes compared to best practices are also key data points.


Step 3- Identify


Picking the right value model is a critical decision.  Smaller hospitals or those with modest regional populations might target cost and quality management of certain service lines or DRGs.  Hospitals in a more competitive market might adopt gain share or co-management models to create dominant service lines.  Major medical centers or integrated delivery systems could explore the more complex models such as case pricing or population management.  Payer incentives should also be considered.  There might be support for medical homes or rewards for improving HCAP scores, reducing readmissions, or other more focused opportunities that could be pursued.


Step 4- Implement


The single most important goal in the development of any value model is success.  Consideration should be given to establishing a modest first step so that the reinforcement that results from achieving that goal can serve as the foundation for more aggressive steps to follow.  Finding the thought leaders in the physician community is a critical first step to establishing a meaningful and focused dialogue.  Understand that these leaders may not be part of the current formal governance structure.


The Challenge


The organizations that are leading the way in developing care management models have had decades of experience in creating the culture of physician/hospital collaboration.  Creating a similar culture will take more time and more effort than many expect.  The worst possible outcome is abandoning the process.  Hospital leadership and physicians (employed or community) need to be committed to the process, regardless of how difficult.  Reliving past wrongs must be avoided.


While fee for service may be destined to join the Dodo physicians and hospitals have the opportunity to avoid the same fate and, together, create a care model that achieves quality outcomes at a cost that can be sustained.  It’s time to get started.


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