Reimbursement for healthcare providers is continuing to shift towards increased incentives for quality outcomes and cost management, as insurers (particularly CMS) focus on reducing fee-for-service payments and increasing the amount of risk taken on by providers.  As examples of this, recently, we have seen CMS release its regulations for Value-Based Care Organizations (ACOs), which will reward providers who are able to reduce CMS’s per capita patient costs and have seen several announcements of private insurers developing bundled payment programs for particular full episodes of care. The greatest success under these models of reimbursement will be earned by the provider organizations who are able to most quickly change care processes to account for these incentives.

For hospitals or health systems with an employed physician group, this represents a major opportunity to engage that group and begin working on the competencies that will result in success as payment reform becomes more of a reality.  Employed physicians are more likely to be economically aligned with the hospital or health system than independent physicians, and thus will be better partners for exploring these concepts.

Key Steps

  1. Educate your physicians about payment reform.  The concepts of an ACO or bundled payments are still foreign to most physicians.  Many do not understand the motivation behind changes in reimbursement, and what these changes will require in terms of adjusting practice patterns
  2. Indentify physician leaders.  Physicians will ultimately be responsible for making the changes that will result in success under payment reform.  Physicians who are both interested in being leaders in changing physician behavior and who are respected by their peers need to be identified.
  3. Develop a steering committee to guide the process.  A key group of employed physician leaders need to be engaged in a “steering committee” or similar, that will allow discussions to take place.  The hospital doesn’t have to have a payment reform plan before engaging its physicians; rather the hospital and its physicians should work together through this committee to learn about the models, and address the issues that will lead to success.
  4. Work with PCPs to develop a patient-centered medical home (PCMH).  The Patient-Centered Medical Home (PCMH) has been referred to as a “mini-ACO” because it espouses many of the concepts that will generate success under the ACO model while having a primary care focus.  Development of this model represents an opportunity to develop leadership amongst your primary care physicians on staff.
  5. Engage specialists in co-management arrangements.  Co-management has traditionally been used to improve alignment with independent specialists, but it represents an opportunity to change the incentives of an employed group of specialists as well.  Increasing incentives for specialists to manage quality, efficiency and cost within a service line will change behavior in a positive manner.
  6. Assess market opportunities. For the ACO market, both Medicare and the private market represent opportunities.  Developing a pilot program using a subset of your employed physician base can result in knowledge of how to be successful under an ACO while minimizing investment and risk before going into the market full-scale.  Many insurers, such as Blue Cross Blue Shield, are developing bundled payments for full episodes of care; opportunities with insurers in your area should be discussed and brought back to your steering committee for further exploration.

When it comes to payment reform, your employed physician group is a strategic asset that can determine how well your hospital or health system is able to respond to payment reform.  HSG, as a leader in developing hospital/physician alignment, is helping many hospitals and health systems around the country develop this type of strategy.  In order to be prepared for payment reform in the future, developing a plan to engage your employed physician group should be an immediate priority.


Travis Ansel

Chief Executive Officer and Managing Director, Strategy