Hospitals and systems have mixed results when employing increasing numbers of physicians, that according to the influx of calls we have fielded from our clients. They want to know the best way to engage these physicians to improve results, citing significant practice losses, physician apathy, and frustration from administration that employment has not had more of an impact on the hospital and the care delivered within the community.

In a number of various situations, HSG has helped administrations achieve their desired results by developing a strategic plan specific to the employed group.  By creating objectives that align the hospital and the group, and by articulating strategies that would be helpful to the hospital, we have been able to change the trajectory and impact of employed groups in several communities.  We first define what success for the group looks like, and, after doing so, the steps necessary to reaching that success will become more apparent.

Most clients attempt to begin this process with an honest discussion with physicians.  That is definitely a great start.  However, those discussions tend to turn towards operational issues, which is when we direct clients to swiftly move beyond operations and get to the meat that is strategy.  We suggest using the following template to create the desired conversation.

1.  What is your vision for the group five years from now?
Creating a common vision for what success will look like is the most overlooked, yet most important, piece to getting value out of an employed physician group.  Their vision should align with the hospital’s vision and its’ strategic objectives.  For example, it should define the role the group will play in helping the hospital achieve objectives for quality, patient satisfaction and financial success.  Creating some initial discussions, and ultimately a common understanding of the group’s role always pays significant dividends.

2.  What strategic initiatives must be prioritized to reach that vision?
With the five-year vision of the group better defined, it is time to outline the strategic initiatives that support that vision.  Typically this is a premature step, but our experience shows it is helpful to move ahead with this discussion – it gives physicians something more tangible.  We find that these initiatives usually fall in the following areas:
• Group governance and leadership
• Quality initiatives
• Group growth, whether through recruitment or market expansion
• Utilization and efficiency initiatives
• IT development
• Development of Centralization of Administrative Functions
• Aggregation of physicians to increase efficiency

3.  How will the physicians organize and govern themselves to accomplish this vision?
Defining the governance structure and how it should operate, including how leadership will interact with administration, is an important step in strategic planning.  As an employed group, the physicians need a formal governance structure that allows for physician leadership roles and physician-led initiatives to be implemented within the group.  Developing this structure will allow individual practices to be represented in group decision making, and will place the responsibility of management of physician behavior and performance on the physicians, rather than administration.

4.  How do the hospital and the physicians work together to develop a culture that supports mutual success?
Just because a physician is employed by a hospital does not mean that the incentives of the hospital and the physician are aligned.  An employed physician does not automatically shift all of his/her referrals/volume to the hospital or its physicians.  An employed physician does not automatically support the hospital’s cost or quality goals.  An employed physician does not automatically support the current administration.  When this is multiplied by 25, 50 or 100 physicians, chaos (along with steep financial and strategic losses) can result.  The culture of a group should be developed over time, through physician leadership and physician governance, teambuilding and the creation of common individual and team incentives.

5.  How can the physician group help the hospital respond to healthcare reform?
For hospitals, the challenges provided by healthcare reform are generally best addressed by changing physician behavior and practice patterns.  If possible, let your physician leaders spearhead this adjustment.  Because they understand the needs of the hospital and have credibility with other physicians, they’re likely to garner success when impacting behavior.  Through an employed physician group, areas like cost control and utilization can be impacted, information technology usage and implementation can be addressed, and evidence-based medicine can be implemented.  All of which are areas impacted by various healthcare reform initiatives.

6. How can the physician group drive quality initiatives at the hospital?
Physicians that work within a service line are those that can directly manage the quality of that service line.  We’ve advised many hospitals to address quality issues with their employed physicians by providing contractual incentives for meeting quality goals within their service line.  This arrangement can be similar to a typical co-management agreement, minus the legal challenges.

These questions provide a good start.  But they are only just that, a start.  Developing a strategic plan should include a steering committee of the physicians and the administrators needed to drive the process to completion.  Our experience dictates that those willing to invest the time and resources to such a process find it pays off.  The employed group is propelled forward, increasing its value to the hospital.


David W. Miller

Founder and Chairman