Three Dimensions of Physician Alignment

Alignment with physicians is the holy grail of hospital operations.  How wonderful it would be if everyone pulled in the same direction, working to improve quality, manage utilization, and improve profitability…with some of the profits reinvested in the technology and staff needed to improve care and some used to reward practitioners for their efforts.

While organizations have pursued a broad array of approaches, it is easiest to think about alignment strategies as fitting into three categories:  convenience, economics, and mindset.

Convenience.  Physicians sell their time, and hospitals that use that time efficiently will win some loyalty.  This aspect of alignment focuses on making the interactions convenient and removing the barriers to smooth operations.

The core tactic here, and the most difficult to implement, is efficiency of the hospital services.   Success in this area requires superb nursing, operational excellence, and user friendly information technology (IT).  It also requires a focus on the physician as the customer and a commitment to prioritize their needs consistently over time.

A more mundane but critical convenience issue is medical office space.  By providing physicians easy access to your hospital, adequate office space can yield a strong strategic advantage.  We have seen clients improve their volume by 10% because they had an inventory of space available when opportunity presented.

A final convenience tactic is extending IT to the physician’s office.  By providing useful functions, such as quick results reporting and patient scheduling, loyalty can be built relatively quickly. Likewise, helping practices with an electronic health record (EHR) will likely strengthen relationships and help improve clinical quality by better integrating clinical processes and record keeping.

Economics.   The array of economic entanglements between physicians and hospitals seems to grow by the week.  And, the degree of integration varies greatly, although the greater the better in terms of alignment.

Gainsharing is still in its early stages, but likely will yield significant benefits.  It may be the best alignment approach for those physicians who do not want to be employed, allowing them to be compensated for their successful efforts to improve quality and manage costs.

Employment is the option creating the strongest alignment.  However, it is important to involve the physicians in decision making and leadership.  Ownership alone will not create alignment.  How you use your newfound access to influence physicians will define the level of success.

When done effectively, we have seen principle benefits of alignment through employment:

  1. It removes many of the disputes over recruiting, as the physicians take less risk for a new recruit than in private practice.
  2. It reduces the risk that physicians will compete against the hospital, although that may come at a price, and if the hospital employs enough physicians, it can make the ventures of non-aligned physicians less lucrative by controlling referral patterns.
  3. Finally, by aligning interests, hospitals and physicians can better negotiate with insurers.  This alignment creates bargaining power, and is frequently the biggest win for the physicians. We have seen physicians gain 30% from private insurance companies simply when being employed, but only if they join a group with economic muscle.

Joint ventures are less effective, as they create alignment only in a very narrow area of the hospital’™s business.  However, it can be effective if it is accompanied by agreements concerning other areas of your business. Many hospitals are requiring ED call and care for unassigned patients as a condition for the joint venture.

Medical directorships are also useful tools for alignment.  They allow the organization to contract for a physician’™s hours, and almost certainly assure you will be working on common goals.  They help create a common mindset.

Mindset.  Alignment of vision, creating a common mindset with the medical staff, has perhaps faded as an integration strategy as the economic interests of hospitals and doctors have diverged.  However, many organizations have used this approach to their advantage, particularly through a common focus on quality and mutual planning efforts.

Our most effective clients have involved physicians in strategic decisions on a routine basis, creating common goals in the process.  In one hospital, physician leaders have been employed on a service line basis and participate in management meetings just like the VPs.  The ultimate dividend has been trust, as physicians and executives better understand the thought process of each.

Another client had a weekly meeting with physician leaders (including the medical staff president, president elect, and past president), a physician board member, and two senior executives.  That forum allowed both the executives and the physicians to talk about their concerns (and the concerns of other physicians) in a more private, intimate setting.  This approach builds trust and powerful allies on the medical staff.

Conclusion.  For decades, most community hospitals have focused their medical staff efforts on developing a common mindset or on the convenience aspects.  Those approaches continue to have value and should not be overlooked in the rush to economic integration, even as pressures on hospitals and changing expectations of new physicians force changes.

Even with greater economic integration, there is a need to make the practice of medicine convenient for physicians.  It is also important to work to build, rather than try to dictate, a common mindset.  Only through those approaches can you build the culture necessary to truly align with physicians.

Travis Ansel

Chief Executive Officer and Managing Director, Strategy