Management of Healthcare Organizations

Building Your Employed Physician Network: A CEO’s Guide to Developing Physician Capabilities for the Future

Words from the Team

This whitepaper was created to help executive leaders understand the crucial importance of their employed physicians as it pertains to the management of healthcare organizations. While education and journals within the industry remain hospital-centric and even efforts to integrate care (such as CINs) focus on the broader medical staff, our view is that your employed physician network will be the core of your future success. The common denominator for all great health systems will be a high-performing employed network of physicians.

This document will help you understand why building a great employed physician group is critical to management of healthcare organizations. It will also help you understand how to do it. And if you are skeptical about this focus, it will help you understand the risks of not prioritizing development of a strong employed network.

We know you will gain insights as your organization charts and implements its strategy. And if you need an outside perspective, HSG can partner with you to assess the strategic and operational performance of your network.

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SummaryManagement of Healthcare Organizations: Building Your Employed Physician Network

Successful management of healthcare organizations is no simple task. Your employed physicians are your most important asset. In the evolving healthcare environment, your employed network will be the core of your health system. This White Paper is The CEO Guide to strengthening that core.

The central nature of your employed physician network seems a stretch to many health system executives. In the current mindset, a tertiary hospital is likely the crown jewel of your system, both in terms of brand and profitability. It is the most visible system element. It is the cash cow that facilitates your growth strategy.

For many, employment of physicians has been a defensive strategy designed to protect volume. Health systems have employed doctors when:

  • Private practices have floundered
  • New recruits required employment
  • Coverage of the ED and hospital consultations were not supported by private practices
  • A doctor in a strategically critical service line was at risk, or
  • A competitor showed interest in a valuable physician or practice

However, the current strategic rationale for employment is changing. We see this driven by four major factors:

1: Growing Accountability for Outcomes

Many payers are committed to the proposition that your health system should not be profitable if it cannot deliver predictable, favorable outcomes, whether related to quality, cost or access. Payers are even competing with you; providing more services such as access via virtual networks or in-store clinics. You will not be able to deliver the desired outcomes without engaged physicians shaping care processes and defining best practices.

2: Patient Expectations are Driving Care Redesign

Patients expect access on their own terms. Patient access applies equally to physician and hospital services, but the physician office is the tip of the spear. If your health system cannot marshal the resources to make access patient friendly, you are fundamentally at risk. That reality is leading to growth in virtual care, increased use of APPs, and expanded geographic distribution of access points. It is also sharpening the focus on tightly aligning with physicians via employment.

3: The Shift from Inpatient to Outpatient

We rarely encounter a client with less than 50% of their revenue derived from outpatient services. Nationally, the average is above 55%. Securing provider referral streams for these outpatient services has never been more important. As providers become less reliant on and less naturally aligned with hospital inpatient capabilities, an engaged employed provider network is critical to retaining outpatient volume.

4: Competition from Private Physicians

Whether profiting from surgeries they perform or profiting from care managed under capitated/risk relationships, doctors are trying to take profit streams that have historically been controlled by hospitals and health systems. We see primary care physicians increasing their income through direct primary care relationships or Medicare Advantage risk contracts. Ditto investment in ancillary delivery models owned by specialists. All of these efforts make private physicians less reliable partners.

Looking down the road to 2030 or 2035, what is your vision for your health system and its employed physician network? We know it must include:

  • A more robust and strategic physician employment strategy
  • A physician base that you partner with to create a roadmap for the future
  • A physician base that you partner with to deliver value
  • Data that helps you understand care processes and their effectiveness
  • A physician enterprise that is financially sustainable
  • A physician enterprise that is a brand asset
  • Greater accountability to payers and patients
  • A fundamental rethinkin of your organizational structure and building the management infrastructure to succeed
  • A physician group that evolves to meet the challenges of that market

Resource prioritization will need to change to make this happen. The senior executives engaged in leadership of your system will change, both in titles and in capabilities. Physician leaders will continue to grow in importance and number. Capital resources will be allocated to create differentiated access points and clinical strengths. Marketing budgets will migrate, slowly, from the hospitals to the physicians who deliver care valued by consumers.

David W. Miller

Founder and Chairman

Travis Ansel

Chief Executive Officer and Managing Director, Strategy

Terrence R. McWilliams, MD, FAAFP

Chief Clinical Officer and Managing Director, Employed Provider Networks