Four years ago healthcare trend experts predicted increased competition between physicians and hospitals, and the difficult decisions on whether hospitals were going to compete with physicians or find joint venture opportunities in working together.

 

Now we are discussing moving physicians transitioning from Alignment to Integration. Healthcare reform is going to require closer and more integration between physicians and hospitals. More and more discussion is going on about Accountable Care Organizations and Episodic Groupers, where single payment will be made and providers will split the capitated or bundled payments. 

 

Physicians have long been essential to the economic success of hospitals. Each physician on a hospital’s medical staff generates between $1 million and $3 million per hospital in revenues depending on specialty (Merritt and Hawkins and Associates). 

 

In Memphis, primary care physicians (Internal Medicine and Family Medicine) have been approached by Baptist Memorial Health Care and Methodist Healthcare to be more aligned and further integrated into their prospective systems. Both healthcare systems performed their due diligence and visited other health systems in the US and looked at their models. As has been said many times, healthcare is local, so both systems looked at systems based on this market. Baptist Health Care elected to use an employed physician foundation model and Methodist Healthcare elected an LLC for profit model. Both feel confident about their decision. 

 

Older traditional models of physician interaction will not work in the new environment we are going to be working in. Hospitals and physicians will be called upon to find ways to ensure they function effectively and efficiently as an integrated unit and share the economic fate tied directly to their success in maximizing efficiency, patient satisfaction, and quality outcomes while minimizing cost and patient risk.

 

Both healthcare systems involved physicians early in the process which is paramount for success. Specialty groups understand, with the changes, that they must form a more collaborative system with hospital systems. John Lewis, CEO of Semmes-Murphey was quoted in last month’s issue of the Memphis Medical News, “We’re working on collaborative projects with both Baptist and Methodist. I think that if you’re going to offer the best quality of medicine without it being expensive, thus the need for collaboration.”

 

For both Baptist and Methodist, having physicians’ input will improve the success of their model. In November, 2009 a major healthcare system in Nebraska had a much publicized disagreement between administration and their medical staff. In the course of this disagreement, the CEO resigned and soon thereafter their CFO and Chief Medical Officer resigned. I was engaged to come and speak to the medical staff and administration. During my due diligence I found out that the hospital system had been hiring physicians and having meetings without the involvement of the physicians not employed by the system. The CEO had thought he had approval from the healthcare system board. The system was working on true integration, but neglected to involve many on the medical staff in the planning. Many of the physicians felt excluded from a system in which they added to its success. The disgruntled physicians met and held a vote of no confidence on the CEO and started using the competitive hospital in the area, thus expediting his resignation. My message to both administration and physicians was communication. The health system was designing the infrastructure that would be positioned well for the future, but the lack of communication determined the outcome. It was a shame that such promise and proper structure did not get to be implemented because of lack of communication.

 

I was called by a healthcare system in the mid-west a couple of weeks ago to meet with their board and medical staff. The CEO of the health system told me he did not have a medical staff problem but he wanted to be proactive, because he felt sure there would be some conflict with the changes which they were going to have to put in place for the system to survive and grow. I was impressed with his being proactive and having a planning session with the board and medical staff, and in having a “visioning” session, which included all participants, to keep the line of communication open. Thus inclusion and communication are important to insure success.