July 8, 2009
Healthcare reform proposals emerging from Washington are signaling a shift away from fragmented, volume-based payments to more unified payments based on episodes or populations. These payment structures--often described as "bundled" or "global" payments--will depend heavily on collaboration between hospitals and physicians.
HFMA's new white paper, Healthcare Payment Reform: A Call to Action, identifies integration as one of three key competencies that healthcare providers should begin to build now to meet the challenges of payment reform. Many hospital leaders and physician executives have already begun this task, spurred on by physician shortages, reimbursement pressures, and quality improvement initiatives that pre-date the new pressures of reform. Their strategies for integration are highlighted in this issue of HFMA Wants You to Know.
Creating Dedicated Physician Partners
Between 70 percent and 80 percent of hospital admissions and patient visits are highly influenced by an individual physician's recommendation. Yet only 59 percent of physicians are loyal to the hospital they are associated with, according to data cited in "Bridging the Gap with Referring Physicians," an article in the summer 2009 issue of HFMA's Strategic Financial Planning newsletter.
In any form of hospital-physician partnership, physicians must be both satisfied and engaged with their hospital partner. A set of five partnership principles defined in the article covers both bases. Satisfaction is achieved through ease of practice and quality of care, while engagement is built with confidence and trust, communication and responsiveness, and physician involvement in planning.
To assess the current state of your hospital's relationship with its physicians, see this checklist of questions from the Strategic Financial Planning article, available free of charge for the next two weeks to HWYTK readers.
Structuring Physician Practice Acquisitions
Hospital leaders and physician executives are avoiding the mistakes of the 1990s—overpayment for practices, failure to actively manage acquired practices, and a lack of productivity incentives for physicians—by taking a strategic approach to today's transactions. Key components of this approach include valuation of practices by independent, third-party advisors; careful management of physician expectations in the physician employment contract and compensation structures; and giving physicians a meaningful voice in governance.
The article also highlights legal issues that must be considered in physician practice acquisitions. It, along with all articles in the current online issue of hfm, will be available through the month of July.
Co-Management Agreements
A growing number of hospitals are entering into co-management agreements with groups of physicians to manage key service lines. These groups often take the form of an LLC management company, which might consist of all physicians or of hospital and physician members. The agreement ties some part of the group's compensation to achievement of specific, measurable outcomes.
The agreements offer benefits for all involved. Hospitals and patients gain substantial clinical and operational input from physicians, while physicians can have their say while remaining independent.
As with all agreements affecting physician compensation, it is important to demonstrate compliance with fair market value (FMV) regulations in a co-management agreement. A September 2, 2009, audio webcast, "Valuing Physician and Executive Compensation Arrangements: Fair Market Value & Commercial Reasonableness Thresholds," will help you understand the regulatory requirements applicable to physician compensation transactional arrangements, as well as the documentation needed to establish FMV compliance. Learn more about this audio webcast.