Physician-Hospital Alignment in the New Era: Plotting the Course

physician-hospital alignmentPhysicians and hospitals must be aligned now more than ever, given the continual changes in healthcare that tie reimbursement to performance.  In order to ensure a successful long-term relationship, it is important for both entities to conduct due diligence pre- and post-affiliation in order to ensure all parties are making well-informed decisions.  Typical areas of consideration include provider productivity, physician compensation, and revenue cycle management.  However, both sides also should consider how potential shifts in payer mix and external changes in the healthcare environment may affect alignment, and make preparations to ensure long-term success.

Assessment of physician motivators for productivity and compensation formulas remains essential.  While some providers are motivated by achievement and will strive to exceed expectations under most models, others will be more motivated to excel if a portion of compensation is at risk based on not meeting minimum requirements for production or participation in organizational goals.   There also may be a blend of motivating factors among physicians, which may require combining compensation models to include incentive and penalty thresholds.  Additionally, the inclusion of quality measures in the physician compensation model is transitioning from an optional to a critical component of success in future value-based payment models.  Determination of motivating factors will be critical in utilizing compensation to drive behavior in current and future alignment goals.

For new affiliations, anticipated shifts in the benefit structure should be evaluated for net effect on productivity.  For example, employed physicians may enjoy the benefit of additional paid time off in comparison to limited time off in a private practice setting.  While increased time off will improve work-life balance for the physician and potentially lead to higher job satisfaction, a significant increase in time off likely will have a negative impact on physician productivity overall.  Therefore, groups should be mindful of expected increases in time off as they build production-based compensation models.  Additionally, when evaluating physician productivity post-affiliation, it may be more helpful to compare physician productivity with time worked to determine if there have been any negative shifts that should impact compensation.

Shifts in payer mix may contribute to significant losses if there is an increase in patients insured by payers with lower reimbursement rates.  These shifts may occur naturally as a result of an aging patient population, i.e., shifting from commercial insurance to Medicare.  In this case, consideration should be given to marketing to a broader patient base.  Additionally, shifts may occur if the existing practice location changes as a result of affiliation.  Therefore, it is beneficial to trend payer mix for both parties over three years to determine any current pattern shifts and forecast payer mix shifts related to any planned location changes to estimate the potential impact on revenue.

Both physician practices, and systems that employ physicians, will be impacted by the Merit-Based Incentive Payment System (MIPS).   They should, therefore, evaluate current performance in the areas that comprise MIPS, and develop a plan for transition to the new reimbursement model.  Physicians and hospital leadership will need to work together to establish plans and budget resources for education, information sharing and coordination, and analysis of data.  Previous practice and hospital quality performance scores should be obtained and evaluated from the Quality Resource and Utilization Report and meaningful use reports available from the Centers for Medicare & Medicaid Services.  Patient experience surveys also should be reviewed.    Groups should utilize this information to outline areas for improvement and align strategic goals accordingly.   Throughout the relationship, negative trends should be managed proactively to reduce negative financial and/or reputational harm to both entities, as performance scores will be made available to the public.  Consideration also should be given to potential new staff roles in the area of care coordination and patient experience management to ensure processes are effectively implemented and adhered to.

As the healthcare industry continues to evolve, there will be continued regulation and at-risk payment associated with patient experience, clinical quality, cost containment, and utilization of technology.  This will increase the need for physician-hospital alignment, whether through employed models, professional service agreements, or accountable care organizations, etc.  Each entity will need to be prepared for shifts in patient care requirements and reimbursement models, and should be well aligned in the overall philosophy of care and process management associated with demonstrating value.

If you would like more information about physician-hospital alignment and reimbursement, contact one of our executives below at (800) 270-9629.

Lori Foley

Lori Foley


Allison Wilson

Allison Wilson

Senior Manager

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