When it comes to the relationship between physicians and hospitals, the message for health care executives is clear: without aligned physicians, hospital admissions are at stake. That alignment has taken on additional importance as physicians and hospitals adjust their strategies to meet rising performance standards within the new risk-based payment models, such as bundled payments.

It should come as no surprise then that the number of physician practices owned by hospitals or integrated delivery networks increased from 16.3 percent in 2007 to 20 percent in 2014.

Physicians are looking for alignment and integration opportunities with hospitals as they face increasing practice costs, rising malpractice premiums, continuing reimbursement pressures and more stringent quality standards. From a hospital perspective, alignment should focus on integration opportunities that engage physicians more formally and ensure more long-term physician loyalty.

The strategies and models for physician alignment with hospitals can vary from low to high integration to incorporate objectives that are critical for both sides. As your organization works toward a high-integration strategy, a focus on the following three considerations will lay the groundwork for success.  

1. Find the right physician partners. Aligning with physicians clinically, economically and structurally is a prerequisite to succeeding in an increasingly value-driven payment system. Physicians are still one of the most important referral channels for health systems — and the single most important player in delivering excellent clinical care. Being selective about the deals that are struck and the physicians to partner with has never been more important.

“Hospital leaders must continually assess performance in core service lines to identify new opportunities for strengthening physician alignment,” said Chris Majdi, senior consulting director, health system and physician strategies, advisory services, for Vizient. “Cultivating a pool of highly engaged physicians devoted to developing leading practices, driving performance improvement and championing culture change is key to successful alignment.”

To establish trust and create a winning relationship, choose physicians who have a record of performance improvement through process redesign, technology adoption, ongoing measurement and outcomes tracking. Remember to gain medical staff support in order to build consensus and momentum for change.

2. Choose from multiple alignment options. Hospitals can choose from multiple structures to strengthen alignment and engage physicians. They should carefully consider the range of alignment options — from low-integration strategies, such as medical directorships and gainsharing agreements, to high-integration models that include employment and joint ventures.

“As hospitals and physicians navigate these new opportunities, it’s essential that they understand the types of structures that are available in the current landscape and the various benefits and challenges associated with each,” continued Majdi. “Every market is different, so keeping abreast of market trends and knowing the legal considerations are critical.”

Hospital leaders must identify where along the continuum they wish to be. Will a contractual agreement, joint venture, employment agreement or some combination of these best fit the needs of the organization and the physicians in the market?

Types of physician alignment structures:

3. Establish trust with the right agreements. Successful integration engages physicians in all aspects of care delivery and performance improvement: strategy, planning, operations, policy decisions and governance. Hospitals should consider involving an independent third party to help strengthen communication and collaboration with physicians while agreements are drafted.

“Prior to entering into a formal agreement, it’s important for both physicians and hospitals to estimate fair market value for compensation and practice assets and determine the governance structure and other key terms,” said Majdi. “An outside consultant well versed in market conditions and contract structure can be beneficial in agreement negotiations.”

A well-written agreement includes careful analysis of economics, physician workforce dynamics and compliance with regulatory standards defined by the Stark law, anti-kickback statute and Internal Revenue Service. Legal counsel should be involved in all discussions about potential alignment structures and in all phases of agreement development.

Transparency, communication and governance result in well-structured agreements that support physician alignment, retention and engagement in organization-wide performance improvement.

As hospitals and physicians navigate these new opportunities to strengthen ties with one another, it is essential that they understand the types of structures that are available and the various benefits and challenges associated with each. By carefully designing an approach that attracts the right physician partners, determining which structures are most appropriate, and putting together well-structured agreements, health care organizations and physicians can succeed in this increasingly competitive marketplace.

For more information on how Vizient can help your organization navigate a successful high-integration physician alignment strategy, click here.


Published: March 14, 2017