Toward Physician Alignment

Healthcare leaders are developing clinical integration models to address clinical and financial transformation.

The healthcare industry is challenged by the need to transform both the clinical and financial aspects of care delivery. Among the challenges leaders are facing is that the financial foundation of the industry is heading toward a variety of risk-sharing payment mechanisms, but for most, fee-for-service reimbursement remains the source of a sizeable portion of revenue.

Healthcare leaders who responded to our Physician Alignment Survey indicate strong movement toward clinical integration, and expect to place increased emphasis on shared savings programs, bundled payments, and at-risk contracts as components of their physician alignment activity. Such shifts in alignment practices suggest that healthcare leaders are addressing how care delivery is becoming more collaborative. Executives are planning changes to their alignment practices because they see signs that those with integrated and aligned medical staffs will be rewarded.

Parity among employed and independents

Maximizing financial performance is the item included most frequently as a business objective behind physician alignment strategies, cited by 61% of respondents. Nearly as many (60%) say that standardizing care for predictable costs is one of their top three objectives.

One would expect financial performance to be at or close to the top of a list of business objectives. And addressing cost is a principal contributor to financial success. But addressing cost through care standardization can be a great deal more challenging than more conventional methods of cost containment, because care standardization requires physician support, which, to an extent, requires that physicians surrender a degree of autonomy. Indeed, engaging physicians in care transformation is the third most frequently mentioned patient care objective, cited by 46%. And standardizing care for quality improvement, a conventional component of most healthcare quality improvement programs, is mentioned as a top patient care objective by 58%, nearly as many who mention standardization for cost savings.

Advisors indicate that objectives such as care transformation (included by 46%) and care coordination (40%) are liable to increase in priority over time. "The goal is to transform the care delivery system. So it was a little bit surprising that that number was that low," says Seth Kronenberg, MD, chief medical officer for 506-bed nonprofit Crouse Hospital and president and medical director for Crouse Medical Practice in Syracuse, New York, an organization that serves 23,000 inpatients and 150,000 outpatients in central and northern New York.

Michael Wiltermood, president and CEO for Enloe Medical Center, a 235-staffed-bed nonprofit hospital in Chico, California, adds, "If you include population health management with care coordination, you would see that number go up as we get better and better about working together." In fact, Wiltermood suggests that care coordination and care transformation are the major patient care drivers of physician alignment. "I think you could make the argument that those two together actually are the major objective and that the other things are subsets."

Regarding employed physicians, employment contracts with incentives is the alignment mechanism mentioned most often (60%). But nearly as many (55%) say they are using clinical integration as an alignment mechanism for employed physicians—not surprising given the high percentages that include care standardization for cost savings (60%) and quality improvement (58%). Nearly as many (52%) are using clinical integration for alignment with independent physicians. In fact, the use of all alignment mechanisms (except, of course, employment) tracks very closely between employed and independent physicians. For instance, 25% use shared savings agreements with employed physicians, while 26% use shared savings with independents.

The drive to integration and collaboration supports the concept of using alignment models that are common between employed and independents, and the need is immediate, especially for organizations involved in shared savings programs.

"It's basically out of necessity to build it that way," says James Parobek, senior vice president of operations for Texas Health Physicians Group, with more than 830 medical professionals operating out of more than 250 locations in the Dallas-Fort Worth area. "We're not going to have enough doctors that we can employ. We couldn't afford to employ all the specialists we need to make sure we get shared savings to actually occur, to make sure that bundled payments happen. Our medical staff and specialty referral network are made of many independent physicians. You're not going to be successful if you can't figure out a way to do clinical integration with them, ACOs with risk sharing, shared savings, and bundled payments. If you don't figure out a way to do those top four items with independents, you're not going to have shared savings for your employed doctors this year."

Of course, the emerging need to take on risk drives physician alignment activities, too. Says Wiltermood, "This whole strategy of alignment is stepwise. First, you acquire practices. Then you achieve a level of integration and [address] quality measures. But ultimately the goal is to be in a position to get into shared risk agreements as a hospital/physician group."

Healthcare leaders expect substantial increases in the degree of use of ACOs, shared savings, and bundled payments as alignment mechanisms, for employed physicians and independents alike. For example, 21% of organizations use bundled payments for employed physicians now, and 41% expect to emphasize bundled payments for alignment over the next three years. The responses for use of bundled payments for independents are 22% now and 36% over the next three years.

Parobek notes that these results may indicate that healthcare leaders are anticipating a long-expected move by payers. He says, "I think the main reason for the jump in the shared savings and bundled payments is that people are expecting that insurance companies are going to change the way we're getting paid, which will allow for those vehicles to happen. Insurance companies are already talking about bundled payments. Because they're talking about it now, people may be expecting that in three years there'll probably finally be those vehicles."

Survey results show that higher percentages of health systems than hospitals use methods now and expect to emphasize those methods in three years, across all alignment mechanisms. The lead by health systems is seen most dramatically with clinical integration: 77% of healthcare leaders from health systems now include clinical integration among the alignment mechanisms used for employed physicians, compared to 44% from hospitals. The difference is as pronounced for independents: 68% of health systems now use clinical integration, compared to 42% of hospitals.

But the gap may not be as pronounced in the future, because, in some areas, higher percentages of hospitals than health systems plan to emphasize alignment mechanisms. For instance, a higher proportion of healthcare leaders from hospitals expect to increase their emphasis on shared savings over the next three years. In three years, 38% of hospitals expect to emphasize shared savings for employed physicians, compared to 14% who use that alignment mechanism now. Thus, the increase in emphasis for hospitals is 24 percentage points. The corresponding increase for health systems is 10 points, going from 37% now to 47% in the three-year time frame.

Clinical integration as a platform for reform

Organizations are positioning themselves to address both the care and payment aspects of healthcare reform. Closer working relationships help facilitate both objectives, and integrating care providers into networks is a way of formalizing closer relationships.

Clinical integration is an organizational structure that allows participants (which may include competitors) to join together to negotiate fees. Participants agree to share quality-of-care improvement objectives and techniques. Shared efficiency objectives are intended to yield cost savings, which benefit network members. IT tools monitor and support, so infrastructure elements such as EHRs are part of clinical integration. Participating physicians often sacrifice a degree of autonomy in order to accommodate the network's governance structure.

As noted, more than half of respondents (55%) now use clinical integration as an alignment mechanism for employed physicians, and 52% use clinical integration for independents. And nearly two-thirds (60%) of those who use clinical integration as an alignment mechanism with either their employed or independent medical staff have a clinically integrated network. Four-fifths (80%) of those 60% say their clinically integrated network is complaint with Federal Trade Commission and/or Department of Justice regulations.

Among organizations that participate in clinically integrated networks, survey respondents expect near-term (three-year) growth in the level of clinically integrated medical staff of 48%, which is nearly five times the expected growth rate of the staff itself. In the same three-year period, healthcare leaders expect their overall medical staff population to increase in size by 10%.

In the busy Dallas/Fort Worth area, Parobek expects overall medical staff growth to be in line with the expectations reported in our survey. But Texas Health's shift to clinical integration is expected to exceed what survey respondents report.

"We can only have clinical integration with our employed physicians. We've got 550 employed providers right now. Our clinically integrated network probably in two years is going to be north of 2,000 physicians, which will include employed and independent physicians. That growth is a lot more than 48%." The Intelligence Report's regional breakout shows medical staff growth over three years for the western region of 18%, with clinically integrated staff expected to grow by 85%.

Parobek suggests that expected expansion of the ranks of clinically integrated physicians is a sign that payment reform is underway. "Medicare Shared Savings Plans and Medicare Advantage Plans are shared risk savings plans in place now that doctors and hospitals are able to do together. That's happening, and that's expanding.

"Bundled payments are occurring right now in some areas," he says. "So we know that that's already started, and clinically integrated networks are another variation of that. ACOs have started to form, so there's a mechanism for these things to happen."

Parobek adds that the model of health systems contracting directly with employers provides still another reimbursement vehicle that favors clinical integration. "I think we're going to see a whole lot of growth in this area. It took 10 years for the groundwork to be laid, but it's now starting to pay off."

Despite important strides in the industry, Kronenberg points to CMS' time frames for switching to value-based payments, and wonders whether the shift toward clinical integration will be swift enough.

"Medicare has a goal that by 2016, 85% of their payments are supposed to be value-based. By 2018, it's going to be up to 95%, I think. By then, a lot of it is going to be shifted to value-based, but you're still going to have only 70% of your medical staff involved in clinical integration. That definitely seems like a slow pace," Kronenberg says. "Maybe they're kind of hedging their bets a little bit. Because if you truly believed in payment reform, I would think your number would be 90% or something. This may be recognition that it's going to be a difficult process."

Alignment and feeling ownership

Many frequently mentioned business objectives behind alignment strategies can be supported by clinical integration. Nearly half of respondents (46%) include establishing primary care as a foundational element in their care continuum among their top three physician alignment business objectives, for instance.

Likewise, emerging but compelling business objectives such as positioning for risk contracts (36%) may be better pursued with a medical staff largely aligned into a clinically integrated network. As we have seen, the move toward clinical integration is clear, but only 33% today include forming a network to deliver value-based care among the top three patient-care objectives for their physician alignment strategies.

Nearly half (46%) include engaging physicians in care coordination among the top three clinical objectives behind their physician alignment strategies. But one-quarter (24%) say that physician engagement is the most difficult aspect of aligning physicians, the item at the top of the chart. Says Kronenberg, "This result demonstrates what we all believe: that physician engagement really is the toughest piece. It's not financial issues. It's getting physicians engaged in the process and willing to practice within the formal confines of a clinically integrated network."

Indeed, acceptance of value-based compensation is cited as the most difficult aspect of aligning physicians by only 5%. Seeing that 47% include early physician involvement among their top two most effective physician engagement tactics, Kronenberg says, "Traditionally we thought, 'Let's develop the system and present it to the docs.' Well, that is not as effective as when they're involved in the decision-making process early on. Then they really feel ownership. That is being recognized as a key piece."

Nimble and responsive

The time for close alignment is now, even though the paths to care delivery and financial transformation are not yet clear. For Wiltermood, alignment provides the flexibility to respond to requirements as they emerge.

"We feel that whatever happens going forward—a big push toward population health or risk sharing agreements or whatnot—a physician alignment strategy is going to be critical to our success. We need to be able to pivot in whatever direction the payers go, and respond competitively. Organizations that have their physicians aligned with them, that have developed quality improvement strategies, and that have some measure of clinical integration—I think those are going to be most successful."

While the alignment mechanisms used for employed and independent mirror each other, Wiltermood sees a benefit in employing physicians. "We need to attract and retain physicians," he says. "Physicians are looking for stronger relationships with hospitals. I think they're looking as much for security, standardized benefits, and employment packages as they are for professional fulfillment. We have to get those for physicians and get the payback, which is improved quality of care, improved efficiencies, and the ability to contract. With aligned physicians, we can bring a healthy provider group to insurance plans. If you don't have that capability, sooner or later you're going to be on the outside looking in."

Reprint HLR0915-3