Clinical Integration Trumps Physician Employment

As payment moves from volume to value, many hospitals/health systems have begun to employ physicians as a business strategy, seeking to align with physicians around common goals and objectives. The Healthcare Financial Management Association (HFMA) reports, however, “many health systems have found that alignment does not automatically follow employment and that the employment model can bring unsustainable losses and decreased productivity.” (“Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)


A clinically integrated network offers an attractive alternative to physician employment for weathering the transition to and full-scale implementation of value-based care delivery and payment models. Physicians in a clinically integrated network tend to be more productive than when employed by a hospital or health system, say the writers of the HFMA report. In addition, a clinically integrated network:


Lowers operating expenses: A health system’s operating expenses per physician have been shown to be significantly lower when managing a clinically integrated network compared with managing employed physicians: The 2014 Medical Group Management Association Cost Survey reports that median operating expenses for a health system in the employed physician model range from $320,000 to $450,000 per physician, depending on specialty, whereas recent Deloitte Consulting experiences indicate operating expenses for a clinically integrated network can range from $30,000 to $50,000 per physician, depending on the scope of services offered to participants.


Achieves better clinical cost performance: Early results from health systems with successful clinically integrated networks show better clinical cost performance in shared-savings arrangements when compared with organizations where employment is the primary physician engagement strategy. For example, in the Medicare Shared Savings and Pioneer accountable care organization (ACO) programs, ACOs composed of both health system-employed and independent physicians generated savings per participating physician approximately 17 percent greater than those formed predominantly with health system-employed physicians.


“Taken together, findings related to productivity, operating expense and shared-savings performance suggest health systems that have invested in an employed physician model should consider reevaluating their strategy and—short of unwinding physician employment—explore a broader strategy that includes working with independent physicians through a clinically integrated network.” (“Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)


Clinical Integration Characteristics


Clinical integration is a “network implementing an active and ongoing program to evaluate and modify practice patterns by the network’s physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality,” according to a joint report from the Federal Trade Commission (FTC) and the Department of Justice.


The FTC has a framework for antitrust enforcement that in effect could be demonstrated by a clinically integrated network. The FTC framework has four characteristics:


The ability to achieve significant clinical and economic efficiencies. Participating physicians and hospitals/health systems would share clinical goals and guidelines, enter into payer contracts together, increase savings and improve quality, achieve appropriate service utilization and ultimately provide better care at a lower cost.


Broad physician representation and physician investment. Physicians in a clinically integrated network must financially invest in the people, processes and tools necessary to drive change. These investments give physicians a voice in the development of a patient-centered, quality-focused care delivery model without being employed by the hospital/health system.


A well-developed care management program that uses evidence-based guidelines. Evidence-based guidelines are a key tool for clinically integrated networks. Physicians and other providers must work as a team to develop a care management program that, ideally, ensures patients are treated by a team that manages the patient’s health care using shared information.


A data management system that enables data collection, information sharing and utilization review. Technology is the backbone of a clinically integrated network, pooling many data sources across a broad clinical record for shared patients. It is also vital for applying the agreed-upon evidence-based guidelines to consolidate patient data so noncompliance or gaps in care are apparent.


(iProtean thanks the Healthcare Financial Management Association for allowing us to liberally quote from its publication, “Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)



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