Hospitals and health systems frequently express the same frustrations when discussing their physician strategies:
- “All we do is respond to what our competitors are doing.”
- “It’s dictated by what the physicians want and which ones knock on the door.”
- “It’s too focused on employment and not on aligning incentives.”
- “We don’t have a systematic approach to physician relationships.”
These dynamics create a physician strategy that is reactive and narrow. The upshot: physician deals that may or may not be in the organization’s best strategic interest and are difficult to manage due to their variability.
To be both proactive and comprehensive, the physician strategy and its execution must tie explicitly to the organization’s strategic objectives, such as capturing referral volume and stabilizing key service lines within the community. Once the organizational strategy is clearly defined, the physician strategy should identify:
- What specialties are needed to achieve the organizational objectives?
- What type of hospital-physician relationship is ideal for those specialties?
- Within each specialty, which physicians are priorities?
To answer the third question, we recommend performing a thorough market analysis to define the following for every physician in the hospital/health system’s primary, secondary and tertiary markets:
- Location. Is the physician located in a strategically relevant market for the organization? Can the organization feasibly support a physician located in that area?
- Age. Is there a potential succession planning issue? Based on affiliation and referral loyalty, does that succession planning issue represent a risk or an opportunity?
- Affiliation. Is the physician already employed or aligned with another hospital/health system?
- Referral Loyalty. What does the organization receive in terms of referrals/cases from that physician? If loyal, do we have the right alignment model to ensure that loyalty continues? If not loyal, what is the best alignment opportunity to build loyalty?
- Quality/Cost Performance. For specialties where it is relevant, how does the physician perform on measurable metrics that the organization prioritizes?
With those elements defined, the organization’s focus should shift toward implementing the appropriate independent or employed physician network alignment models. In executing these agreements, organizations should:
- Be Comprehensive by considering all of its physician alignment options (not just employment).
- Be Consistent by ensuring physician agreements of the same type are consistent in the structure of terms and methodology – no “special deals” or “one-offs”.
- Build the Appropriate Infrastructure to manage physician relationships, particularly employment relationships. Many organizations approach employment with a “cart-before-the-horse” mentality, because they don’t want to overbuild infrastructure and don’t know how many physicians they’ll employ. A proactive physician strategy that defines employment targets will solve this issue.
- Ensure Execution by building sufficient management depth or outside counsel with the appropriate expertise so the physician strategy doesn’t fall by the wayside. The organization’s overall strategy and physician strategy should be reviewed annually to assess appropriateness given environmental trends and the competitive landscape. This will ensure the organization’s plan is relevant for the current situation and will refocus the organization on strategic priorities that have not been accomplished.
