Aligning Physicians' and Hospitals' Interests

Yesterday I discussed that the healthcare reform bill signed by the President will among other things promote bundling of payments between hospitals and physicians. This is certainly not a new concept. In the late 1990's we all thought that capitated managed care was going to rule the world. Everyone set up a PHO (Physician Hospital Organization). Most of these, like ours, went largely unused until they were abandoned altogether. Now there will be a resurgence of such arrangements.



As we work to set these up again we need to keep in mind what I addressed yesterday. To truly align with your physicians you must capture their minds as well as their pocketbooks. So before you can be effective at this you need to know what today's physician priorities are. A recent survey of physicians under 50 listed the following top three priorities:

1) Time for family and personal life
2) Flexible scheduling
3) No, or limited, call

In addition to this you can assume that they want maximum reimbursement for their specialty.

Obviously in an environment of shrinking reimbursement it is impossible to provide physicians all of this, but there are models that are working. Medicare has funded demonstration projects of bundled payments that seem to be effective. One such example is at Baptist Health System in San Antonio, Texas under the leadership of CEO Michael Zucker. This model shares the savings and allows the physicians a gainsharing opportunity. In this case the model focused on DRG 470 which is major joint replacement or reattachment of lower extremity.

The model anticipated significant benefits:

-Greater allignment with physicians
-Improved quality and efficiency
-Reduction in costs
-Increased market share
-Higher patient satisfaction

The demonstration project was set up to discount hospital and physician payments but share with both groups any savings generated over the standard reimbursement. To get physician buy in the CEO elected not to put any of the physician payment at risk when the project started. The hospital assumed all the risk at first but still let the physicians participate in the gainsharing. They were eligible for up to 25% of their Part B reimbursement. With "skin in the game" physicians came together like they never had before and allowed the hospital to negotiate with implant vendors as a group. Cost savings were immediate and substantial. This type of cooperation did not come without some angst and pain, but it came. Continuous attention to physician buy-in is key.

Overall the project has been a success:
-The hospital has increased leverage with vendors
-Physician quality measure have improved
-Gainsharing distributions were earlier than expected
-Overall physician support (despite some defections) has grown
-Managed Care Companies are looking at similar arrangements

As we continue to brace for the many changes under healthcare reform, it is good to know that there are successful models out there for what is coming.

More on this later.

Mark Brodeur