The New Hospital-Physician Alignment: Preparing for a Value-Based Future
Challenges to the traditional structure of physician economics were already creating a trend toward increased hospital-physician alignment when health care reform added a strong incentive in the form of support for accountable care organizations (ACOs).1 Greg Scrine, managing principal in GE Healthcare's Performance Solutions Integrated Healthcare group, says, however, that the factors driving alignment run deeper than a mere desire to capitalize on value-based purchasing. "Volumes are key, and physicians drive volumes," he notes. "Hospitals want to solidify their market position and create a market for growth, and in competitive markets they're also seeking to deny that advantage to their competitors. These factors aren't new, and the trend isn't new."
In fact, the addition of ACOs and other value-based purchasing initiatives, Scrine says, has served to underscore the advantages of an aligned model—but it has also broadened its goals. "Many provider organizations are finding ACOs a lot less exciting than they did last October," he says. "What is increasingly apparent, though, is there will be a wide variety of models and experimentation with the same underlying need. We need to develop structures that move organizations toward delivering the triple aim: improving the care experience for the patient, managing the population's health, and reducing costs per capita."
Chris Van Gorder, president and CEO of Scripps Health, San Diego, California, concurs. "We started our model for physician co-management 12 years ago when we formed a physician leadership cabinet," he says. "About two and a half years ago, we formed the physician business leader cabinet, comprising the leaders of our affiliated medical groups. The hypothesis was that given the same information, we'd align on business decisions—and we have." The advent of health care reform, Van Gorder says, confirmed that this direction was the right one. "Based on the ACO regulations, Medicare requires a provider board—and lo and behold, we already had one."
The New Alignment
Scrine notes that health care in America is currently undergoing perhaps the greatest tectonic shift it has ever faced. "We're in the midst of a movement from a piecework, fee-for-service model to a value-based model, which is a huge transition," he says. "Most senior hospital leaders and forward-thinking physicians get that we need to come together to accomplish this successfully. In order to achieve the triple-aim objectives, you need to have the majority of your physician base aligned under one structure."
Central to the triple aim is the reduction of costs, and this goal, Scrine says, may be the biggest differentiator between today's alignment trend and that of the 1990s. "This movement is similar to the managed care movement of the nineties, but different in that there's been a recognition that if you're really going to change health care behaviors to drive down costs, it has to be provider-driven, not insurer-driven," he says. "If you really want to bend the cost curve, you'll have to do it through care redesign, and that can be done only by the providers themselves."
Van Gorder agrees on this count as well. "We're all in this together," he says. Scripps recently launched its own ACO entity, Scripps Care, which will be governed by a board consisting of the heads of all of Scripps Health's affiliated medical groups, as well as a Medicare patient and a consumer advocate. "Each of our medical groups will get one vote, and the health system will get only one vote," he says. "We recognize that we have to change the paradigm and do it incrementally, and providers do want to be more accountable for care and are anxious to develop those systems."
Van Gorder notes that health care organizations have advantages now that might have made a difference in the 1990s. "We didn't have the IT systems to manage patients more effectively," he says. "Components like registries didn't exist." Scrine also points out that managed care initiatives in the 1990s occurred in a very different economic environment. "Managed care was at least partially cued by the huge growth with the tech boom," he says. "Employers were less concerned about paying for benefits and more concerned with attracting talent, and they allowed benefits costs to skyrocket. That environment is very different now. With regard to Medicare and Medicaid spending, we're at the end of the rope—that's a simple economic fact."
Multiple Models, One Objective
This economic pressure means that today's alignment structures must be developed with an eye toward reducing costs. "We know for a fact that we cannot continue with the same model we've had in the past," Van Gorder says. "There's too much fragmentation, too much duplication of effort, not enough focus on wellness. If you lead with economics, you're probably going to fail; but if you lead with quality, you can create more value. We're going to have to integrate the concepts of cost and quality together."
Multiple models for alignment have emerged, and Scrine anticipates a period of experimentation before hospitals and providers are able to determine which works best for them, both in their marketplace and in terms of effectively changing the care paradigm. "The real world dynamic is that it's hugely powerful to have all your physicians employed under one governance structure and economically integrated," Scrine says. "The challenge is that this model is very difficult to replicate. If you're a CEO pursuing that strategy, it could be the fastest way to get yourself fired."
Instead, Scrine predicts that hybridized approaches such as the clinically integrated physician hospital organization model will take root. Scripps has taken a similar hybridized approach, with two integrated physician groups as well as five affiliated independent physician associations all contributing to a physician leadership cabinet.
"It really incorporates both our tightly integrated group, which is 600 physicians strong, along with our independent physician models for another 2,000 doctors," Van Gorder says. "The physicians make sure the clinical information we need is shared, and we make sure the business decisions that will impact clinical care are shared." The results, he says, have been striking. "Smart people, when given the same information, will agree to the same course. In 12 years, we've agreed 100% of the time."
For this reason, Van Gorder is optimistic about health care's accountable future. "The future is about creating an organization that shares power, with the goal of creating mutually successful health care both economically and clinically," he says. "If you approach it with a doom-and-gloom attitude, it will become a self-fulfilling prophecy. There's certainly concern over the future, but now we're all working together to do what we think will be best for patients."Cat Vasko is editor of HealthCXO.