Evaluating Clinical Integration at Your Organization

January 22, 2013

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By Norman Mosrie and Michael Strilesky

You can appreciate how our industry is changing. Striving to do more with less and shifting from volume to value represent real challenges we will need to face in our industry. The barriers are significant, the goals ambitious and the path to success is not always clear. Developing a road map for clinical integration has become a strategic imperative to assist health systems and physicians to meet these challenges together.

Defining what clinical integration (CI) means will vary depending on the organization. For many, CI is implemented through a physician hospital organization (PHO), limited liability company (LLC) or independent practice association (IPA) and is a legal vehicle to negotiate and share risk with payers on the basis of improved care coordination and quality outcomes. For others, it means developing a new working relationship with physicians, expanding information technology to physician practices or measuring quality across service lines. In order to begin the process of evaluating your organization’s readiness to take on this initiative, one must first define the considerations and options associated with a CI strategy.

Commitment to Partnering with Physicians

We believe this is the first dynamic that must be evaluated and is not a simple step. How the partnership is defined will more than likely shift how the health system chooses to work with physicians that are employed, aligned and independent in the future. Creating a CI partnership model that works with all of these physicians will require an in-depth discussion around the governance and financial implications to each stakeholder. Before we discuss the legal arrangements and key considerations, our key message is to first focus on how CI is fundamentally different from traditional alignment models that may be in place today. Most successful alignment models provide tactical operational benefits and favorable financial results for a subset of physicians on the medical staff. A successful CI strategy will need to address the objectives and concerns for a cross-section of physicians on the medical staff and must overcome conflicting priorities to ensure adequate participation and development of a functional network. We have found that health systems committing to a partnership with their physicians is the first fundamental step in the process of developing a CI network.

Market Readiness for Clinical Integration

There are fundamental market drivers causing health systems and physicians to develop a CI network that can demonstrate improved value through lower cost and higher quality. While each market may have its unique circumstances that ultimately create the right environment for CI, we have highlighted some market conditions that can favorably support the development of a CI network:

  • Physicians increasingly approaching the health system for employment or subsidies to maintain their income due to providing uncompensated care, declining reimbursement and rising private practice costs.
  • Widespread physician and health system adoption of electronic medical records to facilitate the exchange of information and communication between providers.
  • Having a physician community that is dominated by small physician groups with limited large splitter groups that may serve multiple competing hospitals.
  • Health plans proposing or entering into pay-for-performance arrangements or performance-based contracts.
  • Measured out-migration from the market for services that can be provided locally with lower costs and comparable high quality.
  • Employers approaching providers to develop programs to control costs, provide narrow networks or services that meet a defined high-risk subset of their population.

Your Organizational Readiness for Clinical Integration

A CI strategy can effectively respond to the market drivers mentioned above; however, your organization’s readiness to pursue CI will impact the timeline and approach you ultimately take. We have listed a set of criteria to help evaluate your organization’s readiness to pursue CI:

  1. Aligned Vision. Similar view of the pace of change and shift to value-based payment that exists between physicians and the health system.
  2. Sense of Urgency. Willingness to accept new methods of payment, risk and transparent reporting of quality data across the continuum of care.
  3. Physician Leadership. Number of physicians capable of taking on leadership positions within the program, particularly one that has the passion to lead the initiative in the early years of development.
  4. Organizational Structure. Presence of a PHO/IPA/LLC or the ability to introduce one into the market that is accepted by the medical staff and that can be financially supported through a health system employee health plan contract or other payers in the market.
  5. Information Technology. Ability to link patient data from the hospital and physician practices to track quality and network performance.
  6. Quality Management Team. Clinical personnel that are familiar with tracking patient data, measuring against industry benchmarks and implementing evidence-based protocols across specialties or departments.
  7. Financial Reporting Capabilities. Cost accounting system and financial reporting with the ability to use data to make informed operational changes.
  8. Physician Network. Percentage of employed and aligned physicians on the medical staff that will create a sufficient network of physicians to launch the network in the initial years of development.
  9. Employer Network. Degree of larger employer presence in a market that will positively impact and support local networks that can demonstrate value.
  10. Payer Relationships. Willingness to provide incentives and opportunities for improved compensation that is based on demonstrated quality and patient care.

Having a perspective on the three fundamental considerations for Health Systems that would like to develop a CI network is key because how the Health System establishes its commitment to physician partnerships will ultimately set the culture for physician leadership and engagement in the network. The timing of when to begin the development of the network and how long it will take to mature the network to take on risk and performance contracts will largely be dependent on market and organizational accelerators. Not every market will be in a position to begin the development of a network now; however, there is tremendous value in assessing your overall readiness to achieve clinical integration and defining the road map for your health system.

About the Authors

Norman Mosrie, CHP, FHFMA, is the partner in charge of health care services for the West Virginia and Virginia Regions at Dixon Hughes Goodman LLP and serves as a member of the AICPA health care expert panel. He may be reached by phone at (304) 414-1913 or by e-mail at norman.mosrie@dhgllp.com.

Michael Strilesky is a manager with Dixon Hughes Goodman, where he develops strategic and operational solutions for health care clients. He may be reached by phone at (330) 650-1752 or by e-mail at michael.strilesky@dhgllp.com.

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