A Closer Look at a Health System’s Strategic Options

An example of the evolving physician strategy of a health system with a clinically integrated network is shown below:

• Manage the mix of independent and employed relationships. Rationale: The right mix varies depending on the hospital, market and service, even within a highly aligned, integrated system. Failure to balance and coordinate incentive structures and approaches between independent and employed physicians is a threat to the system.
• Create financial and non-financial incentives for independent and employed practices to reduce leakage out of the system. Rationale: Keep all elements of the CIN moving forward at roughly the same pace with respect to the journey from fee-for-service to value-based payment.
• Accept specialty facilities and specialists back into the system. Rationale: It is becoming less attractive for specialty centers to remain independent, and it behooves the system to work out a path for them to move from competitor to ally. Some of these specialists are particularly good, and the system does not want them going to a competitor. Also, since the system’s payments are still significantly fee-for-service, these specialists create profits that can be re-directed to strengthen the financial base.
• Use changes in physician relationships to manage the physician/patient ratio. Rationale: The greatest cause of “excessive” investments in employed physician practices is a shortage of patients per physician. For example, some employed physicians place restrictions on their schedules that hinder filling them with patients. Also some employed specialists have too few patients because they don’t have enough referrals from independent physicians in their service area.
• Continue to adjust employed physicians’ compensation packages as the ratio of value-based to fee-for-service revenues changes. Rationale: Relying on leadership is not enough; compensation has to remain aligned.