OBSERVATIONS - March 5, 2008

Keys to Stronger Hospital/Physician Relationships: Culture and Incentives

One of the greatest obstacles to improving the affordability and quality of American health care has been the traditional lack of alignment of economic and other goals between the two major players: hospitals and physicians.

Hospital and physician services account for half of total health care spending in the United States. Furthermore, a large majority of physicians admit a large majority of patients to a single hospital. Together, these providers should have the economic clout and the clinical expertise to effect major improvements in the efficiency and quality of American health care, if only they could work together more effectively. But too often in our fragmented health care system, physicians and hospitals find themselves pursuing conflicting regulatory and market incentives. For that reason, advocates of a more “accountable” health care system have often worked to create organizational models that bring hospitals and doctors together in a more economically and clinically aligned relationship that promotes quality and efficiency of care.

In February, two dozen leaders of prominent physician groups and hospital systems, along with health policy researchers and analysts, gathered under the auspices of the Kaiser Permanente Institute for Health Policy and several cosponsors to take a fresh look at why hospitals and physicians have such a difficult time working in concert. What they took away from the two-day discussion was a fairly simple, but potentially powerful, insight: the key to the success or failure of physician-hospital partnerships may be largely a matter of the purpose, or mission, they are pursuing – improved health care, or improved bottom lines.

Roundtable participants focused on two types of interventions that could improve physician/hospital alignment in the interest of improved patient care:

Changes in public policy or payer behavior (the external environment); and,
Changes to the culture or practice of physician groups and hospitals (the internal environment) that could improve alignment regardless of, or in conjunction with, changes in the external environment.

One clear takeaway from the meeting was the need for change combining both types of interventions. Changes in the policy environment must accompany the needed cultural changes in health care, focusing directly on the societal benefits of improved quality, affordability and access.

Several important changes in the external environment are desirable to stimulate and support needed changes in the field. Based on the roundtable discussion, these include: bundled payments – not as an endpoint but as a step along the way toward full or partial capitation; greater clarity from the FTC and IRS regarding permissible collaboration between hospitals and physicians; and, reform of the Stark and anti-kickback rules. These issues will be explored further in a forthcoming report on the roundtable. Also see the AHA’s extensive work on clinical integration and regulatory reform.

Despite these challenges in the current payment and policy environment, a number of organizations have managed to achieve improvements in clinical integration. Case studies of three such organizations were presented: Geisinger Health System, a vertically-integrated delivery system comprising both physicians and hospitals under one organizational umbrella; Advocate Physician Partners, an FTC-sanctioned joint venture between a hospital system and a number of associated physician groups, designed to improve the quality of health care; and Integrated Resources for the Middlesex Area (part of the Middlesex Health System), an organization of community-practice physicians collaborating with a single community hospital to improve care coordination across inpatient and outpatient settings.

In each of the three cases, payment innovations from the outside helped stimulate improved clinical integration between physicians and hospitals. However, leaders of all three organizations agreed that the payment scheme was simply a tool they used (albeit an important tool) to promote a deeply-held organizational vision of patient-centered care coordination. Participants agreed that a strong organizational vision, or, more generally, culture, is critical to improved hospital/physician collaboration.

The following were some of the attributes identified by roundtable participants as distinguishing a successful collaborative culture from a more adversarial one. These attributes suggest there is much that providers themselves can do, even without policy changes, to bring about quality and efficiency improvements through partnerships with one another:

A strong focus on mission. While all nonprofit (and many for-profit) health care organizations are committed to improving the health of their communities, this goal can take a back seat to simply keeping the doors open. More collaborative cultures may have a greater sense of connection to this broad mission, and therefore to improving population health.
Strong leadership (medical, administrative, and governance). Good hospital/physician relationships require strong leadership on both sides and from the community, through its influence on boards of directors.
Measurement. A common feature of the successful collaborations discussed at the roundtable was an emphasis on measurements of success – in all cases these included clinical quality measures. Clarity and transparency of measures between physicians and hospitals were also critical.
Tools. Culture and mission alone are not enough to improve clinical collaboration. Certain tools are needed. These include care coordination tools (disease registries, clinical protocols, continuing medical education support, etc) and operational systems support (office staff training, credentialing, common planning and financial systems, etc.) A strong clinical information system is also an important tool, although much can be achieved without it, as evidenced by the Middlesex example, in which there is no common information system across the many physician practices participating in the collaborative.

The roundtable, “Hospital/Physician Collaboration: Better Patient Care Through Aligned Incentives and Improved Systemness,” was cosponsored by the American Hospital Association, the Health Research and Educational Trust, and the Council of Accountable Physician Practices.

- Laura Tollen, MPH, Senior Policy Consultant, KP IHP

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