Integrated Delivery Systems: One Size Won’t Fit All

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Nick FabrizioOn April 1, 2011, the DHHS released its proposed new rules for accountable-care organizations (ACOs), putting in motion provisions of the health-reform package aimed at improving patient care through better coordination among providers. With the ACO program set to launch in January 2012—following a period during which stakeholders can comment on (and the DHHS can adjust) the proposed rules—physician alignment is a buzzword for both hospitals and medical groups. Providers, though, will probably find that when it comes to greater integration, one size does not fit all, according to Nick Fabrizio, PhD, a consultant for the Medical Group Management Association. In “Integrated Delivery Systems: Forming, Storming, and Performing,” which he presented in Chicago, Illinois, on March 23, 2011, at the Congress on Healthcare Leadership of the American College of Healthcare Executives in Chicago, Illinois, Fabrizio shares both the hospital and the private-practice perspectives on health care’s upcoming sea change. Referring to the recent trend toward greater physician alignment as the great migration, Fabrizio points out, “There are tremendous challenges on physicians in private practice today” that might give them incentives to seek the security of some form of integrated delivery system. New Challenges for Practices Prime among these challenges, Fabrizio says, is the pressure that physicians of the baby-boom generation experience when trying to replace themselves with younger physicians. Under the old private-practice model, physicians would buy in as partners after a defined period of time. This is a requirement that newer physicians resist; as Fabrizio points out, what they are buying into is, in effect, the older physicians’ retirement. Younger physicians are also seeking protected hours, limited call, and guaranteed access to the information systems on which they were likely to have been trained in medical school. “Are any of those things bad?” Fabrizio asks. “No: When I talk to senior physicians, they say they don’t agree with it, and they don’t like it. Will the younger physicians be happier and more well-adjusted individuals? Probably so, but practices can’t afford them.” Add younger physicians to the laundry list of items that practices can no longer afford, he continues. The costs of running a private practice continue to mount, while the US Consumer Price Index (CPI) remains flat; the Medicare sustainable growth factor will also lead to big reimbursement cuts, he predicts. “We can continue to push that cut out forever, but the reality is that the CPI is flat, and that discrepancy is bringing groups to their knees,” he says. He notes that 80% of cardiologists in Indiana are now employed, and oncologists and radiologists are following the trend. He says, “Five years ago, would you have believed me if I had said we would start seeing these practices become employed by a hospital or health system? Cuts to ancillaries have a big impact.” Citing electronic medical records as a specific example of the kind of investment that is both increasingly necessary and highly challenging for small groups, Fabrizio observes that this trend will probably continue. “Independent physician groups of small and medium size are going to have a very difficult time,” he says. “They lack the scale, capital, and operating efficiencies to compete in the new marketplace.” He warns hospital executives, however, that physicians are not a homogenous group. “Health systems may need multiple integration strategies,” he says. “It’s much easier for the Mayo Clinics and the Cleveland Clinics to say, ‘We have one model, and that’s it.’ In your community hospitals, it’s hard to say you’ll only have one.” Integration Options Fabrizio notes that hospitals and physician groups might have more in common than they think. Hospitals, he says, are seeking to preserve existing practices in the community while providing deeper pockets with which to recruit new physicians. Perhaps as a result, physicians are increasingly taking on a growing role in governance, partnering with health-care administrators to create what he calls patient-centered collaborative relationships. These relationships enable physicians to retain a modicum of control while becoming more aligned with their hospitals or health systems. Prior to approaching any form of integration, Fabrizio says, both groups should engage in a premerger cultural assessment—which should take precedence over any financial analysis in the decision-making stage. “More health-care marriages break up because of these issues than because of finances,” he says. Fabrizio’s recommended factors for assessment include, in order of priority,
  • expectations,
  • beliefs,
  • core values,
  • decision-making styles,
  • administrative and physician leadership,
  • communication styles,
  • incentives and disincentives,
  • financial indicators, and
  • tangible and intangible assets.
Fabrizio offers several integration strategies, which he divides into old-school, new-school, and reform-school categories. Old-school approaches include medical directorships and lease/service arrangements; new-school approaches could include equity joint ventures, gain sharing, or clinically integrated networks; and reform-school approaches include provider-based clinic staffing, as well as (of course) direct employment. Of these options, Fabrizio observes, direct employment often yields dramatic results in terms of patient care, which is why the government provides incentives for it in the health-reform law. For instance, he says, the majority of hospitals ranked highest by US News and World Report use employed models in which physicians are very involved in governance and operations. “When these rankings come out, our congressmen and congresswomen ask, ‘What about these models works, and why isn’t everyone doing it?’” he notes. Whatever approach to integration physician groups and hospitals take, Fabrizio observes, a patient-centered tack will prepare both parties well for an otherwise uncertain reimbursement future. “Culture eats strategy, every day of the week,” he says. “If you focus on the patient and set up systems around the patient, you can fall into whatever will be in vogue—medical homes or ACOs. You already will have created it.” Cat Vasko is editor of and associate editor of Radiology Business Journal.