How physician executives will drive value for hospitals

“Value” is the pot of gold at the end of the rainbow that health care professionals everywhere are seeking, but which few can seem to find.

Policy makers, hospital executives, physicians,  consultants – all are looking for a means to pivot away from a system that rewards volume of services provided to one that rewards quality and cost effectiveness (i.e., “value”).

How far we are from achieving this goal can be gauged by the type of incentives being offered to physicians.   The great majority of physician contracts today feature a salary with a production bonus, physician recruiting firms report.  In 2011, thirty-five percent of physician bonuses included financial rewards for physicians who achieve quality of care targets, up from less than seven percent the previous year, according to one study.

Though philosophically this represents a significant turn toward value, the practical effect is minimal.  Qualitative metrics still carry relatively little weight in most physician compensation formulas, usually accounting for less than ten percent of a physician’s potential bonus.    The reality is that volume still rules in physician compensation, whether measured by patient encounters, RVUs, net collections or other metrics.

Unless this paradigm can be shifted, achieving a value-based health care system will be problematic.   According to a Boston University School of Public Health study, physicians control close to 90% of all spending on personal health in the United States, by admitting patients, performing surgeries, ordering tests and treatments, and writing prescriptions.  For that reason, health reform at its essence is largely about modifying physician behaviors and aligning their practice patterns and interests with those of hospitals, whose reimbursement rates are likely to rise as they treat patients more efficiently.  However,  as history shows, bringing physicians and hospitals together is easier said than done.

If anyone will be able to bridge the gap it is physician executives.   As medical professionals, they have the best handle on how to define and measure quality – a very elusive metric where physician performance is concerned.  Due to their clinical training, they also are in the best position to evaluate and implement evidence-based treatment protocols that staff physicians will accept as valid and worthwhile.    Last, but not least, physician executives will be called on to lead medical staffs largely composed not of independent private practice owners, but of hospital employees.   Hospitals will look to physician executives to both implement new physician compensation models and to lead physician employees to a more collaborative, value-based mindset.

These are challenging goals, and to achieve them physician executives must evolve away from their traditional role as merely the “voice” of the hospital to the medical staff.   Instead, they will be at the center of hospital and system management, actively involved in both creating physician alignment  strategies and achieving the overall strategic and financial goals of the hospital.    Based on these expanded objectives, the new generation of physician executives is more likely to be involved in management full-time and is less likely to maintain a clinical practice.

Because medical training is not structured to teach management or business skills, hospitals will have to take the lead in creating training and career paths for the physician executives they will need in a value-driven era of health care delivery.    Hospitals that can consistently identify, nurture and recruit physician executives will have the best chance of finding the “pot at the end of the rainbow” in a post fee-for-service world.

Michael N. Sills is Vice President, Baylor Quality Alliance Partner, Cardiology Consultants of Texas Baylor HealthCare System. James Merritt is co-founder of Merritt Hawkins, a national physician search and consulting firm and a company of AMN Healthcare.  

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  • cynholt

    Just what we need, more layers of management to manage physicians! This
    has happened to nursing, now it’s gonna happen to medicine as well. Tell me, how
    is this gonna do anything but cause healthcare costs to go up even further?

    We all know that administrative costs are the primary and overarching reason why health costs are spiraling out of control, and physician executives, as do nurse executives, clearly fall under the category of administrative costs — whether they are on the provider side or the insurer side of things.

  • Prakash Sanzgiri

    The issue of Physician – Hospital interaction and co-operation can never be resolved as there is a dicotomy of thought processes. Physicians are trained to focus on patient care which hospital management focusses on bottom–line , top-line and thereafter patient welfare. The two thought processes are divergent and many a times at cross purposes. I wonder if there is any solution to this issue. If the physician starts thinking like an administrator he can never be patient friendly. If an administrator starts thinking like a physician the hospitals will be financially ruined !!!!!!

  • MarylandMD

    Everybody talks a good game when it comes to promoting “quality.” Where the rubber meets the road is what metrics you come up with and the details of how you measure them.

    Is just checking an A1c a measure of a “quality” physician, and if so, how often? Every 6 months? Every 12 months? Do you measure for all patients or just the patients who come in for visits? If you measure for all patients, how do you know the ones who don’t come in are still your patients? Do you measure “quality” by average A1c for all patients, or the proportion of patients below a threshold? If you use a threshold, what A1c do you use: 7? 8? 9?? If you do use a threshold “quality” measure, is the “highest quality” provider the one who does the best he can with a challenging population, or is it the one who gets rid of all the more challenging patients? What if the patient is seeing an endocrinologist instead of the PCP for their diabetes, does the PCP still get penalized for that patient’s poor control? The further you progress into hammering out all the details of a “quality” measure, the further you get from the concept of “quality.” And get this: diabetes is probably the *easiest* condition for which you can determine a metric! Anybody for a metric for hypertension? obesity? CHF?

    Maybe the reason many physician executives have trouble basing much of compensation on “quality” is they don’t have enough good metrics that they can use!

  • Dike Drummond MD

    The biggest challenge to a physician executive is the hard cold fact that his/her colleagues still practicing within the organization consider them a traitor. They have gone over to the “dark side” of the bean counters and are not to be trusted under ANY circumstances.

    On top of this, most organizations give the physicians the option to opt out of any improvement initiative … while the doctors who object literally put their hands on their hips and say, “You can’t make me” to the administration.

    It is an incredibly dysfunctional, two tiered management and administration challenge. Just because an administrator is a physician is NOT any assurance that ANY of these challenges will disappear.

    There is a balance to be struck between profitability, quality, evidence based care and physician wellness and autonomy and we are no where near that balance at the moment. I sincerely hope physician executives can broker this accommodation AND that will depend on their physician brothers and sisters allowing them to lead.

    Dike Drummond MD

    • buzzkillersmith

      When I started out I thought admindocs were scum. Now after 23 years I know for a stone fact that they are scum. Traitor is the exact word.

  • Randall Oates, MD

    This is the worst of times for most patients and the doctors deserving of their trust, but things will turn around in 2-3 years when fee-for-service wanes. At that point, the hospital systems that have executives (physician or otherwise) who have been implementing approaches that are turning doctors into distracted, stressed, inefficient data trolls will quickly adapt methodologies bringing real value to the patient-doctor experience, or they will cease to exist. The current systems architected to maximize revenue in today’s system will likely be more of an expensive resource drain than assets. These prevalent industry-centric information and care models will simply strangle as patient engagement strategies become the key to success.
    The next generation of of successful physician executives already understand that proper information technology better involves the care team and the patient, rather than being focused on adding administrivia to doctors. This legacy approach wastes the most limited and expensive resource in the system… the doctors attention and time.

    It takes physicians, in control, who are focused on the value stream to the patient in order to make this transformation occur. It simply can’t happen otherwise.
    It will get worse for most before it gets better, and it is better to light a candle than curse the darkness.

  • georgemargelis

    The challenge is that Physician Executives drive a two tier model in our healthcare system. I believe it is better to train all our physicians in basic management science and make each of them managers of part of the system. That way they become all part of region solution, rather than ideological opponents of their managerial colleagues.

  • Gaspere (Gus) Geraci

    Not just hospitals, but physician groups as well, need to train their leaders. As for the buzzkiller and other naysayers, if we are not at the table through good leaders, we are on the table. Some physicians are bad leaders, but most are not. But that is true of any group, not everyone can be good. Training helps be a good one.

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