Physician-Hospital Alignment without Acquisition

For private-office physicians who sense a forced end coming to independent practice, and resent it, Gaurov Dayal, MD, wants you to know: He hears you. And he may have a solution, at least for practices operating within his hospital's region in the Washington, D.C. suburbs.

With hospitals around the country in a buying binge, some are simultaneously experimenting with ways to align with community physicians that fall short of acquiring them, said Dayal, vice president and chief medical officer of Adventist HealthCare, owner of three hospitals other facilities in suburban Maryland.

The goal of such alignment-without-acquisition programs, explained Dayal, is to drive improvement on key patient outcomes measures that hospitals are being increasingly held accountable for, without pushing physicians who don't want to be hospital-employed into accepting practice acquisition deals. Dayal spoke Tuesday at the annual health IT conference HIMSS in Las Vegas.

True alignment is a "close working relationship between doctors and hospitals based on common goals," Dayal said, and it's better defined by how well it changes physician behavior than by how it is structured. He noted that many hospitals that purchased practices in the early and mid 1990s eventually divested themselves of the arrangements. The reason: Costs went up and physician productivity decreased because the hospitals had failed to align physician incentives with hospital objectives, even though they had acquired them. Hospitals' current alignment objectives, however, are to prepare for changing payment models that hold providers accountable for outcomes, not by a desire to drive market share, as the earlier binge was, he said.

Adventist began offering community physicians its Ambulatory Care EHR Support program, or ACES, in May 2010. Through program, Adventist provides EHR support, advice, and some financial subsidies to physicians who agree to work with Adventist on common objectives, like reducing hospital readmission rates.

Participating practices get significantly reduced pricing on one of two EHR systems identified by Adventist, and receive some advice in the implementation process, as well as assistance in meeting the government's meaningful use objectives for EHR usage. They also receive a monthly subsidy from Adventist of $200 per physician for three years, to help defray the costs of switching to an EHR. In exchange, Adventist is hoping to build better relationships with physicians in its community, and to gain their cooperation in care coordination efforts.

But there is no firm enforcement mechanism built into the program. It's all carrots, Dayal acknowledged, and no sticks. There's not even any guarantee that if a practice does later agree to be acquired, that it would allow Adventist - which also wants to build an employed network of about 200 community physicians in multiple specialties over the next five years (it currently employs only a handful) - to buy it. Still, Adventist is betting that its program will prove an effective way to influence behavior of independent-minded docs who'd bridle against the "iron hand" of a hospital employer. It's risky, Dayal said, but for hospitals, there is no risk-free path forward.

"It's a high risk, high-expense proposition to acquire practices, so even if you want to acquire every hospital in your community, you probably can't" Dayal said. The ACES strategy reduces hospital risk exposure, because it's cheaper than an acquisition and the hospital need not concern itself with physician productivity, since driving referrals is not the program's goal.