Can a hospital build a sustainable, high-performing physician organization?

Posted by Don McDaniel on Oct 11, 2016 11:17:43 AM

Last week, I was at yet another healthcare industry forum focused on value-based care. iStock_73683565_LARGE.jpg

The sessions were decent, but I zeroed in on one session. Pairing a health plan executive and a physician leader – a “how to” on collaboration between health plans and physicians, only the millionth one of these. This one, however, felt different. The plan represented was a big one, (one with that "Indicia"), and the physician leader has been a dynamic champion of changing our broken system. So what was different? The bold transparent representation about the importance of independent physician networks and the now well-documented data that patients seen by non-employed primary care physicians generate lower aggregate growth in medical spending than patients seen by employed physicians in hospital-controlled ecosystems.

Why is this?

Do hospitals attract the sub-marginal primary care physicians? Do they not practice evidence-based medicine? More likely, these are not true. However, the dirty little secret (maybe not a secret) is that hospitals aren’t really equipped to build, manage, and sustain viable physician organizations. 

There, I said it. So let me be clear, in the face of tremendous physician consolidation and employment by hospitals and health systems, I am not deluded to expect that hospital-based physician enterprises will go extinct, or all fail. As long as our healthcare system is not a system, as long as we continue to turn market principles on their head, and as long as the bricks and mortar folks deem it “strategic” to subsidize illogical, inefficient physician business models, physician employment will continue. As long as hospital operators continue to make investments, often without the rigorous analysis that the market would require (remember a super-majority of hospital beds are owned by not-for-profit operators governed by, in most cases, unsophisticated boards), they will continue to control ambulatory share that will force purchasers and payers to use them – at least for the near term…but the day of reckoning is coming. So I asked this most enlightened healthcare executive the big question: “are hospital-based physician organizations viable long term?” and to his credit, after a grimace and a deep swallow, he acknowledged what we are all learning. “That business model will be challenged," he said.

And so, what comes next?


Don_McDaniel_Website_Photo_-_Color.jpgDon McDaniel, CEO

As Chief Executive Officer, Don oversees Continuum's strategic plan and vision. Over his professional career, Don has played leadership roles in a number of health care, insurance, and technology organizations, and is recognized as a thought leader, sought-after speaker, and strong executive manager. Don has expertise in the areas of health economics and markets, innovation, entrepreneurship, business and strategic planning, and the strategic deployment of health information technology. 


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