Choosing Wisely: How the Wrong Independent Physician Group Can Cost Your Hospital

Savoy Brummer , MD

Board Member

Denise Brown , MD

Chief Growth Officer

Published April 24, 2014

There are many options for hospitals looking to improve operational performance and physician engagement. Employment models, locums and outsourcing are among the many options available to hospital administrators today.

For those looking to partner with a physician-owned practice to staff an emergency department or hospitalist program, there are many benefits but also many things to consider. One plus is the physician-owners of such groups have a strong incentive to maintain high quality standards that can help hospitals meet the challenges of healthcare reform.

Of course, not all groups are created equal, and choosing the best group to partner with isn't easy. In today's post, two experienced physician-owners discuss common pitfalls and offer advice on how to spot an underperforming group.

Perspectives: Dr. Brown, Dr. Brummer, thanks for joining us. Let's start by talking about some common pain points between hospitals and physician groups. What kinds of things get in the way of that relationship?

Dr. Brummer: Well, first, there's culture. Hospital administrators want to make sure that you have a culture of engagement, a culture of cooperation and communication. But because it's difficult to assess culture when evaluating potential groups, administrators can be lulled into thinking all contract groups are the same and select cost over value hoping that culture follows suit. This rarely happens, and the typical results are negative consequences for patient care, poor quality and operational performance, and a lack of efficiencies that cost even smaller individual hospitals tens of millions of dollars a year.

Perspectives: Which cultural issues are most significant?

Dr. Brummer: Lack of cooperation between emergency physicians and hospitalists is a big one. Ideally, both departments are able to coordinate a seamless, redundant process to manage patients safely and efficiently. But too often, you see a situation where the ED physician thinks X, Y and Z should be done, and yet the hospitalist believes that E, F and G are the real priorities. Without a culture of cooperation, communication breaks down. Waste creeps into the system, and efficiency suffers.

Dr. Brown: Exactly. "Physician integration" is a big catch phrase these days. But in practice, it's really hard to integrate a group of individuals who have widely disparate incentives. When a physician group has a strong collaborative culture, it's willing to adjust and reframe its incentives so they parallel the hospital's. I think that sort of collaborative spirit is the true gold standard that sets a highly effective physician group apart.

Perspectives: Can hospitals get around these issues by employing their own physicians rather than contracting with a group?

Dr. Brown: Actually, when it comes to boosting integration and engagement, contracting a physician group for staffing needs is far more effective than employing physicians outright. In fact, what we often see is that employing doctors can actually worsen interdepartmental alignment.

Dr. Brummer: Right. Actually, I think the idea that employing physicians improves integration is one of the biggest fallacies operating in the industry today. In practice, most hospitals do a very poor job of managing physician employees and the process of doing so can incur far greater costs than contracting with a group. By definition, employment doesn't provide doctors with a strong incentive to collaborate or pursue process improvement. Employees typically do the work to the level that is expected but not to the utmost of their capabilities because there is no structural incentive to do so. I don't see physician alignment and integration particularly effective here.

Perspectives: What are the potential costs to the hospital when a group underperforms?

Dr. Brown: Well, in most communities, patients have several options for care. And when they have a bad experience, they tend to vote with their feet.

Administrators don't always grasp the gravity of the problem until significant damage has been done. They don't realize they're losing money because patients have developed a perception that their ED wait times are too long and opt for the hospital down the street. By allowing an underperforming or dysfunctional group to remain in place, they end up hemorrhaging cash without realizing it.

The same is true for the inpatient experience. If the hospitalist group is dysfunctional, and patients are waiting many hours to be admitted from the ED or discharged to their home without clear instructions, word gets around.

Often it takes getting a functional group in place before administrators fully comprehend what's been happening. There's an a-ha moment when they say to themselves, "Wait a minute. People are coming to our emergency department preferentially. And who knew we could accommodate this kind of volume?" It really is transformative.

Also, it's important to remember that as reimbursement becomes more qualitative in nature, the synergies between the emergency medicine and hospitalist service lines become increasingly important. If they can't come together to maximize value, the hospital starts losing large sums in the form of Medicare penalties. Again, this dollar amount is very hard for administrators to quantify, and for that reason, they don't always pay attention to it. But as penalties increase, I think we'll see more hospitals looking at that number and putting measures in place to mitigate losses.

Perspectives: What are the warning signs that a physician group may be struggling?

Dr. Brown: In the ED, "Left without being seen" is probably the easiest indicator of dysfunction to track. I also think that long turnaround times to admission (TAT-A) can be a sign of problems within the hospitalist group. You can have a great ED unit that's extremely efficient, but if you're not able to move patients all the way through the hospital, their efforts are wasted. It's like a sink with a clogged drain. No matter what you do, water just spills over onto the floor.

Dr. Brummer: In tune with what Denise said, if you're not meeting CMS' quality and reimbursement metrics, that's a very overt sign that something's off and should raise a big red flag for administrators. However, there are also subtle questions administrators should ask themselves. Are your ED and hospitalist medical directors having regular meetings? Are the everyday staff physicians engaged in problem solving efforts and on hospital committees? People in highly functional, collaborative cultures tend to meet challenges head-on as opposed to making excuses or trying to avoid the situation.

Perspectives: When administrators are evaluating potential groups, how can they start to gauge group culture and values?

Dr. Brown: First and foremost, it goes back to finding a cultural partner, not just a service provider. Too often, administrators fail to take a higher-altitude view of what these service providers could be capable of. They need to realize they're not just looking to staff the emergency department with the cheapest option or to have bodies there taking care of other bodies. If you're an engaged healthcare administrator, you're looking for a group of docs who want to get in there and figure it out with you.

Dr. Brummer: Well said. A standout physician group is not just a staffing organization. They truly want to collaborate with their hospital partners and align with their goals. Administrators need to invest in their hospitals and their physicians so they can define their future as opposed to having their future defining them— this means thinking of long-term strategies and relationships. What needs to happen over the next couple of years for the hospital to survive and thrive? And which group is going to be the best partner to execute those strategies?

Partnering to improve patient lives

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