Physician Alignment With Hospital Leadership

Gregory J. Mertz, MBA


January 01, 2018

Seeking Alignment: The Problem of Leakage

In their rush to employ physicians, hospital executives often assumed that when physicians were under their control, the physicians would keep patients within the hospital system for specialty referrals, tests, and inpatient admissions, but it hasn't worked out that way.

It's been estimated 24%-30% of referrals go outside of the hospital's network.[1] This problem is called "leakage." Granted, employed physicians must have the option of sending some patients outside to ensure the best care possible, but such high numbers are not financially sustainable for hospitals. This extra income helps pay physicians' salaries.

Physicians Are the Linchpin

Leakage and other issues that impair physicians' "alignment" with the administration's goals is crucial, because physicians determine 75%-85% of the decisions that drive quality and cost.[2]

In addition to making out-of-network referrals, employed physicians may resist choosing lower-cost medical devices, following clinical protocols, and other initiatives in which they are asked to align with management's goals.

The goals that management wants physicians to align with are changing. In the past, physicians were expected to order a high volume of admissions, tests, and referrals to specialists. Today, however, management is moving toward a value-based approach that calls for reducing volumes without sacrificing quality.

Unwillingness to Align

Employed physicians are often less willing than physicians in independent practices to align with their organizations. For example, only 63% of hospital-employed cardiologists expressed willingness to change medical device use, compared with 78% of cardiologists in multispecialty practices, according to a 2013 survey.[3]

Lack of engagement with management's goals can vary by specialty. Whereas oncologists and vascular surgeons have relatively high levels of engagement, primary care physicians (PCPs) have unusually low levels of engagement.[4] PCPs' lack of engagement might be due to their location in practices removed from the hospital.

Lack of engagement with management's goals can vary by specialty.

Alignment is expected to become a bigger issue as the health system moves to value-based reimbursements, in which hospitals team up with physicians to lower the overall cost of care. A hospital cannot control the outcomes of patients when they are referred outside of its network.

What Inhibits Alignment

Lack of trust. Less than one half of hospital-employed physicians said that hospital leadership delivers on its promises, according to a 2016 survey. The survey also found that only one third of employed physicians were satisfied with the level of communication across the organization.[5]

Unwillingness to work in teams. Many physicians aren't used to working in teams. Kenneth Cohn, MD, a physician alignment expert, asked MBAs and physicians what percent of their grade during training involved team projects. The MBAs said 30%-50%, and the physicians said zero.[6]

Top-down decision-making. Often what happens is that hospital executives use a consultant to develop an arrangement for physicians and then present it to physicians as a done deal, without their input.

How to Improve Alignment

In the old days, when physicians had strong ties with their hospitals, alignment came naturally. Now hospitals have to create strategies to improve alignment, while still letting physicians refer outside when clinically necessary.

Track referrals. Some systems use referral liaisons to track referrals and then ask physicians why they referred outside. Rather than simply pressure physicians to refer in-house, this process can identify barriers that prevent the physician from doing so. These discoveries can then lead to process changes that make it easier to refer in-house.

Let doctors help formulate policy. Establish a physician advisory council that works with top executives to create an alignment strategy. Make sure that the council formulates the policy, rather than just giving its blessings to the administration's decisions.

Make policy on the local level. New policies are more effective when they are made within a certain practice than across the whole organization. However, such policies as choosing an electronic health record (EHR) system or creating a payment formula can only be made system-wide.

Share financial benefits with physicians. Set up such arrangements as gainsharing, bundled payments, or accountable care organizations (ACOs) in which doctors get a share of the savings. Participation does not have to be limited to employed physicians.

Unfortunately, even when mentors are designated, they may not be used.

Pair new physicians with mentors. Assigning seasoned physicians to mentor newly employed physicians can improve alignment and retention. Unfortunately, even when mentors are designated, they may not be used.

Seeking Physician Leaders

One way to improve alignment is to make sure physicians play a major role in policy-making. Relatively few hospital executives are physicians. One oft-cited statistic is a 2014 finding by the American College of Physician Executives that only 5% of hospital leaders are physicians.[7]

However, that number is probably higher today, because many organizations have made a concerted effort to hire more physicians at all levels.

Why the Demand for Physician Leaders?

Alignment strategies haven't worked well. Even though hospitals executives have made alignment a major goal for many years, it's a stubborn problem. Physicians at all levels of leadership can help drive alignment.

More credibility with colleagues. Doctors are more likely to listen to colleagues than to nonphysicians. In a 2016 survey, 64% of physicians had high confidence that physician leaders could reduce unnecessary care that is not evidence-based, whereas only 14% had high confidence that nonphysician leaders could do so.[8]

They represent the doctors' perspective. Physician leaders who have frequent contact with top executives can directly convey physicians' concerns to them and make sure the physicians' perspective is included in new strategies.

They have insights into clinical issues. Such projects as implementing evidence-based medicine, creating ACOs, identifying performance measures, and moving to value-based arrangements require a thorough understanding of clinical medicine.

Are Physicians Able to Lead?

Physicians bring several innate skills to leadership jobs. In addition to their clinical insights, they are committed to excellence; are good learners; and are problem-solvers, owing to the nature of their work.

However, physicians are often unfamiliar with long-term planning, which is at the heart of hospital leadership. In addition, they usually make decisions on their own, whereas hospital leaders make decisions in concert with others. In a 2014 survey, only 22% of physicians said that interacting with colleagues was one of the top two most satisfying elements of practicing medicine.[8]

Moreover, many physicians aren't much interested in taking on leadership roles. New doctors, for example, are looking for a better lifestyle, not more work outside of their clinical responsibilities. Some physician leadership posts go unfilled and the turnover rate in filled positions can be quite high, with some physicians returning to full-time clinical medicine.

The Path to Becoming a Full-Time Physician Leader

The ideal path to leadership for physicians should involve a slow transition over many years, so that they have a chance to take courses and cultivate leadership skills that were not part of their repertoire as clinicians.

The physician may start by taking on a special project, either on his or her own or on an ad hoc committee. The goal might be reducing infections, improving the EHR system, or helping clinicians become more efficient. Alternatively, they might start as the medical director of a service line, where they learn to oversee and delegate work.

From there, they might go on to heading a local group of employed doctors, chairing a division or department, serving on the board of a medical practice, becoming an officer on the hospital medical staff, or serving as a physician representative in a physician-hospital organization.

As they move up the ladder, they take on more strategic responsibilities and have less time for clinical practice. For example, only 27% of chief medical officers saw patients in 2009.[9]

Use of Dyad Leadership Models

In many organizations, physician leaders often share duties with a nonphysician manager in an arrangement called a "dyad." In one survey of physician leaders, 72% said that their organization used a dyad, and 85% said it was an effective leadership model.[10]

In many organizations, physician leaders often share duties with a nonphysician manager in an arrangement called a "dyad."

Dyads are most often used for service lines (in 46% of cases), department chair (25%), and information technology (21%).[11] In a service line leadership dyad, for example, the nonphysician is in charge of day-to-day management, whereas the physician leader is the "champion for change" with clinical peers.

Dyads have flaws, however. They shield physician leaders from learning business skills, which are more important as they climb up the ladder. Also, two managers with the same authority can send conflicting signals to physicians and staff.

Executive Positions for Doctors

Physician CEOs are still somewhat rare. Only 14.4% of CEOs at not-for-profit hospitals were physicians, according to a 2013 survey.[12] Physician CEOs tend to lead academic medical centers or physician-run systems, such as Mayo Clinic and the Cleveland Clinic.

Nonetheless, physicians are assuming more prominent roles on the CEO's executive team. Chief medical officers (CMOs) have always been the liaison between physicians and the CEO, but now they are part of the C-suite. They oversee quality, safety, medical education, and medical staff affairs.

Almost three quarters of CMOs no longer see patients, and more than one half have a postgraduate business management degree, such as master of medical management (23%), master of business administration (18%), master of public health (7%), or master of health administration (7%), according to a 2009 survey.[9]

Other Top Positions for Physicians

Only one half of CMOs engage in strategic planning with the C-suite team, according to a 2014 survey.[13] In some health systems, the physician involved in strategic planning is the chief clinical officer, a relatively new position that is responsible for physician alignment, transformation of care delivery, and decisions on whether an acquisition is clinically beneficial.

Other executive positions usually filled by doctors are chief health information officer, chief patient safety officer, chief research officer, chief transformation officer, and chief experience officer.

Physicians on Boards

Physician trustees can help hospital boards by providing insights on such issues as population health and quality improvement, which are becoming more important for hospitals as they move to value-based care.

The typical not-for-profit hospital has two physicians on a board that usually numbers 14-17 trustees, according to a 2016 study on physicians' role on hospital boards. The study also noted that only 6.6% of board chairs were physicians, and 57% of the hospitals had not made a change in physician representation on their boards.[13]

Why Few Physicians Sit on Boards

Increasing the number of physicians on boards can raise concerns that they could inappropriately influence decisions. Internal Revenue Service regulations, the federal Sarbanes-Oxley law, and other federal and state laws prohibit boards from being dominated by any particular interest group, including physicians.

Increasing the number of physicians on boards can raise concerns that they could inappropriately influence decisions.

In addition, some boards may be concerned that independent physicians on the board would have access to confidential information that could be used by competitors. However, 16.1% of boards don't distinguish between employed and independent physicians when appointing trustees, according to the 2016 study on physicians' role on hospital boards.[14]

Employed physicians are frequently excluded from boards, perhaps because boards don't want to be influenced by the interests of any group of employees. The 2016 study stated that 13% of hospitals do not allow employed physicians to serve on their boards. It also noted that most not-for-profit systems have not altered their board composition in response to having more employed physicians.

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