Sign of the Times: More Hospital-Physician Alignment

December 28, 2011

By HunterMaclean Attorneys

Published in Business in Savannah

In an era defined by health care reform, an ongoing recession, shifting patient demographics and changing regulations, doctors and hospitals are embracing the spirit of collaboration and finding that they have more to gain through working together.

Increased hospital-physician alignment is a sign of the times, one that has caught the attention of many leaders in the health care industry. A decade ago, hospitals and physicians, in many ways, benefitted from pursuing parallel agendas through managed care. Now, the pendulum has shifted, with hospitals and doctors joining forces to weather the changes affecting the health care industry and the economy. The end result, in many cases, is lower costs with improved patient outcomes and increased accountability.

According to a recent study by PriceWaterhouseCoopers, nearly three-quarters of physicians surveyed said they are already financially aligned with hospitals through directorships, employment and joint ventures. In addition, 24 percent said that they already work primarily in hospital practice settings.

A range of forces are pressuring health systems and physicians to reduce costs while improving the quality of care, requiring a more cooperative approach to the hospital-physician relationship. In recent years, physicians have found that competing with hospitals ultimately pays less than aligning with them. As government payments for health care services become increasingly limited, the potential income source for both hospitals and physicians is shrinking. At the same time, hospitals and physicians are continually battling the rising cost of the delivery of health care services to an expanding and aging patient population. To maximize available income sources and control costs, hospitals and physicians must manage the delivery of health care services together.

Moreover, physicians are increasingly finding collaboration with hospitals appealing as they face new economic challenges in a changing competitive landscape. As health care technology advances and electronic health records become industry standard, physicians are often faced with investment requirements that are too large to be economically feasible for a single physician or small group practice. The health care industry is now seeing widespread consolidation, with the view that large, strong organizations are necessary for survival. Hospitals are seeking to establish connections with physician groups to help create solid financial positions, a wide-range of specialties and expertise, and a strong referral base, particularly in outpatient services.

One of the major benefits of these partnerships to physicians is increased financial stability. In a recent survey, 56 percent of physicians expressed an interest in aligning more closely with a hospital in order to increase their overall income. Another 40 percent want to align in order to ensure a more consistent revenue stream. In addition, hospital alignment typically decreases administrative burdens in areas like technology, equipment and billing, and may reduce a physician’s exposure to malpractice lawsuits by sharing risk.

Alignment strategies are bringing hospitals and physicians together in creative ways. If the change is managed well – with clear communication and consensus on goals, plans and objectives – there will be an environment of accountability, greatly increasing the probability of the alignment initiative’s success. At its best, this strategy can benefit physicians, hospitals and patients.

In order to maximize this relationship and ensure that all applicable regulations – from HIPAA to Stark Law — are being complied with, it’s important to consult with an attorney before initiating any alignment initiative. There are many potential benefits to hospital-physician alignment, but it’s important to ensure that any contracts or strategies are reviewed carefully in advance by lawyers with experience in health care law.

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