Alignment from the Physicians' Perspective, Part 2

Part 1, Alignment from Health System Perspective, appeared March 18, 2020.

By Max Reiboldt, CPA
March 19, 2020

Similar to health systems, physicians also face risks and rewards as they consider and pursue alignment strategies. This section details some of those key risks and rewards.

Risks

Lack of Control/Decision Making

A key risk for physicians as they pursue alignment strategies is a possible lack of control over decisions about their practice. In private practice, physicians make all of the decisions relative to their practice. As they enter into an alignment model, depending on the level of alignment, this control wanes, with the hospital taking over much of the decision making process. The lack of input leaves the physicians vulnerable to the whims of the hospital and unable to truly control their practice and its future. This can lead to general feelings of disenfranchisement and unhappiness.

Ability to Unwind (or Lack Thereof)

Another key risk physicians face with alignment is the ability to unwind, or get out of the alignment transaction. The difficulty can manifest itself in many ways. For example, if a physician sells his or her practice to a health system, the historical practice operations may become intertwined extensively with the health system. If he or she wanted to leave and buy back the practice, it would be difficult, if not impossible. Thus, he or she would likely be forced to start from scratch to reestablish. The current economics of the healthcare environment would make this challenging, at best. Further, the physician usually signs a non-compete agreement with the hospital, so the ability to go across the street (or even to the next city down the road) may be constricted, leaving few, if any, options to continue practicing in the local market. The hospital may be willing to negotiate the non-compete to keep the physician in the market if the physician does not become affiliated with a key competitor to the health system during a defined period.

Unwinding presents economic challenges as well. In many cases, the economics (compensation) afforded under an alignment strategy are much better than in pure private practice. Thus, regardless of the start-up or transition costs involved, the physician may not be able to accept the economic realities of unwinding the transaction. After a physician goes down the alignment path in today’s healthcare market, there may be no going back.

Rewards

For physicians, a number of benefits come with alignment. We address the key benefits here.

Stable Economics

Although not always the case, many physicians pursue alignments because of economics. Their current state of practicing no longer can generate a fair market value wage, at least compared to what they made in the past. They align with the health system and benefit from the added resources of that health system, such as the ability to receive a market wage for their services and, even more than that, eliminate much of the financial risk that private practice entails.                                                      

Focus on the Practice of Medicine

In many cases, alignment allows the physicians to redirect their focus from running a business to practicing medicine, which is what they were trained to do. The majority of physicians go to school to learn to be physicians; few graduate with advanced business degrees in business. However, because most physicians have been in small private practices, they must also deal with the day-to-day operations of the business: revenue cycle management, payer contracting, filing taxes, personnel issues, accounts payable, etc. Even in a good economic environment, this can be taxing and even more so in today’s healthcare environment. Thus, while physicians (should) still have a say in their operations post-alignment, the alignment strategy offloads some of the operational details onto health system employees who are trained to run physician practices.

Access to Resources

Another key reward that physicians realize through alignment is the access to resources. Large health systems have much greater resources than small physician practices. Thus, the horizons for the physician are opened in a variety of ways. Information technology is a great example. Health systems are able to afford the top-of-the-line electronic health records systems and other population health tools, whereas private practices often go for much less-expensive tools due to budgetary issues. Alignment allows physicians to tap into these better resources, improving their ability to care for patients.

Summary of Physicians’ Perspective

Physicians experience key risks and rewards in pursuing alignment strategies. These risks and rewards are slightly more concentrated than those health systems enjoy, but are just as important. As in the case with health systems, if structured appropriately, the benefits of alignment can far outweigh the risks in the majority of circumstances.

CONCLUSION

Health systems and physicians must weigh the pros and cons of alliances and move forward with the best options based on individual needs and aspirations. One thing is certain: changes are necessary, regardless where the players are on the integration spectrum. Maintaining the status quo is not an option for the future. 

Excerpt from:  Max Reiboldt, Physician Alignment: Ensuring Success with Negotiations, Payment Systems, and Education of Stakeholders, available in print or eBook.

Topics:

Alignment from the Health System Perspective, Part 1
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