Strengthening hospital-physician relationships

Healthcare Financial Management,  Dec, 2004  by Robert A. McGowan

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When hospitals and physicians work well together, they can Better provide patient care efficiently and cost-effectively. But hospitals and physicians face many challenges today that can undermine their close working relationship. For optimal relationships with physicians, hospitals need to combine a strategy to align economic interests and share revenues with strategies to communicate better, build trust, and include physicians in decision making.

A study by Mitretek Healthcare identified some concrete strategies hospitals are using to strengthen hospital-physician relationships. These findings offer a framework for hospital management, physician leadership, and hospital board members to reflect on what their organization is doing to strengthen these critical relationships.

Study participants consistently recognized the importance of maintaining and strengthening the relationship between hospitals and medical staff members. They also understood the high level of interdependence between the business enterprises of hospitals and the business enterprises of physicians. With strong relationships as a goal, many hospitals have some significant work to do. While 73 percent of the participating CEOs rated their hospital-physician relationships quite positively, only 44 percent of the participating physicians shared this view.

Stresses and Challenges

Several factors placing stress on hospitals make true alignment with physicians difficult. These factors include weak and declining payment, staffing shortages, challenges related to quality and patient safety, constantly changing medical technologies, increasing customer expectations related to quality and access to services, capacity constraints as the population ages, and increased competition from private, for-profit providers of niche clinical services. Physicians also commonly report increased stress due to threats to their clinical autonomy, declining payment, increases in practice overhead, major increases in malpractice insurance premiums, and the challenge of living a balanced lifestyle. These stresses also create increased tension in hospital-physician relationships.

In the study, many hospital leaders expressed concerns related to the loss of the historical loyalty to the hospital as physicians focus more on their office practice. Physicians and niche providers are competing more aggressively for ancillary revenues and for clinical services that provide high payment. Many physicians are threatened by hospital strategies to recruit new physicians and grow select clinical services. Hospitals' on-call demands are alienating many physicians, and an increasing number of physicians are either demanding pay for on-call duty or refusing to be on call.

Revenue-Sharing Strategies Are Critical

Many of the current tensions identified in the study focus on revenue. If this study had been conducted five to 10 years ago, the identified stresses probably would have concerned control issues more than capturing revenue. In the study, both hospital leadership and physicians reported that they are working harder than ever, yet making less money. They also understood that, given the financial challenges of today's healthcare environment, hospitals and physicians will become either more collaborative partners or more active competitors, with few in a neutral zone. Thus, the critical question is: "What are the multiple strategies hospitals should use to better align their economic incentives with those of physicians?"

Study participants commonly noted that "volunteerism is dead" and that physicians expect to be paid for time spent on hospital business. Sixty-four percent of the respondents said their hospitals pay physicians to serve as officers or department heads. Some even pay physicians stipends to attend meetings. Only 21 percent said they pay physicians for being on call, and the interviews suggest strong resistance to doing so for fear that the cost will quickly get out of control.

A literature search suggests that a comprehensive strategy related to shared economic interests should include some combination of the following:

* Growing clinical services that enhance physician income

* Investing in infrastructure and information systems to increase efficiency, access, and physician productivity

* Actively marketing the medical staff

* Offering physicians equity ownership in real estate and not-for-profit bonds

* Paying physicians stipends for value-added services

* Offering gain sharing

* Employing physicians

* Entering into joint ventures

* Entering into collaborative managed care contracting

* Exploring options for providing financial relief for large increases in malpractice premiums

There is no right combination of the above. The strategy must be tailored to each hospital and physician community.

The survey found 87 percent of participating hospitals provide financial support for recruitment to physician practices, 83 percent employ primary care physicians, and 62 percent employ some office-based specialists. All of these strategies received high effectiveness ratings.