Physician Input: A critical strategic-planning tool - Integrated Delivery Systems

Healthcare Financial Management, Jan, 2002 by Michael Rovinsky

To establish effective working relationships with medical staff and community physicians, an IDS must adopt a strategic-planning approach that adequately incorporates physicians' needs and expectations. Research shows that most physicians considered the IDS's market position, the degree to which the IDS can offer physicians practice-enhancing capabilities, and physician involvement in IDS governance to be critical factors for the success of an IDS. By establishing a meaningful role for physicians in the organizational strategic-planning process, an IDS can significantly improve its market position and its relationships with physicians.

Many integrated delivery systems (IDSs) that were formed during the 1990s have faced financial problems that have caused them to question their integration strategy. In most instances, a primary objective of this strategy was to secure a physician referral base by acquiring physician practices and aligning the physicians' financial interests with those of the overall organization. Unfortunately, this objective has proven elusive to most IDSs, and poor financial performance has led many to divest their owned practices.

The inability of IDSs to align physicians' interests with those of the organization has been due in large part to a failure to develop governance and strategic-planning structures that adequately incorporate physicians' perspectives. Physician input into the strategic development of these organizations often was limited to formal or informal "confidential stakeholder" interviews with key physician leaders identified by the hospital or health system administration. Occasionally, select physicians would be invited to participate in a strategic-planning retreat, or results and recommendations from the strategic-planning process would be presented to a "physician advisory group" that was formed to serve as a vehicle for physician input. But these tactics usually were insufficient to foster physician support of the organization's business strategy and goals.

Nonetheless, the operational reality that motivated IDSs to acquire physician practices persists. Despite the perceived increase in patient consumerism, physicians still control healthcare utilization and, therefore, cost. Thus, it remains imperative for IDSs to align their financial interests with those of staff physicians, as well as community physicians who are part of the organization's referral base. This alignment can be accomplished only by first understanding what physicians consider to be the critical success factors for an IDS.

IDS Critical Success Factors

Based on evaluation of about 30 integration projects, a review of the professional literature, and more than 1,000 interviews with physicians regarding IDSs, the critical success factors that physicians perceive to be essential for developing an effective IDS fall into three categories:

* The IDS's market position;

* The IDS's ability to offer capabilities that can enhance a physician's practice; and

* Involvement of physicians in IDS governance.

Market position. To thrive, an IDS must become indispensable in its market. One way to do so is to develop and maintain a prestigious brand name. The Mayo Clinic and Cleveland Clinic, for example, have reputations for high-quality care that enable them to attract patients from around the world. As a result, managed care plans are compelled to include these providers on their provider panels to meet purchaser demand, an advantage that provides financial benefits to physicians associated with these organizations by providing access to a significantly larger patient base.

An IDS also can enhance its market position by offering a scope of services or embracing a service mission that uniquely matches the needs of the market. The requisite scope of services may range from a comprehensive "one-stop shopping" approach to patient care to developing specialty programs that become recognized as the best or the only programs of their kind in the market. Examples of service missions that may uniquely match a market's needs include the provision of indigent care, service to other underserved populations, and religious sponsorship. Having one or more of these characteristics can help make an IDS indispensable to its particular market and, therefore, to medical staff and community physicians.

Capabilities that enhance a physician's practice. Physicians typically are attracted to their profession by the desire to practice high-quality medicine and make a good living doing so. Any capability an IDS can offer to physicians that will enable them to achieve these ends will foster increased physician commitment to the organization. Such capabilities include various means to help physicians provide optimum clinical care, access patient and other health information, and efficiently manage practice operations.

An IDS can demonstrate its support of physicians first and foremost by ensuring that physicians retain primary decision-making authority in medical practice. Physicians perceive that medical decisions--once, and appropriately solely their domain--increasingly are being made by less qualified medical personnel or being influenced by medically unqualified individuals, such as managed care executives and hospital administrators.