Co-management is an increasingly popular model for partnerships between hospitals and physician-owned ambulatory surgery centers (ASC). Under co-management, hospitals maintain full ownership of the ASC and management services are contracted to the physician group. Hospitals should negotiate a two-level payment model for co-management compensation fees in order to mitigate risk and ensure quality.
The base fee is a fixed annual fee that reflects fair market value (FMV) for management responsibilities necessary to operate the ASC, while the incentive fee is a variable fee that reflects FMV for performance on quality and efficiency goals.
With little control over supervision and delivery of services, hospitals take a significant risk by investing in ASCs and handing over management to physicians. Incentive fees help shift some of that risk from the hospital to the physician group by making a portion of the total compensation contingent on how well physicians perform their clinical and management services.
Incentive fees mitigate risk to hospitals in co-managed ASCs
The Marketing and Planning Leadership Council previously featured the application of co-management models to the orthopedic service line and how these arrangements can improve both care and market share capture.
In our more recent work on referral management, we’ve come to realize another positive element that co-management can bring to the table; strengthening your referral network. Co-management arrangements that include elements linked to the business objectives of both organizations can be used as a lever to secure alignment with independent physicians, who are often more challenging to work with than employed physicians.
Reinforcing your referral network with co-management arrangements
We regularly hear from hospitals seeking to better engage physicians in quality improvement and utilization management efforts. At a service-line level, hospitals have seen some success increasing physician engagement through co-management arrangements. Co-management arrangements pay physicians at fair-market value for administrative responsibilities and provide additional incentive payments based on achievement of quality and cost goals.
Hospitals find this alignment model to be particularly attractive for orthopedics service lines, given the independence of orthopedic surgeons and the substantial potential for both quality gains and cost reduction within orthopedics. In a survey of 258 hospital and health system leaders, 11% reported co-management of orthopedics service line, the third highest among service lines after cardiology (13%) and imaging (12%). Tight alignment with orthopedic surgeons will be even more critical as hospitals seek to balance two competing influences on volumes: Demographics will drive growth of joint replacement even as scrutiny of appropriateness increases.
Co-management models especially promising for orthopedic service lines