Three imperatives for building the high-performance employed medical group

Physician employment by hospitals has risen steadily in recent years. According to Merritt Hawkins, 56% of physician searches across 2010 featured hospital employment, up from only 23% five years earlier. Also, a recent HealthLeaders survey found 74% of hospital leaders plan to employ more physicians in the next 12 to 36 months. At the local level, this trend is even more apparent: as struggling physicians seek out better-capitalized partners and hospitals look to lock up market share or build accountable care-ready physician networks, many institutions have reported exponential growth in practice ownership across the past 12 to 24 months.

Even as their employed ranks have grown, most hospitals have taken a relatively hands-off approach toward managing owned practices. Beyond basic back-office consolidation to capture administrative economies of scale, the focus has been on ensuring practice-level financial sustainability, primarily through the design of compensation models that maximize revenue and minimize costs while otherwise protecting physician autonomy. As rapid growth makes disaggregated management more difficult—and as providers recognize that enhanced coordination is key to survival in a new payment paradigm—hospitals are increasingly seeking to adopt a more strategic, integrated approach toward the employed physician enterprise.

Building increased cohesion among previously independent physicians requires more than simply consolidating practices into a single corporate structure. Organizations that have successfully met this challenge—created employed networks capable of maintaining a stable bottom line, enhancing market share, realizing clinical quality improvements and preparing for population risk—cite three key imperatives for building the high-performance medical group:

1.      Make a foundational commitment to physician leadership and shared success: High-performance medical groups maintain a culture in which physicians understand that organizational success equals personal success—and hospital owners likewise view employed physicians as contributing more than just a negative number on the balance sheet. Recognizing that physicians will give up autonomy only to other physicians, successful groups also treat physician leadership as vital to this culture of mutual commitment, building multi-level physician governance structures and creating opportunities for medical group leaders to influence system decision-making.

2.      Use a range of levers for motivating physician behavior when culture is not enough: Even longstanding clinics sometimes struggle to engage physicians against organizational strategy. But rather than looking automatically to compensation change—as is often the first instinct for hospital managers—high-performance groups also rely on other levers for affecting performance improvement, developing comprehensive, two-way communication systems, and fostering peer competition through transparent data sharing.

3.      Invest in tools and processes that enhance internal communication and capitalize on cohesion: Starting with a common electronic health record, high-performance medical groups build a staffing and technical infrastructure to facilitate referrals and handoffs between physicians. Successful groups also capture “economies of intellect” through opportunities for internal best practice sharing and win physician support for changes by rolling out new initiatives or standards in a gradual, non-threatening way.

Learn more at the national meeting

As part of the 2011-2012 National Meeting series, the Health Care Advisory Board will examine how high-performance medical groups implement these strategies for maximizing the performance of employed physicians. Health Care Advisory Board members may register now for Beyond the ACO. Daily Briefing readers with questions about the Health Care Advisory Board may email

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