The Growth Channel

Why health systems shouldn't default to employing physicians


All too often, we see health systems jump straight to employing a physician whenever it needs to establish a closer relationship. And although employment is an effective means of alignment, as the employment enterprise increases in size, so does its complexity and costliness.

I am not discouraging physician employment, when it’s the right answer. Employment has a place in any overarching physician alignment strategy, but there are other ways to engage physicians as professional service partners. Co-management, clinical integration, MSO support, gainsharing, service line structuring, and other newly innovated models, such as service line councils, are all viable methods in the right circumstances.

Perhaps most importantly, these methods are similar to successful physician employment models, in that they enable physicians to innovate and manage care delivery in partnership with health systems that bring expertise in facility and ancillary care resource management.

As health systems tighten their belts on costs more and more, they should save employment for strategic hiring needs that can’t be satisfied otherwise.

So how do you know when employment, versus an alternative model of physician alignment, is the right answer?

Evaluate your current employment process

Most of my work involves advising health system-owned medical groups on how to perform better, as well as overseeing our interim executives serving in leadership positions at these medical groups. This experience has given me a unique perspective on employment relationships and their outcomes. And just hiring physicians doesn’t create an employment model. It creates a variable group of micro-delivery systems that is costly, difficult to manage, and has limited ability to provide a consistent patient experience.

That is not the best recipe for health system leaders trying meet their strategic objectives for physician alignment, which can include securing market share and attributed lives, growth through reducing network leakage, improving hospital service line performance, and better overall health management, and building a strong brand.

But physician employment can be successful when health systems establish an intentionally designed model—and manage it consistently. To know if your health system’s employment model is effective, ask your health system and medical group leadership these questions:

  • Do we have a rationale or supported position on when we use employment, and is it convergent with our vision?
  • Does employment satisfy all of our strategic objectives, and in a measurable way? Is employment the only means of achieving these objectives?
  • Can we articulate our employment model and how the model drives differentiated consumer-facing outcomes?
  • Is our current model affordable? Does growth at some point become too expensive?

If the answer to any of these questions is "no," it doesn’t mean you shouldn’t consider physician employment. It does mean your health system’s employment model needs to be modified, and health system leadership should explore alternative models of alignment.

Let the objective drive the solution, not the reverse

New England Quality Care Alliance (NEQCA) is a clinically integrated network affiliated with Tufts Medical Center. While NEQCA has a related affiliate that directly employs some physicians, which are managed by NEQCA, most of its network providers are from independent solo and group practices, independent practice associations, and Tufts’ employed physician enterprise.

A short while ago, NEQCA, like many other systems today, acknowledged certain realities about their independent community physicians. The physicians were finding it harder to remain viable as independents, and they were faced with competitive employment offers or were beginning to contemplate retirement without solidifying a succession plan.

NEQCA’s objective was clear: support and retain its network physicians. But it also wanted to cater to the physicians’ preference to be self-employed, and didn’t want to take on the cost, risk, or complexity of employment if it wasn’t absolutely necessary.

The solution was to leverage its practice management and population health infrastructure to provide services to independent physicians in need, in exchange for them remaining in the network. This included resources such as practice management administrators, IT platforms, population health management resources, recruitment services, contract negotiation, and facilities.

Prioritize employment in select situations

If health system leaders can meet their strategic objectives without investing hundreds-of-thousands of dollars per physician, I would usually advise to go that route. However, there are many cases in which employment may still be the preferred strategy.

The first scenario is if community physicians aren’t willing or able to meet the community’s needs for which the health system is a backstop provider of last resort. Examples of this include providing call coverage for the trauma program or emergency department, or extending a major program clinically or geographically.

Another scenario is if the professional service is a strategically and/or clinically important portion of inpatient business. In these instances, owning the service may be more secure than arranging a partnership, in which withdrawing from the facility or being interrupted by a competitor might be easier.

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