From the Consultant’s Corner 3/3/15

Primary Care Networks
They can be a win-win for medical centers and physician practices.

Competitive pressures, access to expanded patient populations, healthcare reform, and changing reimbursement models have required healthcare organizations to re-evaluate their growth and population health management strategies, which often includes implementing clinical alignment and integration initiatives. One such initiative becoming increasingly popular again is the formation of employed primary care networks.

The primary care model offers substantial benefits for both the academic medical center and the physician practice, including:

Health system benefits. In the past, academic medical centers and integrated delivery systems created physician networks with the intent of growing their patient population, expanding their service area and brand, and creating opportunities for primary care teaching. Although the initial goals are still valid, a more financially prudent and economically sustainable approach is to develop and manage the network not as a cost center, but as a sustainable delivery model. This improves care quality, and does so in a manner that downstream revenues — from sources such as specialty referrals, hospital-based services, and inpatient admissions — exceed the network’s operating expenses. For example, according to a 2006 Academic Medicine article, Ohio State University Medical Center (OSUMC) found that for every $1 invested in its primary care network, it received $6.30 in downstream contribution margin.

In addition to the financial benefits, primary networks can help position medical centers for future success. For instance, in the context of population health management, primary care physicians will bring significant strategic value to health systems in overseeing large populations. As the industry keeps moving toward value-based care, health systems will increasingly rely on their primary care networks to manage quality and care delivery, as well as coordinate care across a range of providers.

Physician practice benefits. As healthcare reimbursement declines and business risk increases, more physicians are considering selling their practices. A 2012 survey by the American Hospital Association showed that between 2000 and 2010, hospital employment of physicians increased by 32 percent, and that trend appears to be continuing. With shrinking margins and increasing costs, independent physicians are struggling to maintain profitability.

There are many reasons why joining a private network can be an attractive option. For instance, it can reduce overhead, while providing a better work-life balance and predictable compensation. It can also offer practices greater negotiating power with payers as well as access to more cutting-edge technology because physicians benefit from the collective resources of the larger group and health system.

In some cases, patients have greater exposure to a wider range of specialists within an academic or large-scale health network, helping practices attract more patients and ensure better care continuity. There is also benefit in aligning with the medical center brand, potentially improving credibility and driving even more patients to the practice.

It’s all in the design
In my experience, in order for a primary care network to be a strategic asset for an academic medical center or other large health system, it must be designed and managed correctly. Effective network management includes:

• Developing reasonable practice-management controls.
• Crafting appropriate, incentive-based compensation models.
• Consolidating management, administrative, and clinical staff.
• Right-sizing property, plant, and equipment.
• Achieving balance between internal and outsourced services.

Before going down this road, medical centers should create a strategic plan that addresses all of these points, including how they will accomplish these tasks. Moreover, they should engage in financial modeling to budget and manage true downstream revenues.

Just like their medical center counterparts, physician practices must also take a strategic approach when deciding whether to sign on to a primary care network. While the benefits can outweigh the negatives, physician practices need to fully understand the impact of the decision before making the commitment. In particular, practices should keep in mind that they may lose some autonomy, see a reduction in administrative staff and/or be compelled to redefine their productivity expectations.

Planning ahead
Whether an organization is looking to create a primary care physician network or join one, there are several complexities to consider, and organizations should not rush in without careful planning. As such, both parties can benefit from seeking expert resources in areas such as strategy development, contract negotiations, and network management. By taking a careful approach, medical centers and physician practices can achieve a partnership that truly supports collaborative care both now and in the future.

Brad Boyd is vice president of sales and marketing for Culbert Healthcare Solutions.

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Contacts

Jennifer,  Mr. H, Lorre, Dr. Jayne, Dr. Gregg, Lt. Dan, Dr. Travis

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