In our last post, we discussed the increase in physician integration and defined the four phases of successful integration. This post will focus on the first phase of integration: Network Expansion and associated priorities.
Most commonly, hospitals’ early acquisitions are opportunistic purchases of primary care practices, key specialists who are close to retirement, or practices in need of financial rescue. Hospitals frequently scoop up the practices with the intent to figure out the best ways to grow and manage the network at some future date. This acquisition phase is both necessary and appropriate, as a fully developed network takes time and collaborative effort to create. Regardless of the initial reasons to employ physicians, as hospitals move forward, the reality is that the competitive environment and payor requirements get more complex, and the pressure to grow the network intensifies. Whether it involves primary care physicians or specialists, hospitals cannot let their admitters be recruited by competitors and must bring needed providers and services into the network. Growing a network entails marketing and sales, although it is not often thought of in those terms. Physician interest must be piqued, a mutually agreeable terms sheet created and agreed upon, descriptive and legal documents developed, and many meetings held before the “sale” can occur and a physician or group of physicians can make the commitment to join the hospital’s network.
Unfortunately, many hospitals get stuck in this phase for long periods. Hospitals commonly add providers based on availability and give little thought to how these providers will improve efficiency or coordination of care within a given network. During Phase 1, hospitals should develop a well-thought-out plan codifying a number of objectives, including:
- The number of required specialty(ies) and timing for the recruitment of new physicians
- The organizational model for the employed physicians
- The deployment of employed physicians across the hospital or health system
- The amount of capital investment required to fund the physician organization
Rather than reacting to opportunities as they arise, hospitals can be proactive in building a network that responds to its strategic priorities, such as strengthening specific service lines or building satellite facilities, as well as preserving relations with independent providers. It is also critically important that the board, hospital leadership, and other key stakeholders understand how this plan supports the goals of the enterprise as a whole. While events will undoubtedly require adjustments to the plan, it is important to get consensus regarding the scope and likely cost of the network.
Management must be focused on meeting with physicians, explaining the proposed arrangements, negotiating acquisition and compensation, overseeing the on-boarding process, and facilitating the creation of a physician network strategic plan. Based on the required tasks, sales, marketing, and planning, a high level of experience is critical to the network expansion phase.
Our next post will focus on Phase 2 of physician integration: Operational Excellence.
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