Blog Post

Physician Network Development:The Critical Ingredient

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Recently, I had a conversation with a colleague who mentioned that one of his clients had not heard the term “clinical integration.” As I think about this more, I’m reminded how easily those of us focused on defining the existential threats to our industry can lose sight of how slowly things change, and why. Last year was the 10-year anniversary of the FTC ruling that gave us the term “clinical integration” to describe a permissible model for nonrisk joint contracting between private physicians, health systems, and commercial payers. The more recent and parallel rise of the accountable care organization (ACO) model (a term used to describe arrangements with government payers) has created an unprecedented environment to support cooperation between private physicians and health systems. But not every market or institution has been driven to use these tools to address physician alignment yet.

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Shifting Accountability for Cost Risk in Caring for Populations

While older models based on risk arrangements, service models, or contract aggregation (PHOs, MSOs, GPOs, IPAs) have come and—in many cases, gone—hundreds of physician and hospital groups have used the newer safe harbors provided by the ACO and clinical integration (CI) models to build new platforms for alignment. From the perspective of payers, including CMS, the goal is for providers to take on the cost risk for caring for populations: capitation 2.0. The CI and ACO models build incremental capability for taking on this risk.

Incentivizing Providers

The key question remains, what are the incentives for the providers in this evolution? Provider buy-in determines why some integration efforts are successful while others do not deliver the intended outcomes or even launch successfully. With initial resource and technology commitments to build a Clinically Integrated Network (CIN) or ACO starting at $2 million, both physicians and systems sponsoring these networks expect value from their participation, for themselves and for their patients.

It is vitally important to understand that there is no single answer, generally or even within a network. The value proposition varies across two major dimensions: the market in which the network would exist and the stakeholder groups within the nascent network. Our experience has shown that there are five major stakeholder groups that must be addressed:

  • Private PCPs
  • Private specialists
  • Employed physicians
  • System hospitals
  • Payers

The key element in defining a sustainable network development effort is implementation of a specific, well-defined, and coordinated value proposition for each. This might seem obvious, but failure to address this critical step before attempting to proceed with even initial network building measures or purchasing technology platforms results in costly delays and negative outcomes that can linger for years.

Evaluating Your Market

Another dimension of variability in value propositions is that every market is different. The value of a network to stakeholders in a growing, privately insured service area is completely different from one in a rapidly aging market with a shrinking population base. For example, private specialists in a booming market might see themselves as doing better by remaining splitters across competing systems, while those in a dwindling market will see the threat of being left out of volume-driving networks to the point where they may even sacrifice rates for volume. For health systems, a strategy of PCP employment might seem the most logical but could be impeded by capital availability, history, and management competency, making the CIN an attractive alternative or complementary strategy.

Driving Sustainability and Success

Understanding and delivering on value drivers in physician networks are critical to ensuring sustainability and success while withstanding competitive pressures, changes in reimbursement rates, shifting population demographics, culture, supply, and history.