Blog Post

The Four Phases of Physician Integration


The growing pressure on hospitals to acquire physician practices often evokes memories of the primary care acquisition frenzy of the 1990s. Back then, staggering financial losses frequently resulted in divestiture, with little strategic gain for anyone. Physician employment is again at center stage, and this time it appears here to stay. The demands of payors, the government, and consumers to provide better care more efficiently will make economic integration between hospitals and doctors a necessity in most markets. Hospitals must find ways to build and sustain a network of primary care and specialty providers if they are to remain competitive over the next decade.

Attaining meaningful integration with providers is no easy task. The complexities involved and the tools required to make integration initiatives successful and sustainable require clear vision and sophisticated expertise. Among the most important lessons is matching the management of the employed physician network to the changing needs of the network over time. Specifically, there are four overlapping phases of integration: Network Expansion, Operational Excellence, Clinical Coordination, and Physician Partnership. Each phase requires different management skill sets and priorities. Too often, hospitals fail to recognize the need to change priorities, and even managers, as a physician network grows and evolves. This and subsequent posts focus on the phases of physician integration and discuss the management skills that are most appropriate to each phase.

The Phases of Physician Integration

As depicted above, there is a clear progression of management needs, which are dictated by the maturity of the physician network. For the majority of hospitals, the first priority is network expansion (physician recruiting). Then, the focus should move to developing operational excellence, followed by implementing clinical coordination and, finally, developing a partnership that incorporates physicians in all aspects of system operations and governance. Hospitals that do not recognize the changing demands of the network or that are unable to work through the layering of management skills are likely to face significant barriers to success.

Our next post will focus on the first phase of physician integration: Network Expansion.

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