Integration of Clinics and Hospitals: Culture, Leadership and Change

Bonnie R. Bina RMA, MHHSA, FACMPE

ACMPE Dual-Purpose Professional Research Paper

In partial fulfillment of the requirements for election to Fellow

March 6, 2014

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Executive Summary

In recent years there has been a resurgence of integration models. The purpose of

this analysis has been to review the process of integration between hospital systems and

physicians. Leadership and change management were reviewed and analyzed as they

relate to the integration of physicians into hospital systems. A study of peer-reviewed

literature aided in analyzing integration models and the process of integrating and

engaging clinic leaders into the hospital setting. Several integration models were

included in this review including a physician services agreement (PSA), integrated

delivery systems (IDS), an accountable care organization (ACO), management services

organizations, and physician employment within the hospital system either in a clinic

setting or in the hospital setting. These models could be accomplished in the form of

mergers, vertical integration, or joint ventures.

This analysis reviewed the importance of including the physicians throughout the

process from strategic planning through implementation of these integration models. It

reviewed some of the challenges and successes encountered by hospitals and physicians.

The analysis reviewed leading and managing integration during the planning and

implementation process. The analysis revealed the importance of incorporating the

physicians throughout the entire process. It was found that by including physicians the

integration was more successful and that physician acceptance of the integration model

was much higher when they were involve throughout the entire integration process.

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Executive Summary 2

Introduction 4

Change Initiatives in Integration 5

Integration models 7

Integrating the physician 10

Barriers, Conflicts, Challenges, and Perceptions 12

Physician leadership in the integration process 13

Legal issues 14

Issues related to cost 15

Information technology 17

Health care reform 17

Change Management/Change Leadership 18

Cultural issues 19

Quality of care 20

Governance and planning 20

Summary 21

Conclusions and Recommendations 22

References 24

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Introduction

As part of change management, an understanding of an organization’s mission,

vision and goals are important, as is an analysis of the strengths and weaknesses. But,

more important than this is the leadership of the organization. Leadership can be found

in the corporate headquarters and it can be found in the trenches. In healthcare leadership

can include physicians and nurses; as well as managerial, allied health, and administrative

staff. It is important to recognize this when managing times of change. According to

Firth-Cozens and Mowbray (2001) "leadership has been shown to affect the quality of

patient care" and "personality and behavior of leaders may contribute towards quality

through the effects they have on the well-being of staff." (p. ii3) Firth-Cozens and

Mowbray (2001) concluded that certain characteristics and behaviors of leadership can be

of great benefit to patient care. Among the traits of leadership were confidence and

sociability, as well as consideration of the well-being of staff and developing the skills

and strengths of that staff. (Bina, 2012a) According to Gill (2003), incorporating values,

communication, and team building have been thought to be key to successful change

leadership.

With the increased influx of models integrating hospitals and physician groups a

great deal of change has been surfacing. Back in 2009, Moore and Coddington noted a

paradigm shift back toward increased integration of physician groups and the hospital.

They wrote that the difference this time was that there would be multiple models through

which integration would happen and that "the key elements physicians and other

caregivers, hospitals, patients and ideally the health plan – share information in close to

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real time, have aligned incentives, act in concert with each other, and are positioned to

accept financial risk." (Moore & Coddington, 2009, p. 47-48)

Change is often met with a certain level of resistance. This is true of any

organization. In the case of physician and hospital integration models, the inclusion of

physicians throughout the change process has been found to assist in creating acceptance.

According to Gill (2003) incorporating values, communication, and team building have

been considered key to successful change leadership. The use of meaningful or spiritual

leadership, cognitive leadership, utilizing communication or behavioral leadership, and

incorporating shared values or emotional leadership, have also been key dimensions of

change management through the leadership model (Gill, 2003). Adaptability can come

from incorporating good leadership in the change process (Firth-Cozens & Mowbray

2001, Gill 2003) and can provide alignment and transformational leadership to the

process as well (Gill, 2003). These concepts can be carried across to the process of

physician-hospital integration; recognizing the importance of including physician leaders

throughout the process.

Change Initiatives in Integration

A 2010 survey in The New England Journal of Medicine revealed that leadership

in 74% of the responding hospitals had plans to "increase physician employment within

the next 12 to 36 months." (Kocher & Sahni, 2011) The article went on to discuss the

increased push for the hiring of primary care providers (PCPs) by hospitals (Kocher &

Sahni), but no mention was made regarding how to best integrate these established

physicians into the hospital system. There are several integration models including the

Professional Services Agreement (PSA) and Accountable Care Organization (ACO)

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model which are loose forms of clinic integration with hospital systems. In addition, the

ACO model has more recently been introduced into healthcare systems. This model has

been formed to allow for greater inclusion of both employed and independent physicians,

working in conjunction with a single hospital or a larger healthcare system. In addition,

at the other end of the spectrum, integration via full-employment of the physician by the

hospital system remains a common practice within hospital systems.

In 2003 the Institute for the Future forecasted certain changes which were

anticipated to occur by 2010. Among these changes were the expectation of an extended

lifespan for individuals, and the anticipation that the first members of the baby boomer

generation would soon be all reaching age 65. The Institute for the Future also anticipated

that with the increase in lifespan and population over 65 there would be an increased

demand for healthcare. Part of the reasoning for this is that there is a greater incidence of

chronic conditions in the later years of life. The Institute forecasted an increase in

Americans affected by chronic conditions, projecting that the figure could reach 157

million by the year 2020. The Institute also indicated that "chronic illnesses now account

for nearly 70 percent of all deaths in the United States." (p. 279) This increased demand

would also have the potential of impacting the cost of healthcare in 2010 and beyond.

While this is not specific to the issue of integration models, it is important to recognize

the anticipated increase in the need for healthcare services over the next 20 years.

The demand for care has been forecast to continue to grow but the cost of

delivering care will continue to grow as well. As a result smaller practices may find it

difficult under the pressures of cost to continue to operate independently. It is well known

that the cost of care is a large portion of the U.S. economy (Langabeer II, DelliFraine &

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Helton 2010). The financial burden on the healthcare industry continues to make it more

difficult for smaller practices to maintain their independent status. This is likely to be a

reason for the resurgence of integration models for physicians and hospitals. It is

believed that one of the benefits that may come from integration, and more specifically

the ACO model, will be better management of healthcare cost. According to Mulvany

(2010), the ACO model will tie reimbursement for physicians to efficiency and quality.

The model "rewards providers for using high-cost technologies more judiciously and for

actively coordinating and managing care of patients with high-cost chronic conditions to

minimize demand for acute and ancillary services." (Mulvany, 2010, p. 48)

Integration models

One of the recent change models within the healthcare field has been the

resurgence of integration models between physician offices and hospital systems. Over

the past few years there has been a resurgence of integration, but the approach has been

different than in the past. Among these integration models are joint ventures, Integrated

Delivery Systems (Esposto, 2004), and Professional Services Agreements (Grauman &

Harris, 2008), Management Services Organizations (Esposto, 2004) and the ACO model

(Mulvany, 2010). In addition, there has been a resurgence of clinic acquisitions and

direct physician employment by hospital systems.

Three common strategies in alignment between physicians and hospitals were

found to be the physician employment, professional services agreement (PSA) models,

and income guarantee programs (Grauman & Harris, 2008). In addition to these there

have been other integrated health care systems such as mergers and joint ventures. Each

of these strategies has a degree of physician integration within the hospital, from

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maintaining a separate but integrated status to full employment status (Grauman &

Harris). Full integration is represented by physician employment either through a contract

to work within the hospital system, e.g. hospitalists, or through employment within a

clinic owned by the hospital system (Grauman & Harris). In other integration agreements

physicians have established a PSA with the hospital system. In cases such as this the

physicians retain their independence from the hospital but are integrated with regards to

management and oversight of the clinic (Mack & Pedersen, 2009).

The PSA allows the physician group to retain their independence while sharing in

some of the benefits of being integrated with the hospital. According to Grauman and

Harris (2008) physicians in a PSA have a low degree of alignment with the hospital but

still have some income guarantees. The PSA will offer the physicians an opportunity to

participate with and be engaged in quality initiatives within the hospitals; and they may

be involved in leadership activities within the hospital (Grauman & Harris). In some

settings these are considered to be joint ventures in which the hospital contracts with

physicians for affiliation related to specific services (Sanderson, Rice, & Fox, 2008).

The ACO model can be complex. The ACO can be made up of groups of

independent physicians; groups of independent physicians and a hospital system; or even

a combination of independent physicians, employed physicians, and a hospital system.

The intent of the ACO has been to form an integrated network of providers to improve

quality healthcare while managing the cost (Mulvany, 2010). In 2012, the Centers for

Medicare and Medicaid Services (CMS) pilot ACO program began with a small group of

ACOs throughout the United States. The pilot was established to evaluate the process of

providing shared savings for reduced cost with the ACO, with the expectation that the

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ACO would meet certain quality care measures (Mulvany, 2010). In addition, the private

sector had already launched several independent ACO projects. Some organizations had

begun developing ACO projects for non-Medicare health plans. In 2009 Fairview

Health System, Minneapolis MN, began work to establish an ACO within the private

sector in conjunction with an insurance carrier (Page, 2010). The process of developing

this ACO model included 500 employed physicians within Fairview, seven Fairview

hospitals, and in the neighborhood of 1,400 independent physicians throughout the Twin

Cities Metro and greater Minnesota (Page). Leadership from within the independent

physician groups as well as leaders at Fairview were heavily involved in the process of

developing the ACO model. As the clinic administrator for one of the independent

primary care physician groups, I participated in the ACO task force organized to establish

a payment model for the independent providers participating in the Fairview Health

Systems ACO. This task force included clinic administrator and physician

representatives from several independent physician groups. Our inclusion helped ensure

to that the voice of the independent physician was being heard during the planning,

development, and implementation stages of the ACO.

The Integrated Delivery Systems (IDS) model is another form of integration

found in the health care industry. Many of these models were formed in the 1990s as a

means of securing a referral base of physicians through acquisition (Rovinsky, 2002).

Historically the IDS model has had difficulties mainly because of the inability to align the

interests of the IDS with those of the physician (Rovinsky). According to Rovinsky,

physicians were only occasionally invited to be involved in the strategic planning process

and as a result their perspectives were not taken into account and alignment was weak. To

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improve communications and physician buy-in during the integration process, hospitals

were being encouraged to involve physicians in the strategic planning, development, and

implementation of change (Rovinsky, 2002). It is not clear from the 2002 data if there

was actually a move toward greater physician involvement in the integration process.

Physician alignment with hospitals can also be found through employment of the

physician by the hospital. This can be in the form of direct employment with the

physicians working in the hospital. It can also be in the form of employment in a medical

group owned by the hospital system. In these settings the hospital manages control of the

salary but also takes responsibility for overhead and management of the organization. In

this model hospitals have been encouraged to include physicians in a leadership role in by

including them in strategic planning, governance, and decision-making roles within the

hospital. According to Moore and Coddington (2009), "physician leaders are an integral

part of advanced integrated systems and are the key to the system's success." (p. 52)

Integrating the physician

Historically, failing to include the physician as part of the strategic planning of an

IDS has resulted in poor financial performance and in some cases the necessity to divest

from integration (Rovinsky, 2002). Rovinsky believed that the inclusion of physicians in

the strategic planning improved the market position and competitive advantage of the

IDS. In the physician-oriented strategic plan the physicians would be part of the entire

planning process. They would be involved during the foundation, formulation and

implementation of the strategic planning process for the formation of the IDS (Rovinsky).

During the foundation process Rovinsky encouraged the inclusion of physicians through

advisory groups and in other ways deemed appropriate. Rovinsky also encouraged strong

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physician involvement during the formulation stage of the process, through the inclusion

of a physician advisory group that would then communicate the status to the physician

community at large. Finally, during the implementation phase, Rovinsky strongly

encouraged the use of physicians as champions in the implementation of the strategic

plan. Again, communication with the physician community was strongly encouraged,

including providing the opportunity for physician input throughout the implementation

phase as with the foundation and formulation phases (Rovinsky).

As has been previously mentioned, it is important to have the physician as an

integral part of the integration process. Physician leaders will help maximize the

acceptance of the rest of the physician group to the changes related to integration.

According to Moore and Coddington (2009) physicians should be involved in all aspects

of the decision-making process.

There are levels of integration and according to Grauman and Harris (2008) it is

important to select the right strategy for the hospital as well as for the physician group

being integrated into the system. Grauman and Harris (2008), as well as Reilly (2012),

wrote about the importance of involving the physicians during times of change.

Rovinsky (2002) encouraged the involvement of physicians throughout the integration

process through the use of physicians in an advisory role and as strategic champions in

the implementation process. Accordingly, Rovinsky wrote that "IDS's will find that the

mere act of welcoming meaningful physician participation in organizational strategic

planning will help to strengthen relationships with medical staff and community

physicians.” (2002, p. 38)

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Barriers, Conflicts, Challenges, and Perceptions

Moore and Coddington (2009) discussed three issues that are likely to create

barriers in the ability to follow a path of integration. These barriers are a lack of interest

on the part of the physician to integrate, insufficiencies in the information technology

especially clinical, and limitations in the financial resources available (Moore &

Coddington). Given these barriers, Moore and Coddington recommended that the

integration process be done in steps. In this way the barriers to integration could be

handled individually rather than as a whole. Perhaps the financial issues would be

analyzed first, followed by a review and management of clinical IT problems; with the

inclusion of physician leadership throughout the process (Moore & Coddington). Some

integration models have failed in part due to the misalignment of management.

Sanderson, Rice, and Fox (2008) wrote that some integration has failed in part due to

“lop-sided management controls, governance issues, or misaligned incentives.” (p. 65)

In a 2011 article on leadership and workplace conflict, Singleton, Toombs,

Taneja, Larkin and Pryor wrote that "conflict is a natural consequence of daily

interactions," and that "conflict management is a coping response to conflicting

relationships and situations." (p. 152) A certain amount of conflict is not always bad and

can result in better communications and quality improvement (Cloke & Goldsmith,

2000); and it is inevitable that conflict will arise within organizations (Haraway &

Haraway, 2005). Haraway and Haraway posited that "although it is impossible, and

probably not wise, to eliminate conflict, it is prudent for healthcare organizations to

provide direct instruction in conflict-management training." (p. 11)

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Physician leadership in the integration process

Policy director for the American Hospital Association (AHA) Ellen Pryga was

quoted as saying that “(t)here are different incentives for hospitals than for physicians,”

and that “(t)he current payment system encourages doctors not to work with hospitals and

creates barriers to clinical – integration.” (Taylor, 2008, para. 10) In a 2010 interview in

hfm (Healthcare Financial Management), Robert Reed, CFO indicated that the biggest

challenge to implementing integration was inertia. Reed said that "resisting change is part

of human nature, and maintaining status quo can be appealing, especially if the future

isn't particularly clear." (Reilly, 2010, p. 30) In a 2012 hfm interview with several

financial leaders, it was revealed that integration of the physicians has not always

happened at the beginning of the change process (Reilly). Reilly's interviewees stressed

the importance of integrating the physicians in the change process, even when the change

process is related to containing cost. Markell, CFO and treasurer at Partners HealthCare

in Boston was quoted by Reilly as saying:

Bringing together piecemeal payment mechanisms and various silos into an

integrated model takes time, effort, and a departure from the status quo. The

knowledge that healthcare delivery in the future will involve accountable care

organizations (ACOs) and bundled payments has helped with integration efforts.

(p. 56)

According to Reilly one way in which organizations have successfully integrated

physicians has been by paying for their participation on committees within the integrated

system. Perhaps by incorporating the physician in the change process there would be

better integration, both clinically and financially.

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Legal issues

Hospitals and physicians have discovered other challenges during the integration

process. According to Pryga, there have been the legal issues related to federal laws such

as stark and self-referral, as well as anti-kickback laws (Taylor, 2008). In their 2008 text

on healthcare systems, Shi and Singh wrote about the concerns related to antitrust and

how they may impact integration. Antitrust laws in healthcare provide a check and

balance regarding competitive behavior as well as managing issues related to price fixing

and exclusivity contracting (Shi & Singh, 2008). They wrote that in spite of these laws

healthcare monopolies have developed and small organizations have been forced to sell

out to larger groups due to economics (Shi & Singh, 2008).

According to Shi and Singh (2008), Congress enacted regulations prohibiting self-

referral, "these laws prohibit physicians from sending patients to facilities in which they

have an ownership interest." (p. 171) Physicians are also precluded from receiving

kickbacks. The anti-kickback statute:

penalizes anyone who knowingly and willfully solicits, receives, offers, or pays

anything of value as an inducement in return for: referring an individual to a

person for the furnishing or arranging for the furnishing of any item or service

payable under the Medicare or Medicaid programs: and purchasing, leasing, or

ordering or arranging for or recommending purchasing, leasing or ordering any

good, facility, service, or item payable under the Medicare or Medicaid programs.

(Pozgar, 2007, p. 55)

It is because of these risks that physicians and hospital systems are cautioned to

closely analyze any integration model they may be pursuing. Physicians and hospital

systems would be wise to include attorneys in the strategic planning process of any

integration model.

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With the expansion of the ACO model CMS found it necessary to evaluate

statutes related to self-referral, anti-kickback and other laws related to healthcare to

ensure that an ACO would not be in violation of these laws (Kaiser Family Foundation,

2011). As a result a specific set of waivers were established to allow for integration in the

ACO model without violating self-referral, anti-kickback, or other legislative rules

related to certain monetary penalties for healthcare (Department of Health and Human

Services, 2011). According to the Kaiser Family Foundation, these waivers were only

enacted for the ACO model (2011). Organizations pursuing other types of integration

models would need to continue to be aware of legal issues related to self-referral, anti-

kickback rules and other laws related to civil monetary penalties.

Issues related to cost

In the 2012 hfm interview, Reilly found that a running theme among the financial

leaders interviewed was indeed the importance of including physicians in the change

process. Freed, one of the leaders interviewed, indicated that "the toughest sell when you

have an integrated healthcare system is being responsible for the financing of care and the

delivery of care because they are naturally at odds with one another." (Reilly, 2012, p.

54) The financing of care has generally come from the hospital side, led by the CFO,

COO, CEO, and Board of Directors; while the delivery of care is the primarily

responsibility of physicians. The process can require a large investment and someone has

to foot the bill for the integration process. Often this cost has been covered by the

hospital system. The cost can include investment in capital and subsidizing practices

that are owned by the hospital (Grauman, et. al., 2011). Cost can also come in the form of

investing in technology such as the implementation of electronic medical records.

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The ACO program for Medicare has an established risk model for shared savings.

This is a fixed model that physicians and hospital systems will already be aware of prior

to establishing an ACO. This is not the case for other integration models. Palazzo et al.

(2010) addressed some of these concerns in their white paper in which they encouraged

those parties involved in the strategic planning of an integration model ensure that a

valuation be conducted by independent experts for purposes of compliance and fairness,

but also to assure that both parties have reasonable and accurate information on the value

of the seller organization.

In a 2010 white paper report on integration Palazzo, O’Neill and Moss wrote that

understanding the valuation of the physician organization is essential to the process of

integration. They indicated this to be true regardless of whether the model was for full

employment of the physician or it was a lease arrangement between the hospital and the

physician group (Palazzo et al.). They wrote that "independent valuation experts should

be brought in to not only ensure compliance of the transaction, but also to validate that

the numbers are indeed reasonable for both the seller/lessee and the buyer/leaser."

(Palazzo et al., 2010, p. 2)

Hospitals may have increased their acquisition of hired physicians, but according

to Kocher et al. (2011) this acquisition of physicians has not come cheap. Kocher et al.

revealed to The New England Journal of Medicine that the loss per year, when employing

a new physician, during the first three years of employment can range from $150,000 to

$250,000. This is due to the time it takes to build a physician practice. During the first

2-3 years the physician can cost the organization more than they can receive back in

revenue. The aggressive hiring of new physicians by hospital systems can therefore be a

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very costly act and should be strategically evaluated and managed by both hospital

system administration and physician leadership.

Information technology

Health information technology (HIT) was not discussed at any great length by the

authors reviewed for this analysis. However, it is important to consider HIT systems

currently in use when an existing group practice has chosen to integrate with a hospital

system. Moore & Coddington (2009) listed IT issues as a likely barrier to smooth

integration. It is likely that each organization already has a practice management system

and perhaps an EMR actively in use. It would be important, especially in the ACO model,

for the physician groups and hospital to be able to share data. The shared savings pilot

with Medicare includes the requirement that the ACO must be able to report both

financial and clinical data this collaboration would require that the ACO to be able to

integrate information from all participating groups into a format reportable to the Center

for Medicare and Medicaid Innovation, a division CMS (Goldsmith, 2011).

Health care reform

It is believed that the integrated delivery system (IDS) is meant to play a key role

in health care reform (Shortell & McCurdy, 2010). Rovinsky (2002) found that when the

physician was actively involved in the strategic planning and ongoing development of the

IDS, the model was much more successful. “An IDS that actively promotes physician

leadership in medical decision-making and strives to minimize interference in that

process is likely to strengthen relationships with both medical staff and community

physicians, while improving the quality of care provided within the system." (Rovinsky,

p. 37) The inclusion of the physician in the foundation, formulation and implementation

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process has been found to strengthen the relationship between the physician and the

hospital system; Rovinsky found that this also improved the market position of the

organization and improve the formants of the physicians within the practice.

The ACO model has been an inclusionary part of health care reform.

Organizations such as Baylor Health Care System (Roberson, 2010) and Fairview Health

System (Page, 2010) have pursued the ACO model of integration in order to control costs

while still managing to provide quality coordinated care to their patients (Roberson 2010,

Page 2010). As previously discussed, the ACO model participants can include the

hospital system, clinics owned by the hospital system, and independent medical practices;

all joined in an integrated approach to provide well-coordinated quality healthcare to the

community while working to control costs (Shields, Patel, Manning, Sacks, 2011).

Change Management/Change Leadership

Change is inevitable and in order to adapt to change, leaders must acknowledge

the change. Including the physicians throughout the integration process of change has

been found to increase the involvement in, as well as the acceptance of, physicians to the

change. Learning from previous mistakes, hospitals have found value in engaging

physicians in the integration process (Reilly 2012, Jacobson 2009, Burns, Gimm, &

Nicholson 2005). Jacobson (2009) reported that when trying to incorporate both

financial and health care related issues Rush University Medical Center in Chicago

concluded that including the physician throughout the process improved both quality and

cost management. Physicians should be involved in all steps of the change process. They

should be involved in the planning, implementation, and follow-up process of integrating

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the healthcare organization with the hospital system. This should be the case regardless of

the type of integration model, be it a limited PSA model or full employment.

Cultural issues

Regardless of the type of integration model selected the alignment of the cultures

is a key factor for success. As such, experts like Palazzo et al. (2010) have emphasized

the importance of taking into account the culture of the two entities throughout the

analysis and negotiation process. Again, including the physicians in the integration has

been considered a vital part of the process. Grauman and Harris (2008) recognized the

importance of engaging clinic leadership when integrating physician practices with the

hospital system. Additional review reflected on the importance of understanding and

aligning the cultures of the entities (Palazzo, O’Neill, & Moss, 2010). According to

Palazzo, et al. (2010), “actions must be taken through the entire development and

negotiation process to ensure that key cultural elements are discussed.” (para. 7) Even in

a PSA model these elements are important for all parties to consider (Mack & Pederson,

2009).

Moore and Coddington (2009) indicated that culture is important and that

involving physicians are vital when considering the cultural aspects of the organization.

They used Mayo Clinic as an example, in that, by including physicians as leaders in

many committees they have incorporated them in the leadership of Mayo (Moore &

Coddington). Mayo has been brought forward as a positive example for physician

integration in other articles as well. They are frequently referred to as an organization that

has done a good job of integrating the physician leadership with the organization.

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Quality of care

Another important result to strive for in clinical integration is improved quality of

care and better outcomes through the improved coordination of care as a result of clinical

integration (Edmiston & Wofford, 2010). Edmiston and Wofford stressed the importance

of collaboration between the physicians and the hospitals in order to provide better

coordination of patient care; they believed collaboration to be critical to providing

improved outcomes. It is believed that better coordination of care between the hospital

and physician has resulted in improved management of patient illnesses. By coordinating

the care between the hospital and physician it is felt that the patient being discharged

from the hospital may be less likely to be readmitted (Arnst, 2010). Arnst believed that

the ACO model may be instrumental in improving the coordination of care within the

care system of hospitals and physicians. In another report, Baylor Health Care System’s

team revealed that a primary motivator for its becoming an ACO was to improve care

management of a population that had previously been poorly managed (Roberson, 2010),

e.g. heart disease, diabetes, and other chronic conditions.

Governance and planning

Palazzo et al. (2010) emphasized the importance of including the physicians not

only in the planning process but also in the governance. They also expressed the

importance of a comprehensive plan for governance during and after the integration, and

encouraged the inclusion of physicians and their practice along with the administration

from the hospital (Palazzo et al.). Among the steps involved in the integration process are

the needs analysis, process of strategic planning, and conducting due diligence

(Sanderson, Rice & Fox, 2008). Sanderson et al. encouraged hospitals to recognize the

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level of affiliation appropriate for integration with certain physicians. They discussed

several degrees of integration between the physician and the hospital. The degrees ranged

from high integration of the physician through employment down to low integration with

private practice physicians maintaining their independence.

Some ways in which the medical staff has been encouraged to be integrated

particularly in the hospital setting, have been through including physicians on committees

within the hospital. Some of the committees within which hospitals have included

physicians are the executive committee, bylaws committee, credentials, infection control,

pharmacy and therapeutics, utilization review committee and the quality improvement

council (Pozgar, 2007). In addition, hospitals will have a medical director and in some

cases several physician department leads as part of the medical leadership. Some

organizations have even implemented the position of CMO (chief medical officer).

Summary

Regardless of the level of integration the inclusion of physicians has been found

to be vital to the success of the integration between physician groups and hospital

systems. Moore and Coddington (2009) posited that the hospital system would be more

likely to have a successful integration if they took into account the diversity of economic

models within physician groups that they may be integrating with. They also encouraged

hospital systems to recognize the diversity of information technology and some of the

needs with regards to interfaces and other accommodations that may need to be made to

communicate electronically (Moore & Coddington). In addition Moore and Coddington

strongly encouraged the development of what they termed as an ‘umbrella culture’ that

takes into account multiple micro-cultures within the system.

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Conclusions and Recommendations

As discussed, the process of managing integration of physician groups and

hospital systems can take on many forms. Among these are full ownership of the clinic

and employment of the physicians, joint ventures, ACOs, MSAs and PSAs. All levels of

physician integration will have an impact on both the physician group and the hospital

system. The inclusion of physicians throughout the process of integrating and

implementing change has been posited by many to be extremely valuable in managing

the acceptance by physicians of this change. Inclusion of physicians in the needs

analysis, strategic planning, and implementation of this integration has been found to not

only improve acceptance but to help with quality and cost management (Rovinsky 2002,

Reilly 2012). "By establishing a meaningful role for physicians in the organizational

strategic planning process, an IDS can significantly improve its market position and its

relationships with physicians." (Rovinsky, p. 36)

The inclusion of physician leaders throughout the integration process has been

found to assist in managing cultural changes and improving acceptance of the physicians

to the change. While failure to include physicians in the integration process has seen poor

results both financially and related to potential divestitures of previously acquired

organizations (Rovinsky). The inclusion of physicians in strategic planning in a limited

way was usually found to be insufficient and did not foster the support needed to develop

a commitment or buy-in from the physicians in the integration process (Rovinsky).

The acceptance of integration models and the change involved in incorporating

the physician in to a hospital health system has been found to be much greater when

physicians have been included in the planning process. Health system administrators

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should take this into consideration when entering into negotiations with physicians for

any integration model.

Financial risk is also a consideration when evaluating options for integration.

Hospital leadership should keep this in mind when working on any integration project

with physicians, are employed or independent. As such, consideration for the physician

acceptance and buy-in of the integration, cultural adjustment to the change, and

involvement of the physician in the integration process has been shown to strongly

impact the success of the integration project (Rovinsky 2002, Palazzo 2010, Reilly 2012).

This analysis has shown that greater success has resulted from including physicians in the

process from start to finish. In the end, "hospitals should select affiliation models based

on a structured strategic planning process that takes context, culture, needs, and

boundaries into account and is tailored for the selected physicians." (Sanderson et al.,

2008, p. 69)

24

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