The key to successful physician and hospital relationships? In a word, balance.

Look to your facility’s P&T committee for a model. It could help your IDN succeed in the world of bundled payments.
By Fred Pane, R.Ph., BS Pharmacy, FASHP

The issue of how to improve physician and hospital relationships is coming to the forefront again. For those of us who have worked in hospitals, we know there has always been a water and oil relationship. The analogy was the “suits against the white coats,” but there have been hospitals that have succeeded in building relationships and capitalizing on it. For hospitals to succeed, they need to engage their No. 1 business partner – the physicians!

Physicians need to be involved with all aspects of running a hospital, clinical and financial. They need to sit on various committees and boards, give input that is valued and receive communication about projects and programs that affect them and their patients. Some hospitals conduct yearly surveys of their medical staff to determine medical staff satisfaction and what issues exist; the results are discussed with the physicians, along with action plans, if appropriate.

Physicians are internal customers of the hospital, and loyalty needs to be built. A key to building physician loyalty is to understand their language and implement effective communication strategies.  When physicians perceive that you are truly interested in engaging them and that you welcome their thoughts and ideas, you open a dialogue that can be very productive.

Before we begin discussing physician engagement in addressing items such as physician preference items, we should understand a few dynamics, which will generate interest among hospitals and physicians to work more closely together to improve clinical and financial outcomes for both parties. This is an opportunity!

The current economic downturn is making physicians think about their own practices and the need to approach hospitals for assistance. The June 2009 Hospitals and Health Networks had an article, “Positioning Your Hospital for Brighter Days,” which contained a chart based on an American Hospital Association Rapid Response survey. The survey, “The Economic Crisis: Ongoing Monitoring of Impact on Hospitals,” showed that since September 2008, hospitals have seen an increase in physicians seeking financial support. Specifically, the survey showed that:

  • 65 percent of hospitals overall, have been approached by physicians.
  • 79 percent of physicians are seeking increased pay for on-call or other services provided to the hospital.
  • 71 percent of physicians are seeking hospital employment.
  • 37 percent of physicians are seeking to sell their practices.
  • 14 percent of physicians are seeking to partner on equipment purchases.

Changes among government and private payers are driving physicians and hospitals to build relationships focused on improving the quality of care and maintaining or growing revenues. Proposals regarding bundled payments – whereby hospitals and physicians would both be reimbursed for the management of inpatient and outpatient care – represent an opportunity to work together and address a mutual risk, such as physician preference items.

Engaging physicians
So, how can hospitals engage physicians around such issues as physician preference items, formulary management, improving quality of care, etc? You can start by looking at your physician model(s). Do you have all private practices, hospital-owned practices/hospitalists/intensivists, or a mix of both? Do the physicians also practice at other hospitals? It is easier to engage physicians in hospital-owned physician practices in controlling costs, improving length of stay and improving quality. After all, they are salaried employees of the hospital or health system. Among those in private practices, the task is more difficult.
Regardless, it is important to recognize that physicians are the “clinical leaders” of the hospital. They are accountable for the quality of care through service lines and monitoring of their individual performance, and they are given substantial autonomy to fulfill their role as agents for their patients. The performance of physicians is measured directly from patient care. This is a key point.

For years, hospitals have been generating “report cards” on physicians or physician groups, using the Balanced Scorecard approach, that is, showing their cost of care for a DRG and the outcomes associated with it (such as length of stay, number of 30-day readmissions, infection rates, etc.) The cost of care would include physician preference items, labs, radiology tests, drug costs, etc. Peer-to-peer comparisons are the best, and benchmarking conducted internally or externally. Once the information is obtained, the physician chairperson of the division (e.g. Surgery) and department (e.g. Orthopedics), should be involved, as well as the vice president of quality/performance improvement (PI) in discussions. Hospitals have used the information with success, to change the usage and ordering habits of their physicians.

It is important to remember that hospitals and their employees who assist with managing the care of patients are equally responsible for optimal patient outcomes and risks associated with poor outcomes or poor/inappropriate selection of physician preference items. It is a team of providers that drive clinical success, lead by the physician. Vendors have no risk in the patient care model of quality and finances.

Many hospital committees approach physicians from a non-balanced-scorecard approach. An example would be, “We need to take cost out of the system; you are using non-contracted products,” without focusing on the quality or outcome of patients.

Hospitals that have been successful have approached physicians with both financial and clinical strategies, and they involved physicians early in any selection process of physician-preference items and hospital operations. So ask yourself, “Has anyone in the C suite sat down with the physicians to explain the financial status of the hospital?” “Has a structured plan of how the hospital is going to address rising costs or physician-preference items been developed and presented to the physicians?”

What physicians need to hear
Physicians need to know that hospital administration is a patient advocate, focused not only on the cost of a physician-preference item, lab/diagnostic test, drug, etc., but also on the clinical outcomes associated with it (if they can be measured). The hospital’s PI/QA department can play a role also in tracking outcomes, infection rates, 30-day readmissions, length of stay, etc. The hospital should sit down with the physicians and explain the role of a GPO, how products are purchased, market share, contract vs non-contract, and why compliance is important. This should be standard practice before a task force, subcommittee or committee, addresses a project involving a physician-preference item. Hospitals that have achieved the highest levels of cooperation among physicians, supply officers, and device manufacturers are most successful in addressing physician preference items.3

In July 2009, the Healthcare Financial Management Association published the results of a survey, “Impact of Shifting Patient Volumes,” about the actions hospitals are taking in response to changes in patient volumes, including “targeting physician recruitment, relationships, and referrals.” Enhanced collaboration between clinicians and finance is the next most anticipated transformational change, and hospitals are increasing accountability for service line performance, including increased collaboration with physicians in clinical areas.4

For more than 25 years, pharmacy P&T committees have addressed drugs and formulary management in the following order, beginning with the most important: clinical effectiveness, adverse effects and side effects, and cost. It makes sense; drugs have always been a physician-preference item. It’s also useful to keep in mind that the P&T committee is a medical staff committee, following medical staff bylaws, which reports into the hospital medical executive committee.

Many P&T committees track outcomes associated with its decisions. such as, is the drug as good as or better than the previous treatment? (The physicians can give suggestions on metrics to be measured.) Physicians are presented the results and the cost savings. Standardized treatment protocols and physician order forms, specifying formulary items, can be generated from this committee, as well as therapeutic substitution lists.

The question for JHC readers is this: Can physician-preference items selected for use by the IDN be written into treatment guidelines/protocols after approval by the value analysis or other selection committee? If so, it is a win-win situation for the hospital, regardless of what physician model(s) exist there.

Using the P&T model, some hospitals are investigating the possibility of forming a Therapeutics Committee that would address all types of treatments for patients – drugs, devices, surgery, preventative care. The committee would also track outcomes associated with various treatments for a disease5. The focus is quality-driven by best treatments, not physician preference for a product or drug. The Therapeutics Committee would, in essence, be a version of comparative effectiveness, and it would address the bundled payment model. Using this model, once quality metrics are established, the cost of treatments would be examined, including the cost/length of stay, cost of devices and drugs used, cost and number of radiology and lab tests, 30-day readmissions, etc. The information would be presented to the physicians and appropriate C-suite leaders. As bundled payments from payers continue to gain interest, this type of committee can play a bigger role in helping both the hospital and physicians provide the best care and treatment, and maintain an appropriate financial balance. The information can also be presented to payers as part of contract negotiations.

In summary, with any product selected for use in the hospital, including physician preference items, drugs, etc., physicians need to be involved in the process as early as possible. Once you demonstrate that they are an important part of the hospital and that you are interested in the best possible care of their patients, you will gain their support. Naturally, communication plays a large role. With the changing economic and payer dynamics, the timing is right for hospitals to approach physicians and build stronger working relationships, to control cost and improve patient care.
Fred Pane is Senior Director of Pharmacy Affairs for Premier. He is a member of the American College of Healthcare Executives.

Sources: 1Griffith, JR and White, KR, “Chapter 6: The Physician Organization”, The Well-Managed Healthcare Organization”, 2006. 2Popely, D., “Partners in Change, Physicians and Hospitals Aligning for Success”, Healthcare Executive, Volume 24, Number 4, July/August 2009. 3Schneller, G., Montgomery, K., “Purchasing physician preference items: The search for a cure”, Knowledge@W.P. Carey, July 18, 2007. 4HFMA Healthcare Financial Pulse, “Impact of Shifting Patient Volumes”, July 2009. 5Pane, F., “Are P and T Committees Outdated?”, Drug Topics, September 17, 2007, page 29.