Health systems are beginning to address the many issues that come with the physician enterprise. Rudd Kierstead, Director, Veralon, speaks with Victoria Sheridan, Counsel, Corporate & Regulatory Affairs, Atlantic Health System, about some of the motivating issues, key factors, and main goals related to integrating the physician enterprise. They also discuss issues related to governance and branding. Sponsored by Veralon.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Health systems are beginning to address the many issues that come with the physician enterprise. Rudd Kierstead, Director, Veralon, speaks with Victoria Sheridan, Counsel, Corporate & Regulatory Affairs, Atlantic Health System, about some of the motivating issues, key factors, and main goals related to integrating the physician enterprise. They also discuss issues related to governance and branding. Sponsored by Veralon.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Support for A HLA comes from Velon Partners, Inc. A national leader in valuation transaction advisory, compensation, and strategy exclusively in the healthcare industry. LAN's Brain Trust approach pulls together focused teams of trusted advisors that work together to provide comprehensive solutions for an organization's complex and interrelated needs. For more information, visit velon.com.
Speaker 2:I'm Red Stead from Velon . Uh, I'm a director. Been working in consulting for about , uh, 12, 15 years, and for another 15 or so I've been in health systems , um, uh, working in physician enterprises. Um, Victoria, why don't you introduce yourself and then I'll introduce the topic.
Speaker 3:Hi, I'm Victoria Sheridan. I am , um, in-House Corporate and Regulatory Council at Atlantic Health System in New Jersey.
Speaker 2:Great. Um, so the topic title, of course, is , uh, considerations for Integrated Physician Enterprise Performance. And I think this topic, at least from my point of view, has grown out of the notion that , uh, it is no longer the case that we are just offering physicians a comp , uh, plan, signing them up and putting them in an exam room. Uh, those days are over. Life is much more complicated , um, and , uh, health systems especially are starting to , uh, address the many issues , uh, that come along with , um, the physician enterprise. Um, so , uh, we are gonna touch on what this topic is about a little bit. Um, get a little bit into why this perhaps is a little bit of a third rail for some folks. Uh, we're gonna talk about some of the factors and then we'll get to some of the key goals , uh, when integrating physician enterprise. And , um, spoiler alert, I suppose , uh, the end of the show is really that there is no black and white. Uh, you know, there is no one best way. If there were, we probably wouldn't be here talking about it, and you all would've done it already. So , um, that's, I think the, the super high level background. Um, Victoria, I guess from your point of view , uh, what are some of the motivating issues for this topic , uh, you know, been in your experience?
Speaker 3:Sure. Um, well, I , I think we all recognize that hospitals and health systems need doctors and providers in order to provide care to our communities. And given how the healthcare industry has evolved and it's, you know, continuing to evolve day to day and ever more rapidly , um, we see how payment models have changed, how regulators are pushing for greater coordination of care, and transparency and information and, and data sharing. There's a growing and ever-growing need for hospitals and health systems to become more integrated with their providers. And I think there's basically an endless list of reasons or motivations for a health system to pursue , uh, different types of physician integration strategies. But, you know, a few that that come to mind and come up often are , um, working towards adopting and, and being successful in value-based payment models. Um, and, and even if your system is not, does not actively have , um, some sort of, you know, capitate capitated or bundled payment methodology , um, just the, the potential for, for penalties or incentives that relate to greater integrated care , um, is a big reason for finding ways , um, to make sure that you have strong integration with your providers. Um, also just improving the quality of care and care coordination , uh, that often happens through being able to efficiently share data , um, and efficiently access electronic medical records. Um, that's what patients want. That's what the public wants, that's what payers want. Um, and so the greater integration you have and the greater ability to share data can, can improve , um, sort of multiple business objectives. And then , um, you know, another thing we see is just, you know, finding ways to make sure that we have a stable physician workforce. Um, making sure that we can recruit new providers, we can retain our existing providers , um, whether or not they're employed by us or just actively practicing in our community, and know that we have specialists and , and primary care doctors to service our community , uh, is a big need for us. And working with physicians to ensure there is that succession planning and retention. Uh, the more integrated we are, the more comfort we have that we have that stability. So those are three of, of the big ones, but certainly not , uh, the only list of reasons why we're focused on physician integration.
Speaker 2:Yes, I think there are , there are many issues I've, I've come up with lists over the years myself as to why you go down this difficult path of coordinating and coordinating physicians. And the list changes every time I try to jot down five or 10 items. I think one that I see a lot also is the losses , uh, particularly post pandemic , uh, and with the , uh, p and ls of health systems today , um, very challenged by labor force costs that , um, the losses on the physician enterprise, although it may be lofty to wish those losses away in many instances, they could do better. And I think that's been a major issue. This along with the ones you've mentioned , uh, as, as we said, really are about coordination. And you can't achieve these goals without some sort of a co coordination , uh, and pulling people together so that they're pulling on the same, or I think that's , um, uh, if, if there are physicians left in health systems that wanna be left alone , uh, that's probably gonna be a challenge <laugh> , uh, for their future. For their future. Um, I think also, if I may , uh, having been drawn into many situations trying to integrate or having the , uh, the outcomes of poor integration, it seems that , uh, the general counsel's office is on the receiving end of when lots of those plans aren't working out. That when there's all sorts of different compensation models, all sorts of different deals, all sorts of special deals , uh, all sorts of , uh, cross-divisional or cross institutional arrangements that the general Council's office is there to , uh, institutionalize those things. And , uh, Victoria, it just reads to me like when there's a lot of that your need for integration is, is just stronger or more profound , uh, that , uh, that that's, you're on the receiving end very much of , uh, the need for integration. I don't know if you see it that way.
Speaker 3:Oh, no, I mean, absolutely. I mean, when , when things aren't going right, we're, we're usually the office that people come to, to, to fix it <laugh> or to make it go away. Um, but I also like to think , um, because of that, we're, we're also in a good position to help push things on the front end to a place where , um, we number one try to set it up for success, both from a legal standpoint and a business standpoint , um, but also because we have visibility into the different ways that integration efforts in the past have gone wrong. Um, or, you know, ways that they, they have gone right. And we have access and, and discussions with , uh, various , um, business people and, and operations people throughout the system. Uh, we can be in a position to issue spot on the front end , um, identify the pros and cons to particular , um, models, structures , um, uh, in a way that, that can really provide a value add, I think, to our business and operations teams. Uh, but I mean, this is healthcare. It changes every day. You never know what's gonna happen. We're constantly responding to , um, you know, changes in the market , uh, changes in reimbursement. Um, so it , you never know what you're gonna get, but we can at least learn from what's happened in the past and, and try and set things up for success in the future in a way that I think , um, you know, just the business team or the operations team alone , um, might not be able to do because we we're kind of the funnel for information on , on the good and bad end. Right.
Speaker 2:Right. So maybe now we can get into some of the key factors. Um, I think there's, there's , uh, a , a difficult balance to strike , um, especially for physicians and their medical practices , uh, which is this , uh, just that , that to over generalize this notion of centralizing versus decentralizing or individuality or how I like to practice versus , uh, you know, the hospital's needs. That's a , that's a ongoing challenging balance that will never end, but it, but it is important to keep in mind, and I think health systems are coming around to this more and more, that in part their physicians have to have the best PR place to practice medicine. Uh, you know, that's how you remain competitive in the physician market. And so the balance is to balance the institutional needs, which can become a great advantage with size and scope , uh, that health systems have , uh, with an individual physicians need to practice medicine. Um, and , uh, so again, I don't think that'll change, but I think there are some tools , uh, and factors or approaches or strategies, whichever word , uh, you prefer that, that , uh, that are good to highlight, to help steer some of these issues towards , um, uh, more successful or, you know, stay away from in terms of making less successful , uh, outcomes. Um, so Victoria, do you have any thoughts in terms of what are some of the key , uh, tools or approaches that , uh, come to the surface in your mind or your experience?
Speaker 3:Sure. Well, I , I mean, I think you did mention it, it , there's, there really can't be a one size fits all approach , um, because there are different needs that vary from doctor to doctor, from specialty to specialty , um, but also, you know, the health system might have different needs depending on where the physician's office is located, what's the size of the practice, what's the composition of the practice . And so we are, you know, trying to develop different models that we can present for integration strategies or structures that, that can fit different needs of us and of the, the physicians. But you really have to look at the individual physician or individual group , um, to figure out what's, what's the best model that's going to make you both happy, because physicians and providers are people too, right? This is , we need to figure out, like you said, the best way to help them practice medicine the way they want to practice. And there's a very big difference between a solo practitioner who's getting close to retirement and, and a straight employment model can give them what they need to feel like they can continue practicing medicine and, and be alleviated of some of the burden of operating their own medical practice and, and potentially setting up their office staff for, you know, continued employment after they retire. Versus a large multi-specialty practice that has been , um, operating in, in a manner where they are , um, focusing on their ancillary businesses. They're promoting their own specialties. They have young doctors, they have doctors closer to retirement. Um, there's a lot of different needs or desires within that practice. And the practice is just sort of a bigger operation. What's the best integration strategy for them? Could be very, very different. Um, uh, I think we also see differences in location of the practice , um, you know , uh, practices that are further away from our primary medical centers or that are in slightly more rural areas, though in New Jersey, there's not too much that's really rural, but , um, that are further away from , um, like I said, our primary medical centers, that they might have a different need or, or we might see different needs or ways to integrate that practice , um, that allow them to, to continue practicing the way they've been practicing. But we provide the connection that we need to coordinate the care among their patients who, who do need , um, services from, from our hospitals or other facilities that they don't have access to in those further away locations.
Speaker 2:Yeah. Yeah. And another distinction is , uh, you know, for large health systems that have the resources to offer , uh, uh, different vehicles or different homes for their physicians, there are also small hospitals, you know, community hospitals who have some of the ch same challenges, but not the breadth of resources. So, you know, the range of options for their physicians has to be , uh, tailor made a little differently. Um, what are some , your , a large health system at Atlantic? What , um, what are some of the options , uh, uh, you offer to physicians?
Speaker 3:Sure. I mean, it, it really, really runs the gamut. I mean, there is just an option for straight employment. You know, we have a large affiliated physician group, and that can be a good option for a lot of doctors. Um, we've pursued least practice models that I'm sure a lot of our contemporaries have, have also tried over the years, which allow a practice to continue kind of operating in the way it's been operated. But, but we have that , um, integration with, with the providers. Um, we, you know, are pursuing and have pursued just straight out acquisitions where we've , uh, acquired , uh, a practice. And there's kind of a whole gamut in between. And while there are, I think, a, a variety of models that range from that employment to sort of , um, uh, full acquisition to maybe we just have , um, some sort of, you know, value-based, clinically integrated network type of arrangement , uh, to help coordinate care. Um, it really depends on the, the particular needs of the practice and, and what we're both looking to , uh, achieve.
Speaker 2:Yeah. Yeah. And again, this is , uh, you know , uh, a balancing act. I've encountered health systems granted , uh, on the smaller side where , uh, choosing one, believe it or not , uh, one EMR was something they were gonna put off for quite a while. That just was a, a challenging issue for them. And they had to find other ways to seek integration , uh, through cross platform it and that kind of thing for, for larger health systems there , that tends not to be a problem there . The , the diversity itself tends to be a challenge , um, where, you know, you have so many docs who are interested either in an entrepreneurial activity or being close, but not employed or being employed, but having a void and, you know, there's such a wide range , um, wide over time. I wonder, Victoria, have you noticed any , uh, steps or needs in terms of , uh, uh, governance or , um, how physicians feel that they do have a voice, you know, across your health system? Has that evolved at all?
Speaker 3:Yeah, I'm , I I think that when you're talking about just , um, you know, an affiliated physician practice where all the physicians are employed, it, it seems kind of easy <laugh> , right? Right. It , it's, it's just like any other practice where you become an employee and you understand that you're gonna comply with the policies and procedures of that, that , um, practice and , and you'll be reporting up to the physician who runs the practice. But , um, you know, governance can be tricky when you have a whole host of different types of integration strategies or models. And really making sure that the physicians understand what the expectations are , um, and how their voice will be heard, I think goes a long way to promoting integration. Because I, I think nobody wants to spend the time and effort and money to pursue an integration strategy. And at the end of the day, the physicians feel like they don't have a voice or they're not getting , um, the , um, ability to sort of have their concerns heard. Uh, but on the other hand too , uh, in order to be truly integrated, there needs to be some consistency in policies, procedures, clinical protocols , um, otherwise the, the integrations not going to be , you know, fully beneficial to the health system. So there's a real balance there. And, and I think , um, you know, a , a again, if, if there was a , an easy solution to how to make everybody happy, we would probably all be doing it right. Um , but we look to what's worked in the past , uh, you know, we talk to our consultants and see what, you know, what do you all think has been working? Do you have suggestions? Um, because , uh, the larger the system, the more important it is for there to be, you know, sort of clear delineation of, of how both clinical and just sort of corporate and decision making governance works. Uh, so it's , um, you know, it's what keeps the job interesting, <laugh> . Right,
Speaker 2:Right. I think one thing also , um, that I've noticed is , uh, some concept of funds flow, whether you're , uh, a medium sized health system or a A MC with multiple community and academic , uh, entities trying to function together that funds flow, first of all, can mean only what you want it to mean. But , uh, having a way to figure out how separate or disparate entities can be paid for this or that, or, you know, sessional activity across town and windshield time and , um, even the payment structure to set expectations for recruiting really can facilitate , um, many of these conversations because many of these conversations have trouble getting past the dollars. And if you have an orientation as to even how the dollars will flow, let alone how many dollars , um, it can, you know, wherever you land in that , uh, sort of maturity of funds flow can be a, a very helpful process , uh, in greasing the wheel , uh, uh, in my opinion, because it removes those numbers from the conversation, or at least provides a pathway to resolving them so that you can talk about the more substantive issues so that people can have ideas about programming that might work. Um, and it can really facilitate that kind of conversation , um, really at all levels, I think. Um, so that's something I would, I would add to an agenda , uh, for someone who is looking to resolve this, again, often if it's not resolved, it ends up in the general counsel's office. They need an agreement, I need an agreement, and you need to know, you know, what do your clients wanna pay? Oh, you really need to know how much I gotta pay, don't you? So, you know, those conversations can take half a year sometimes.
Speaker 3:Oh, yeah, absolutely. And, you know, I do think that , um, again, I try to take the perspective that as, as legal counsel, I can provide some value here , um, because, well, number one, we need to make sure that whatever the funds flow is that we feel comfortable with it from a regulatory perspective. You know, we all acknowledge that we , uh, we work in a highly regulated environment that has certain types of financial restrictions that don't apply to other businesses. And sometimes our business people appreciate that, sometimes they don't. But, you know, my job as council is to explain to them, you know , where those guardrails are and what we can and can't do. Um, and I think having a relationship with your business people where they understand the importance of those legal restrictions and know they can come to you and get good advice and education and options for approaching funds flow that help them achieve whatever they're trying to achieve , um, is goes a long way to helping make sure that the objectives are achieved. Um, but I , I also think that it, it's always helpful for, for me in advising, you know, my internal clients in understanding what their business goals and objectives are. I was just on a phone call yesterday and, you know, was presented with, we wanna do something <laugh> with, with, you know, x, y, and Z group. And, and I just kept going back to, all right , well, what is it that we want? What are we trying to achieve with this? Because we could put dollar amounts on the table, we can put options on the table for what the contract would look like, but at the end of the day, if I don't know what's most important to you, or the top three things that are most important to you , uh, I'm not gonna be able to provide you with , with options or guidance. That helps make sure that, that those two, three things get achieved. Um, and so that is, you know, the, the funding is one thing and how the funds flow , um, but also the motivations. 'cause like we talked about earlier, not every doctor group, not every specialty , um, just given the , the day of the week, you know , um, one particular motivation might be more important than the deal that we did a week ago. Um, and so really having some transparency and an ongoing dialogue with the business people and the operations people about what must we absolutely have, what are the things we definitely don't want to happen . Um, I think , uh, helps move the conversation forward, helps move the integration strategy forward more efficiently, and hopefully helps to reduce or eliminate some of that <laugh>, this has gone really wrong, how are we gonna get out of it? Right.
Speaker 2:Well, let's dig in a little more into what some of those goals are , um, because there are some goals that are helpful , uh, in terms of moving the institution and physician practices, and there are some goals that are counterproductive. Um, what are, let's focus on the helpful goals. Um, uh, what are some that, that you've seen?
Speaker 3:Sure. I mean, I, I think that , um, some goals that, that are helpful are understanding what the sort of ultimate care coordination strategy is. Mm-Hmm. <affirmative> , is it that we want to be intimately involved in the day-to-day operations and, and running of a particular practice, a particular specialty? Or is it that what we really want is more data sharing, more willingness to, to work together for particular value-based payment contract or payment model , um, or know to, to just kind of help achieve quality outcomes in a particular area, whether it's for business reason or , um, a payment reason, something like that. And so understanding where on sort of the, the care coordination spectrum we are, what is it that we need from that coordination? Why , why are we looking to develop a closer relationship , um, can then help us identify , um, how closely we want, want, or need to integrate versus , um, what other types of arrangements might achieve the same goal without , um, formal employment or formal integration and, and sort of direct oversight of the operations of that practice, that specialty that that individual physician.
Speaker 2:Yeah. I think one thing also along those lines that I've seen more and more of is arrangements that are seeking , uh, for lack of a better label at the moment, you know, the , the skin in the game that these are not, people are not looking for arrangements that just , uh, as much that just , uh, accumulate numbers, but are looking for , uh, physicians or practices or service lines or , uh, redesign along, you know, for, for those practices that achieve some level of engagement with the physicians. Mm-hmm . <affirmative> that hospitals and , and health systems increasingly , um, uh, whether you call it acknowledge or, or are exploring that they need the physicians to be managers, at least in part , um, of the future. And whether that's their own particular practice and how they refer to how they organize a service line or a new or a new clinical program , uh, they still need managers , um, who are , uh, partnering with the health system and have an interest back to skin in the game in making it work. Um, that it's not just all , uh, for good or bad reasons, not just all on the health system to make it work. Uh, in part 'cause they always haven't always done such a good job at that , uh, especially in the physician enterprise , um, and that they need that physician manager. So I, I see that as sort of one of the big , um, uh, kind of turning points for health systems, I think is, is bringing the physician back into the management role , uh, to some extent and at every level. Um, so I think, I think that's something I've seen. Is that fair to say, do you think from your experience?
Speaker 3:Yeah, I think so. And you know, a a lot of that is relationship building and understanding , um, the, the ways that community physician leaders have, have organized and run their practices, how that translates into integration into an enterprise kind of management and, and where is the line between , um, joint decision making and decision making that needs to, to really be run up the pole and, and part of the overall enterprise strategy versus , um, you know, decision making that is sort of happening more loosely, but we understand that on certain things we're coming together to, to coordinate and, and what does that structure look like? What do the contracts look like? What does the funding look like if there is funding? Um, so yeah, I , I would say that that is , um, developing those relationships , uh, really understanding what has been successful and has made, made practices or specialties or individual physicians successful when they haven't been fully integrated with the enterprise. And how do we keep that when they become more integrated is important. Uh , it's a challenge , um, and, and something that I think , um, we work on when we put together the legal documents, but also that the business team actively works on once the, the integration kind of goes live.
Speaker 2:Right, right. Um, um, I think another observation is that , um, increasingly, well, let me put it this way. It used to be that growth from one point of view, at least in the physician enterprise, was defined by , um, by hiring more docs, which it certainly is a perfectly reasonable growth measure, but I think there's also more of an interest in , uh, managing growth from the inside that growth is something that , um, individuals in their practice in as complex as it is, can manage , uh, and provide feedback on what's preventing growth on what could enable growth , uh, uh, and, and that kind of thing. Do you think , um, that's something you've heard and seen?
Speaker 3:Yeah, I , I mean I think we're, we're at, it's sort of an interesting shift shifting point because I think it seems like in the industry overall, this is not just with, you know, hospital or health system employed physicians, but in other large physician enterprises, just growing the physician labor force is not necessarily the, the key to success, financial success, clinical success, quality success. Um, and so I definitely think we've seen that. Um, but in terms of how we grow internally, I mean the, the larger your enterprise, the , the more physicians and providers there are to manage and make aware of all of the internal efficiencies and benefits that come from kind of growing that enterprise, making sure that the physicians who are part of the enterprise , um, have coordinated their care , um, with other enterprise physicians and, and see the benefits of that. So , uh, I don't know, in terms of what we see in the legal department, I don't see as much in terms of what's that internal growth look like, how do we, how do we pursue that though I think it's certainly something that , um, the business and operations team are, are trying to, to figure out ways to , uh, operationalize.
Speaker 2:Yeah. Yeah. Okay. Um, maybe , um, maybe we can exit, I don't know if you have other thoughts along these lines, but , uh, exit on the topic, just because it's so tangible and actually visible, but branding , uh, is something that , um, uh, again, can be such a focused thing and it, and it can, it can really disrupt an arrangement. Uh, and, you know, disrupt efforts to bring disparate, even disparate employed groups within one specialty together can sometimes get caught up in branding. Um, uh, have you noticed that this was an issue for you guys at Atlantic? Um, do you have any , uh, good war stories for us
Speaker 3:<laugh> ? Um, I , I would say it depends on the deal, right? Um, I, I have had a deal die because we couldn't agree on branding. Um, but um, I think it's, it's very specific and to , to the particular practice, I think the health systems needs are specific to the particular , um, practice specialty , um, deal in particular. Um, a a lot of times, you know, there I think are benefits to everybody from, from public integration and affiliation when we have integrated with a physician practice. Um, but sometimes we, you know, a lot of times we don't want to lose that practice's branding because they have a relationship with the community, right? And so , um, you know, it's not always the, I think the best business decision to, to just, you know, kind of wipe away the, the history or the branding and awareness of that , uh, that particular practice. You know, from , from a legal perspective, if, if it is a fully integrated practice, I prefer for there to be some health system branding because the public then is aware of who's providing services to them. Um, but we want to avoid any confusion, right? We want the patients to understand , um, who the service provider is and, and what that means for them. So , um, uh, I would say it's not always an issue, but when it is an issue, it can be a pretty big issue, right? Um , <laugh> and there's a whole host of ways that, that we try and , um, figure that out in the documents themselves. Um, but a lot of times, you know, there is some that's just kinda left up to, we'll , we'll have to see how it plays out and , and agree on how this works in the future.
Speaker 2:Right. Yeah. Well, I think we've covered a lot of topics. Victoria, do you think we've missed anything? Any, anything we should touch on before we sign off?
Speaker 3:Um, I guess I would just say that, you know, just because , uh, you pursue one type of integration strategy or model doesn't mean that you have to continue <laugh> down that path. And sometimes the, the best way to integrate is to take sort of slow steps, you know, develop some, some service arrangements or clinical integration , um, before you consider a full acquisition, a full employment. Um, and that really, again, depends on the practice, depends on the timing , um, depends on the composition of the practice. Um, and so , um, i , I think it, in order to, to be successful, you do have to be open a little bit to change Mm-Hmm , <affirmative> , um, and, and know that you're not always going to, to create something that is meant to be the way that the relationship lasts forever. Um, but the goal should be setting yourself up at the beginning to develop the relationship so that the integration is one that's comfortable for both sides and can lends itself to continued discussions about the, the best way , um, for that relationship to continue. And, and if it needs to change , um, can change in a way that , um, makes sense to both parties and both parties feel comfortable putting that on the table and figuring out the way to move forward.
Speaker 2:Well, I think that's a great place to end. Um, I like that summary and , uh, well thank you Victoria, and , uh, thanks Red . Talk to you later.
Speaker 1:Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.