Physician-health system partnerships with Craig E. Holm, FACHE

Craig E. Holm, FACHE, is the author of the Health Administration Press book Next Generation Physician-Health System Partnerships and vice president of Health Strategies and Solutions, Inc., in Philadelphia, Pa. Mr. Holm specializes in strategy development for physicians, hospitals, and health systems, including such areas as avoiding financial losses from physician affiliations, laying the foundation for effective physician-health system partnerships, and structuring partnerships that will pass regulatory scrutiny.

Click on a link below or scroll down to read the questions posted for Mr. Holm as well as his responses:

• Balancing the interests of the hospital and the physicians when PHO contracts are the issue
• Physician sales associate commission salary formulas
• Physician liaison (new position for network)
• Caribbean clinic
• New competitive outpatient facilities sponsored by physicians
• Physician services
• Medical Director vs. Paid Chiefs of Service
• IDS Medical Staff Development vs. Network Development
• Employed Physicians and the Medical Director

malave - 01:59pm May 3, 2001
How can I persuade physician members of the organization from setting up their own cadre of services to compete with their hospital?

1. Holm's response - 03:49pm May 8, 2001 (#1 of 1)
   To some extent the trend of physicians setting up services competitive with their hospital is inevitable. Physicians are generally working harder for the same or less income. Ancillary revenue is a logical source (for the larger, organized groups) of additional revenue. My suggestion is to pick your battles. Do not fight ancillary services which will "inevitably outmigrate" (e.g., OP eye procedures, chemo, EKGs, OP imaging etc), but try to partner with physicians in those captital-intensive services that can potentially represent incremental revenue (or a minimal loss) to both partners. Also, the tendency is to only consider services being delivered in the hospital, in the physician's practice, or in a joint venture relationship. There are lots of other partnerships to consider as ways to meet the objectives of each party (e.g., joint operating agreement, management contract, and others).

robinson - 04:12pm May 10, 2001
What salary incentive formula do you recommend we initiate for our physician sales team? Our sales team calls on physicians currently but we want to incentivize their efforts to help our health system gain new market share.

1. Holm's response - 09:49am May 11, 2001 (#1 of 5)
   Physician outreach programs are one of my favorite initiatives to build (or rebuild) relationships with private practice physicians. It is critical, however, that issues and problems that are identified by your physician sales team are resolved, and the resolution communicated to the physician. Usually, the issues and problems identified involve hospital operations and systems (or nursing staffing in today's environment). Many hospitals use salary incentives for the physician outreach staff -- your "sales team."
2. I would recommend that an incentive component of salary be 15-20%, large enough to be meaningful, but not too large a component due to the difficulty in measurement systems (see below). Two ways to consider measuring achievement of the incentive component: the first is to establish and measure achievement of quantifiable improvement in hospital operational efficiency (e.g., lab results turnaround time, ED waiting time, OR turnaround time, etc). To the extent that the physician sales team is able to contribute to the identification of operations and systems inefficiency and their actions help to improve efficiency, the sales team is rewarded. Difficult to measure, but sometimes used. The second way to measure physician sales team performance is to survey the medical staff and their perceptions of hospital operational efficiency. The sales team should be helping to improve operations and systems in order to earn the loyalty of physicians. If that does occur, and physicians indicate high satisfaction, the sales team should be rewarded. Whatever you do, do not reward the sales team on the basis of increased referrals to your hospital!

McQueen - 09:13am May 21, 2001 (#2 of 5)
I read your response on incentives in terms of operational efficiencies. We are in a medical staff building mode. What do you recommend in terms of incentives for bringing in new physicians to a medical staff, e.g. a per-physician commission? And are there any legal or regulatory issues to keep in mind? Thank you.

1. Holm's response - 02:35pm May 21, 2001 (#3 of 5)
   I am not an attorney, so I would not be able to give you legal advice. Paying recruitment bonuses is VERY common today for an incentive to recruit nursing personnel, with the nursing shortage. Paying physician "bonuses" for successful recruitment is much less common. I have seen two techniques used--payment (fairly modest) for each "qualified lead" and larger bonuses for successful recruitment.

banko - 09:36pm May 26, 2001 (#4 of 5)
Hey there, fellow Sloanie..... Going with this thought of physician sales associates--as you know, I work for a for-profit physician practice management company based in Raleigh-Durham, North Carolina. We use "provider relations representatives" to build relationships with our physicians. Since I'm near the Research Triangle and the home of many pharmaceutical giants, what lessons can hospitals take from such companies and how they use their "drug reps"? I hear from my physicians, including our CMO, all the time how effective drug companies are with their sales force. I've always thought hospitals could take these lessons to attract new medical staff, align current medical staff, and (as you said above) identify barriers to using the hospital system. Peter Banko

1. Holm's response - 08:28am May 29, 2001 (#5 of 5)
   Peter, you are as articulate as ever! Pharmaceutical reps are quite effective in getting into the door. Hospital sales reps have the challenge of getting in the door, and providing practice support vis-a-vis hospital operations, to the practice.

ericson - 10:08am May 17, 2001
We are currently in the process of establishing a physician liaison in our network that will be responsible for out reach to our physicians in the community. My question is broad. We have our model in terms of salary, incentive and duties but I would like to hear what some national averages may be for a position like this?

1. Holm's response - 01:50pm May 23, 2001 (#1 of 1)
   The duties and expectations vary quite a bit for physician liaisons, in addition to the geographic salary differences. Nevertheless, a typical range is $40,000 - $60,000.

Alexander - 11:49am May 17, 2001
I am a healthcare marketing consultant representing a client/organization that is in the process of developing a 90-bed facility for natural/integrative treatment of cancer and other chronic degenerative diseases. This clinic will operate in the Caribbean in order to be able to provide treatment protocols that are not approved in the United States. The organization contracted with a naturopathic physician to serve as the vice president of medical and scientific technology.

Launch has been delayed for a period of 9-12 months due to capital development issues and market conditions. A heated contractual dispute between this practitioner/director and the organization has emerged during this period. The principals are trying to find a solution to the dispute but would like to develop a parallel strategy for replacing the medical director without causing a ripple of bad public relations with potential investors and/or referral sources. Please keep in mind that this clinical director role is very specialized due to the unique nature of the clinic focus and modalities. Also, bear in mind that although the clinic environment is in a tropical paradise setting it inherently does not have the recruitment/retention amenities of a major metropolitan medical center setting. Therefore, the population of qualified medical candidates is very small and very "networked". Please share thoughts and/or strategies for this "case-study."

1. Holm's response - 02:30pm May 21, 2001 (#1 of 3)
   A "heated contractual dispute" is seldom, in my opinion, resolved in a satisfactory manner by the original parties. One suggestion is to include an objective, independent mediator to suggest contract resolution ideas. While the field you reference is quite specialized, there are always options for alternative coverage and/or "champions." Sounds quite exciting. Good luck with your new venture and good luck with conflict resolution.
2. 1. Alexander - 04:36pm May 23, 2001 (#2 of 3)
      Thanks for your reply, Craig. Can you recommend any independent mediators and/or recruiting specialists with experience recruiting / placing alternative-complementary medical physicians?
   2. 1. Holm's response - 01:49pm May 24, 2001
         (#3 of 3)
         If you contact Julie Chyna, managing editor of ache.org, at ache@ache.org, she can give you my e-mail address and I will give you some names.

Tucker - 11:52am May 17, 2001
What difficult issues do physician groups face when setting up a freestanding outpatient surgical center to compete with a hospital system that has no FOSCs out in the community? The question then is, what countermeasures -- whether related to those issues or any other points of action -- can the hospital cost-effectively take to vitiate such an initiative?

1. Holm's response - 02:48pm May 21, 2001 (#1 of 1)
   This is a very common initiative today. There are several "counter measures" a hospital can use to mitigate the effects of freestanding ASCs. First, some hospitals exclude freestanding ASCs from managed care contracts in which the hospital participates. Second, some hospitals give less desirable times on the OR schedule to those physicians that are less than full-time commitment to the hospital.
2. But the best strategy is to make hospital OR operations and systems as efficient as possible. "Mature" ASC's (i.e., those operational for 5-10+ years) are competive with hospital ORs due to operational efficiency (measured as number of cases performed per day or session), rather than spectacular returns on capital investment. So, if the hospital can offer efficiency equal to a freestanding ASC, there is usually less than adequate incentive for physicians to place substantial capital at risk.

Paul - 01:44pm May 18, 2001
Our PHO is interested in expanding the services we provide for our member physicians. How do you suggest we begin assessing the primary needs of our members, and what types of services do you feel are the most popular and most needed in physicians' offices currently?

1. Holm's response - 09:45am May 21, 2001 (#1 of 1)
   The first step in determining if your PHO could expand services to members is to survey membership to ascertain interest in a menu of potential services. Those that express interest proceed to step 2, which is a review of the practices' income statements. Those services that improve the practice bottom line are usually those that "sell" to membership. In my opinion, the most popular today are: (1) pooled insurance purchasing (health insurance for staff, general liability, disability, etc); (2) staff recruitment assistance (particularly help in finding nursing staff!!); (3) practice promotion and marketing. Notice that billing and collections is not on the list!!

hess - 02:56pm May 18, 2001
We are a rural facility (92 beds, about 4,000 admissions per year) with about 40 active physicians. There has recently been increased pressure from the medical staff to either hire a medical director to handle some of the admin. burden, or pay the chiefs of some departments (namely medicine, surgery). I have some models of part-time medical directors for other rural organizations, but I wondered if you might provide some insight on whether there is precedent for paying the chiefs; and if so, what sort of dollars might we be looking to spend?

1. Holm's response - 04:46pm May 18, 2001 (#1 of 1)
   Paying medical directors for services is fairly common. There seem to be two primary categories where this is most common: the large hospital where the burden is fairly high, and the small rural hospital (like yours) where this practice can aid securing a "volunteer."
2. Be careful--once given, these stipends are nearly impossible to take away. Paid directors usually give a greater degree of commitment than the unpaid, volunteer director. My suggestion on valuing time is as follows. First, try to objectively determine the approximate amount of time necessary to fulfill the administrative duties requested (not calculated by the physician). Then pay a discount for the administrative time on a per hour basis. The discount is off of the clinical value of time by that particular physician. The discount is appropriate since the highest and best use of a physician's time should be clinical time. My rule of thumb discount is 50% off of the per hour clinical value. I hope that these are good starting points for negotiation.

williamson - 08:56pm May 21, 2001
Our Integrated Delivery System (IDS) includes a health insurance plan with over 100,000 enrollees in various product lines. The PHO provides the contracted network of providers, takes financial risk for the health plan and other payor contracts, and manages the medical care and expenses. The health system has currently engaged a consultant for medical staff development (and filling new office space?); the PHO is engaged in internal discussions on network development and criteria to add or close to specific specialty/physicians; the health plan is developing a new POS product with a preference to include a limited network of physicians. What are the critical issues the IDS should consider to come to terms with different objectives in medical staff development and physician participation in its related entities (health plan, PHO, system)?

1. Holm's response - 09:27am May 31, 2001 (#1 of 1)
   The issues related to medical staff development and selecting providers for managed care panels are often in conflict. Medical staff development planning is usually "credentials neutral" in the process of determining projected needs for physicians by specialty and geographic area. Community needs are the focus. Developing a managed care product and its panel of providers involves issues of selection criteria, enrollment requirements and time periods, targeting multispecialty groups to fill panels vs. open enrollement by providers, etc.
2. One of the most common conflicts occurs when a medical staff development plan recommends that a specialty is well served in terms of community need, but existing practices are not interested in participating in a managed care panel. The issue to address is whether to try to work with existing practices vs. recruiting additional practices for a managed care panel even though community need is not indicated. Also, to what extent should the IDS assist in the recruitment of additional practices for the managed care panel? And what are potential "backlash" effects of going outside existing (uninterested) practices to fill the panel requirements.
3. A similar issue may arise relative to "coverage" findings in a medical staff development plan. The FTE physician supply count may indicate that a particular specialty is well served, but qualitative findings may indicate that a specialty or geographic region are not well "covered" as evidenced in timely access to the practice, service quality, and other factors. The key issue for the IDS is how to work with existing practices to improve coverage, or to what extent should the IDS take steps to improve coverage when the community need projections do not indicate a need for additional physicians. Good question.

Lisa - 08:58am May 29, 2001
Hi Craig, I'm asking about an employed medical staff of 5 at a small rural hospital. Since the staff are all employees of the hospital, should the medical director receive a stipend for his/her services? Are the CEO/Med. Director/Board Chair relations and leadership issues still the same where the physicians are employees of the hospital? Should an employed physician hold a seat on the Board of Trustees in such a hospital? Thanks for letting me ask multiple questions. Regards, Mark Lisa

1. Holm's response - 09:40am May 31, 2001 (#1 of 1)
   Hi Mark: The options for medical director are to have the 5 physicians share or rotate the responsibility, or designate one physician. I would favor the designation of one individual, to recognize the "learning curve" required for someone to fulfil the duties. I would not suggest a stipend, but instead an "allowance" of less clinical time required to fulfill the administrative responsibilities. For example, the other employed physicians may have a requirement of 36 clinical hours per week (4 1/2 days) and the medical director given an allowance of an additional 4 hours to fulfill additional adminstrative duties. Therefore, the medical director would be required to devote 32 clinical hours, 4 medical director hours, and 4 additional administrative hours per week.
2. Also, I favor physicians being included on boards. Usually with these seats, term limits also work well to introduce fresh ideas to the board. Your last questions relates to potential dynamics of CEO/Medical Director/Board Chair relations. My observation is that the relations are highly dependent on the personalities of the individuals in those positions. Dominant CEOs can dominate those relationships, as can Board Chairs or Medical Directors. I would not necessarily correlate an employment status of a medical director to the nature of those relationships.