Co Management Agreements
Cardiology is a major service line for our hospital. Can a Co Management Agreement strengthen its success with expansion, quality and efficiencies?
Physician alignment is a key strategic objective for our hospital. Our Cardiology program has been a major service line over the years and continues to grow. I am interested in a better alignment than just an employment agreement. With today’s cost and quality pressures we are looking at options to align our program to meet the goals and objectives. We want to continue a program that both benefits the hospital and physicians.
Has anyone had success with a co management agreement with any service line. The importance of aligning the physicians is for program expansion, quality and efficiency objectives. What is the best incentive structure that appropriately rewards the achievement of positive and sustainable change?
What are the benefits of this type of agreement?
What are some the challenges to look for?
Traditionally co-management agreements often struggle after the first couple of years as the cost savings and revenue sharing opportunities decrease. However with the transformation of healthcare that is occurring today the opportunities to share in the upside of this transformation make this model once again viable. The largest challenge will be to define an arrangement that meets the regulatory safe harbors related to Stark and Anti-kickback laws. Employement often services as the easiest harbor but it certainly is not the only one. One opportunity I have used in the past was to create an “institute” or “center” in my Hospital that provided the physicians the opportunity to have a percentage of any upside contribution margin over budget placed into a “restricted” fund that could be used to purchase capital equipment, hire additional support staff, fund resident over the program’s “allocated cap slots” fund research project and the like. There was no income distributed back to the individual physicians but gave them more “ownership” and control over their program and how it is resourced. By the funding coming from performance over budget and a percentage of the overage there is little drag on the overall portfolio.
We have had some success with developing a few different inpatient care service agreements. There was a defined expectation of continuous access to specialty care in the hospital, including overnight and weekend on call coverage. The private physician groups had designated physician leaders who met with the health system leadership to design the incentives together based on national quality metrics and also based on shared value metrics some of which the private physicians proposed specific to each specialty based on the physicians’ opinions about what defined high quality specialty care in the hospital and some of which the health system proposed based on hospital care quality metrics that are measurable and specific to each speciality. A few of the specific incentive elements included: clinical documentation expectations that articulated specific follow up plans for each patient (including outpatient transition and follow up plans), rapid access appointments for patients seen in the ER to help facilitate efficient outpatient follow up appointments with specialists within 1-2 weeks, and establishment of safety and quality databases with metrics specific to each specialty that were incorporated into OPPE for the physicians in the hospital.
I would like to share with you our experience in one of the areas of diagnostic that I believe its working effectively. The physicians of this particular area are beginning to participate of the net profit of each procedure they make, the net profit its already calculated as a standard for future payments. These amounts are paid to the physicians in a monthly basis. For instance: if the charge for the procedure is $1000 , the direct costs are $600, the physician receives $200 dollars and the hospital retains the other $200. This methodology has provoked that the group of physicians are permanently looking for more efficient ways to perform the same procedures and obtaining better use of supply and resources to optimize their benefits and consequently the hospital´s. We have done implementing the concept of win-win.
I am not aware of co-management agreements, but we have always tried to align the interest of physicians in the cardiology department as they are major producers and the profitability of this department is very critical to the overall performance. We have defined employment agreements that have a fixed and a variable component, with fixed being relatively small percentage of the total compensation. The variable is tight to both productivity (volume, revenue etc.) as well as to quality indicators. each component has a share in the overall variable components.