Exploring integration models that work for both hospitals and practices

By Shannon Geis
August 22, 2016
Body of Knowledge Domain(s): Operations Management, Organizational Governance

The inevitability of integration looms large over many medical practices these days. And a number of practice executives and physicians are asking the question: Can we align with a hospital for certain needs yet remain independent in other areas? 

In a recent MGMA Webinar, “Exploring Integration and Partner Models Between Physicians and Hospitals,” Curt Chase, partner at Hush Blackwell, LLC, Denver, Colo., discusses some of the most common integration models and the ways in which each can be beneficial.

The integration models used most often are either contractual agreements or employment arrangements. Contractual models are structurally straightforward and are typically implemented when a hospital needs coverage of a specific service or patient population where an outside practice can assist. However, the incentives of the hospital and practice are not very aligned, which can lead to misunderstandings and give no reason to share risk.

Employment arrangements, on the other hand, allow physicians to get rid of the hassle of many practice management headaches, but they also lose an enormous amount of autonomy in the process.  

New integration models

Chase recommends looking into a newer pseudo-employment model, which he dubs the Group Practice Subsidiary model. The arrangement combines the benefits of independence and employment for both the hospital and the practice, according to Chase. The idea is to “align the practice and hospital with shared goals, but maintain autonomy over day-to-day operations,” he says. 

To implement this model, the hospital creates a subsidiary that employs the physicians rather than the hospital directly. The subsidiary is also largely controlled by the physicians rather than the hospital. 

Chase says there are several advantages to this model:

  • It allows the hospital and the physicians to integrate better. The organizations can jointly contract with payers around risk and bundle payments. 
  • The subsidiary entity immediately gets to take advantage of the hospital’s contracts. The group is no longer negotiating on its own for payer contracts, and is part of the hospital for the purposes of contracting. “We’ve seen revenue increases for groups from anywhere from 10 to 60% depending on the specialty,” says Chase. 
  • The laws that apply to this model do not allow the hospital to subsidize the group, so the subsidiary group does not turn into a money pit for the hospital. 

“We are seeing this get a lot of traction around the country, both in specialty practices and primary care,” says Chase. “This is certainly a model that is stabilizing revenue and putting practices and hospitals in a better position to manage population health and negotiate with payers.”

What to consider before integrating

Chase recommends looking into risk-sharing arrangements regardless of whether your practice is planning to integrate, because it can help manage risk in the long run as the healthcare environment changes. 

“Start by partnering with hospitals or other groups to deal with certain issues or populations, such as diabetes, and go from there,” says Chase. He says to start small to minimize adverse effects if it doesn’t work out. 

If you are considering different integration models, Chase says to start with what your goals are and find a model that best fits them. “There is no one correct model for everyone,” says Chase. “So find the one that works for you.” 

To learn more about the Group Practice Subsidiary model and other integration models, check out the “Exploring Integration and Partner Models Between Physicians and Hospitals” webinar available on demand now.

Shannon Geis, Staff writer/editor, MGMA

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