5 Minutes with HFMA President Joe Fifer
Lessons Learned on the Financial Impact of Employed Physicians
with Joseph Fifer, president and CEO, Healthcare Financial Management Association
HR: How is the employment of physicians changing the financial outlook of health systems?
JF: Most, if not all, of the health systems we speak with on the issue of physician employment are experiencing losses on their investments in physician practices. Even the accounting for these practices varies from organization to organization, which adds to the confusion. For example, are lab revenues in the practice or in the hospital? In some instances, we’ve seen these issues translate into either ratings warnings or ratings downgrades.
So in this environment, it’s important for health systems to remember the strategic rationale for hiring a specific physician or acquiring a given practice. Typically the underlying strategic driver is to better position the health system for value-based payment. So the key activities the organization needs to focus on are those that will help physicians improve the quality—both clinical outcomes and patient experience—and cost efficiency of care delivery. I like to think of it as defragging the healthcare system.
Success in those activities may not translate into reduced per-physician losses, and in some cases where care is better managed, it may actually increase them. But those losses can be offset by reduced cost to provide care, increased performance-based payments, and value-based steerage. I should note that a key to this strategy seems to me to be a significant change in the payment methodology. Coordinating care, reducing readmissions, reducing complications, and streamlining processes and care delivery could significantly harm revenues in a fee-for-service environment. While it’s great for patients, and it’s the right thing to do, none of us really know what impact this will all have on health systems’ bottom lines.
HR: How does this change the CFO’s role?
JF: I’m not sure that it fundamentally does. I have always believed that a good CFO has broad and strategic vision that goes way beyond just the numbers. When I think about successful CFOs I’ve encountered throughout my career, they typically have open, honest, and highly collaborative relationships with physicians in their organizations.
And while that’s not necessarily a change in the CFO’s role, I think that will grow in importance. Moving forward, one of the things that will propel successful organizations forward is the ability of CFOs (or really any member of the finance team) to sit at the table with physicians, look at the data, and have a productive conversation about what needs to occur to improve quality and reduce cost for the patient.
HR: What are the most successful CFOs doing today when it comes to clinical integration?
JF: It starts with attitude, the tone at the top. The best thing a CFO can do is to be openly supportive of clinical integration strategies. It is a powerful statement for an organization to see a CFO and CMO working together on projects, talking the same talk, and showing mutual respect for one another’s disciplines. Only from this relationship starting point can the best clinical integration take place.
At the end of the day, physicians are scientists. And like finance people, they are hungry for good data that helps them improve patient outcomes. One of the key things HFMA sees successful organizations do is collaborate with physicians to make sure that the finance team is providing them with good data.
It starts with a discussion about what’s measured and how it’s measured. If a health system wants to improve outcomes and reduce the overall cost of care delivery for a specific condition, it needs to involve its physician champions in identifying a manageable set of cost and quality measures, defining how they should be measured (what should be included in the measurement calculation, what should be excluded), and then specifying which systems are used to pull the data.
Once you have data, there needs to be a resource available to help physicians explore and understand any anomalies they may see in the data. Finally, and this is probably the most important to building trust and credibility: When there’s an issue with the data, finance needs to own it, fix it, and make sure it’s not repeated.
HR: What role should the CFO play in building an employed medical group?
JF: It’s critical that the CFO understands and agrees with the employed medical group strategy. While honest debate can always occur about the “how” of building a medical group, if the “why” is debated, it will become apparent and divisive. On the contrary, if a CFO sees the future, and understands how an employed medical group enhances this vision, he or she can actively develop a financial model that can work. And, with this established credibility—by supporting the vision—it opens the door for engaged conversation as opposed to being frozen out or isolated.
Beyond what we’ve discussed, I think it’s important for the CFO to make sure the incentives for physicians in the employed medical group are aligned with the organization’s strategic goals and the prevailing managed care contracts. While we’ve seen some movement to include quality measures in physician compensation packages over the past five years, the amount of income tied to those measures is still low relative to productivity-based measures.
Joseph J . Fifer, FHFMA, CPA is president and CEO of the Healthcare Financial Management Association, the nation’s leading membership organization of healthcare finance executives and leaders.