Are Independent Urology Practices Embracing Business and Clinical Integration to Prepare for the Coming Era of Value-based Payment?

LUGPA NEWS Are Independent Urology Practices Embracing Business and Clinical Integration to Prepare for the Coming Era of Value-based Payment? Gary M. Kirsh, MD President, LUGPA; The Urology Group, Cincinnati, OH [Rev Urol. 2016;18(2):103-105 doi: 10.3909/riu0719] ® © 2016 MedReviews , LLC I n recent columns, I have discussed how independent urology is well positioned heading into the new value-based payment paradigm that the Medicare Access and CHIP Reauthorization Act (MACRA; the law that passed approximately 1 year ago that replaced the sustainable growth rate formula for determining Medicare payments for health care providers’ services) is ushering in for urology and the entire house of medicine. Independent, integrated urology has always embodied the spirit of value-based payments: we embrace innovation, entrepreneurship, and efficiency with a goal of lowering cost and improving quality of care for our patients. With alternative payment models conceived in MACRA on the way to becoming reality, it is imperative that independent urology groups have a robust business infrastructure and increased clinical integration to enable them to adapt to the changes new payment models will bring. Each group must examine various aspects of its organization, and determine how best to align its practice so it can thrive under new payment models. Evolving our business practices for future success has been a hot topic of discussion at a series of recent regional meetings LUGPA has organized for its members. These meetings have allowed us to share best business practices with each other. Prior to these meetings, LUGPA administered a detailed survey to attendees regarding a wide range of the business and clinical processes of the groups participating. The results of the survey have enabled us to understand the state of our practices so that collectively we can understand what is working well and where areas of improvement exist. Through this survey we’ve examined trends in four broad areas: (1) Governance and Leadership Structure, (2) Facilities Integration, (3) Clinical Integration, and (4) Physician Compensation Structures. It is my hope that information obtained from this survey, some of which is summarized in this article, will provide insights into how you can best optimize your group’s business practices as we enter into the new value-based payment world. Governance and Leadership Structure • Establish a robust centralized decisionmaking structure. In all, 70% of groups surveyed said they have a physician board of directors or other organizational entity, such as an executive committee, making day-to-day business Vol. 18 No. 2 • 2016 • Reviews in Urology • 103 4004170006_RIU0719.indd 103 28/07/16 10:48 am LUGPA News continued decisions. Considering the importance and volume of business decisions coming in the future, groups that take day-today business matters to their physicians—even a relatively small subset of their physicians— will be at a disadvantage. It is becoming increasingly clear that the development of robust management teams, which include qualified physician and nonphysician leaders, will be necessary to improve business efficiency in the fast-paced and changing environment in which urology operates. Larger decisions that significantly impact the direction of the organization should be brought to larger numbers of physician members, but most decisions should be handled by a nimble management team. • Engage in an annual planning process to establish goals, directions and budget forecasts. Approximately half of the groups surveyed said they have embedded a process to establish annual goals. And nearly half of the groups also said they engage in annual planning to establish a budget forecast. By engaging in planning and budget forecasting processes proactively, urology groups are setting up a defined strategic framework to succeed. • Noncompete covenants among shareholders are critical. The majority of urology groups surveyed have implemented noncompete agreements. The importance of noncompete agreements, where allowed by law, cannot be overstated in my judgment. Those groups that don’t implement and enforce noncompete agreements are at risk of being held hostage by their least loyal physician partners. In the reimbursement world of the future it will be imperative that groups have the wherewithal to hold physicians accountable to clinical pathways, customer satisfaction, and a host of other measures. Without the strength of noncompete agreements binding physicians to the group it is difficult to achieve this leverage. Moreover, without noncompete agreements, your group is vulnerable to takeover as competitors try to pick off your least loyal members. Unfortunately, I have witnessed this first hand. • Physician leader compensation is paramount. Nearly one-third of groups surveyed have yet to move to a structure in which their physician leader is compensated for his or her administrative and leadership duties. How can urologists expect to continue to succeed in an increasingly complex business environment without empowering their physician leadership and compensating them for their administrative time? Leading a business of potentially millions of dollars of revenue and dozens or even hundreds of employees is not a pastime that can be handled between clinical duties and on weekends. Groups that are not willing to recognize these realities and invest in physician management are at risk of failure. • Ensure your group has hired the right administrative staff to effectively manage the business. A majority of group practices have grown their business by hiring the right full-time staff to properly manage their businesses. More than 7 out of 10 have a chief financial officer, chief operations officer, and clinical managers on staff. Having a professional staff in place to manage for growth is essential and should be considered mandatory by all LUGPA groups. Too frequently, I hear groups focusing on overhead. Of course, runaway overhead should not be tolerated, but an excessive focus on the cost of doing business is actually often counterproductive, as it will prevent your group from assembling the right cadre of professionals that can promote revenue growth (revenue growth is a better recipe for success than cost cutting) and guide you to success in the future. Facilities Integration • Facility assessment is critical to ensure physicians are deployed properly to maximize return on investment. The average physician per location varies widely within the LUGPA membership. Although some groups have 14 physicians at a single location, others have an average of just two. If your group has an average of two physicians per location (and especially if you have yet to close facilities), it is a sign that you probably have not yet assessed your facility footprint and really embraced integration as a group. Facilities integration is challenging work—physicians are often loath to consolidate with partners with whom they have not traditionally shared space—but this type of integration is critical to promote efficiency and the development of group culture. • Establish rules and guidelines to maintain consistency in office appearance. More than 70% of groups say they maintain central control over the appearance of offices within the group. A high-quality and consistent office appearance, regardless of location, is an important strategy that all urology groups should use to begin to build internal culture and a recognizable brand in the broader community. 104 • Vol. 18 No. 2 • 2016 • Reviews in Urology 4004170006_RIU0719.indd 104 28/07/16 10:48 am LUGPA News Clinical Integration • Groups are hiring subspecialty physicians. The majority of groups surveyed report they have hired fellowship-trained physicians. This is a positive trend and indicates that groups are recognizing the value of subspecialization. Clinical integration and subspecialization— making sure patients are getting to the best doctors who meet their needs—must be the hallmark of the successful urology practice of the future. • Establish systems so that subspecialists are getting internal referrals. Although having subspecialists on staff is important, it’s also vital to ensure they have an adequate patient load. More than 70% of practices do have systems in place so that subspecialists are receiving internal referrals. If your group is considering hiring fellowship-trained physicians, it’s paramount that an internal referral process is activated so that they are receiving appropriate referrals. • Establish clinical protocols and a process to monitor and enforce adherence. Nine out of 10 groups say they have established clinical protocols in their groups. Although this is an encouraging development, fewer groups say they have established a system to monitor and enforce these protocols. It is important for groups that have established protocols to take the next step and measure their adherence. Only then will the hard work of protocol development pay off with measurable results. • Appoint a physician to lead clinical integration and compensate that person. Approximately half of groups surveyed said they had a chief medical officer on staff who is compensated. It is essential that groups have a paid physician leading clinical integration, establishing protocols and enforcing adherence to them. • Establish a physician performance review system. Very few groups have established a physician review system. Some groups have begun using patient and staff satisfaction surveys, along with clinical measures, to assess physician performance. Physician performance reviews are critical in identifying physician outliers so that any potential performance shortcomings can be addressed in a collaborative and positive fashion. Physician Compensation Structures • Ensure physician compensation systems are aligned with the group’s growth strategy and plan for success. In my experience, there is no perfect, “one size fits all” approach to physician compensation. It is important for groups to recognize that physician compensation formulas need to adapt and evolve over time to align incentives and promote clinical integration. Some groups compensate all of their shareholders equally. This model is ideal for promoting clinical integration, but may not be practical depending upon the size of the group, as well as the distribution of age and work ethic among the partners. On the other hand, some groups compensate physicians based strictly upon clinical productivity. This approach probably needs to be modified to succeed as an integrated urology business in the future, and I encourage groups who employ this model to revisit it. A strictly “eat what you kill” compensation model does not allow for growth (physicians often jealously guard their patient base and resist referring to new service lines) or subspecialization. LUGPA surveys show that many successful groups work out a blended approach to physician compensation, somewhere between equal sharing and pure productivity, to align incentives while meeting the needs of the unique physician complement that exists in the group at that time. The results from these surveys, and the roundtable discussions we have held surrounding them, offer LUGPA members a road map to optimize their practices’ chance of success. We will continue these discussions among each other throughout the year at upcoming regional meetings as well as at our annual meeting in November 2016. As I read our survey results and discuss the clinical and business characteristics of LUGPA groups across the country, I am pleased to see how many groups are engaged in reforming their businesses to position for success in the coming payment paradigm. If your group is already working to raise your game to meet the challenges of the future—congratulations! If your group has yet to confront the fundamental need for improved business and clinical integration, you should start working on it today. I fear that those who wait will be unable to thrive in the changing healthcare landscape that will certainly be upon us over the next few years. Vol. 18 No. 2 • 2016 • Reviews in Urology • 105 4004170006_RIU0719.indd 105 28/07/16 10:48 am