Balancing Profit and Purpose: Strategies for Medical Groups
In the evolving landscape of healthcare, hospitals continue to grapple with financial challenges, often operating on razor-thin margins of less than 2%. A significant factor contributing to these financial woes is the losses incurred by employed physician practices. The annual loss per employed physician now exceeds $100,000 and is on an upward trajectory. This financial strain is a direct result of the nationwide physician shortage and the misalignment of physician and healthcare system incentives. Additionally, physicians often feel undervalued, underappreciated, and at odds with hospital leadership. In this blog post, we will explore strategies employed by successful healthcare leaders to address these issues and improve the financial performance of physician practices.
Cultural Challenges and Physician Dissatisfaction
A physician’s job satisfaction and alignment with the hospital’s missions are essential for overall success. Unfortunately, the disconnect between physicians and hospital leadership can exacerbate the financial challenges faced by healthcare institutions. When discussing these financial challenges with physicians, it becomes clear that they perceive hospitals as overly focused on financial performance, rather than the well-being of patients and caregivers. Consequently, physicians may lack the motivation to actively participate in solving the problem.
Strategies for Physician Satisfaction and Improved Performance in Healthcare Practices
To tackle the financial losses in physician practices and address the underlying cultural issues, healthcare leaders are adopting strategies that focus on physician satisfaction and engagement. These strategies aim to bridge the gap between hospital leaders and physicians and create a more harmonious working environment.
Empowering physicians to take the helm in shaping a practice’s culture is the fundamental strategy for enhancing physician performance. By allowing physicians to establish the foundation of leadership, they gain the liberty to influence both the culture and the autonomy of individual practices, fostering improvements in productivity and overall work satisfaction. Here are three approaches healthcare practices can implement to ensure their physicians feel included and welcomed.
Physician-Led Governance: Many successful organizations place the leadership of the physician enterprise in the hands of a physician board, mirroring the structure of a large multispecialty or single-specialty physician-owned practice. This approach ensures that physicians have a meaningful voice in shaping the culture and operations of the practice. And physicians have a responsibility to develop and implement plans to ensure the practice is financially self-sustaining.
Freedom to Shape Culture: The physician board should have the freedom to influence the culture and operational processes of the practice. This autonomy fosters a sense of ownership among physicians, which, in turn, drives performance and commitment.
Individual Practice Autonomy: While common electronic medical record (EMR) systems and financial protocols may exist, individual practice sites must have the flexibility to adjust practice hours, staffing and operational processes. Providing physicians with this level of autonomy leads to a higher level of commitment and engagement, further bolstering overall performance.
Practice Performance Goals
In the relentless pursuit of excellence, performance goals must be comprehensive and multifaceted. These approaches foster ongoing dialogue and the establishment of precise standards, propelling the practice toward greater productivity, increased patient satisfaction and a sustainable state of financial well-being. Here are some strategies that will guide physicians into achieving their objectives.
Establishing Metrics: Metrics must be established to measure provider productivity, financial performance, patient satisfaction and clinical outcomes. These metrics serve as the foundation for tracking performance and setting goals.
Regular Feedback: Providers require quarterly feedback on how they are performing against these key metrics. This feedback should be constructive and should help physicians understand how to improve their performance.
Alignment of Compensation: Physician compensation should be closely aligned with the goals of an organization. This incentivizes physicians to actively contribute to the practices’ financial and operational objectives.
Rewarding Financial Performance: Physicians should be compensated based on practice revenue minus expenses. This compensation structure encourages physicians to drive revenue growth and exercise control over expenses. In cases where practices are operating at a deficit, compensation can be based on reducing practice losses.
Embracing Value-Based Care
As healthcare transitions from a volume-based to a value-based model, successful organizations will be those that foster a culture in which physicians are engaged and driven to improve organizational performance. By aligning the interests of physicians with those of the healthcare institution, these strategies ensure a more cohesive and financially sustainable healthcare ecosystem.
With healthcare continuously evolving, the financial stability of hospitals is essential to improve the performance of physician practices. Success lies in addressing cultural issues, creating a collaborative environment, and aligning the interests of physicians with the organization’s goals.
Most non-proceduralists struggle to break even financially. Participating in value-based contracts provides a new source of revenue to improve overall financial performance.