In the era of accountable care, hospitals and physicians are partnering as never before. There are several approaches to hospital-physician integration, including employment, co-management and contracting for certain services. One perhaps under-explored option is service line agreements. Tucson (Ariz.) Medical Center and the Tucson Orthopaedic Institute, PC, began developing an SLA in the fall of 2007, with the first agreement effective July 1, 2008. While SLAs can be rewarding clinically, operationally and financially, they present several challenges. Scott Slagis, MD, partner at Tucson Orthopaedic Institute and medical director of the orthopedic SLA, and Stuart Katz, director of the hospital's orthopaedic outpatient surgery department and manager of the SLA, share tips for creating a successful venture.
Change attitudes
The first step in forming an agreement between a physician practice and a hospital is to change the organizations' attitudes toward each other. "The reality for most places is that there is an adversarial, non-collaborative relationship between hospital administration and physicians, which is not productive in achieving goals for patient care," Dr. Slagis says. The concept of the SLA at TMC was spurred by a change in hospital leadership and a realization, on both sides, that "a collaborative effort would be helpful in producing a better product. They had to change that attitude. Physicians had a considerable amount of knowledge to apply to the healthcare process, and could be effective partners in improving the overall quality of care and profitability for the hospital," he says.
Physicians at the Tucson Orthopaedic Institute also needed to change their attitude toward the hospital. "The physician attitude at most hospitals is a civil servant attitude: Do your work at some entity you don't really care about and then leave," Dr. Slagis notes. "That attitude had to be changed." Engaging physicians in the management of a service line required that they be invested in the outcomes and believed that a partnership could be successful. If members of the agreement do not believe that working together to achieve common goals is possible, the SLA is likely to fail. "My suggestion is don't enter into [an SLA] unless you have real leadership in hospital administration and the physician group, and you commit to developing a high quality product, which is the orthopedic service line at the hospital," he says.
Partnering for patient care and quality specifically is essential to SLA success, according to Mr. Katz. The decision should not be solely financially motivated, but should be driven by a desire to improve quality of care. "It's about process and efficiencies, not dollars. You need to focus on the process and how [the hospital] views physicians as partners and physicians view the hospital as partners," he says. "If you [get] cost reductions associated, good, but focus on improving quality and improving efficiency. If those aren't what you start with, you shouldn't start."
Agree on metrics
Dr. Slagis and Mr. Katz say one of the biggest challenges in creating an SLA is agreeing on metrics by which to measure the physicians' and hospital's success. The hospital and physician group have to agree on not only what to measure, but also how to measure it, what the goal is, who is responsible for achieving the goal and who is responsible for measuring. Some examples of metrics that TMC and the Tucson Orthopaedic Institute agreed on include surgeon arrival time in the operating room, surgical care improvement process compliance, patient satisfaction, utilization of appropriate implants and turnover time.
While metrics are difficult to agree upon, discussing these issues helps strengthen the relationship between the hospital and physicians, Mr. Katz says. "There may be times where [the groups] are diametrically opposed to a particular metric. Working through those conversations really helps you build a partnership." In fact, Dr. Slagis suggests that while metrics are essential for measuring performance and tracking the effectiveness of interventions, how the hospital and physicians create the metrics are equally, if not more, important. "If it's not a collaborative effort, it's not going to be effective, and you're not going to build a bridge of collaborative and successful outcomes. Metrics are significant, but their development and how they're attained are a more significant problem," he says.
Commit to management
A key tenet of a service line agreement is that physicians play a large role in managing the service line. Understanding the true scope of management responsibilities is critical before entering an SLA. "Management is not just having meetings," Dr. Slagis says. "It's an enormous amount of work, and it has to be well documented and agreed upon in advance so everyone knows what they're in for." TMC and Tucson Orthopaedic Institute's SLA includes 52 major management items, including supervising staff, participating in hiring and firing, participating in third-party contracting with vendors or physician services and negotiating with the anesthesia group. Dr. Slagis says the SLA is a new hospital-physician relationship because "the expectation is physicians bring a valuable product to management of the service line at the hospital in terms of management skill and knowledge. They're expected to work hard for it and produce a good product."
One area physicians in the orthopedic group spend a significant amount of time is in the supply chain, particularly the type and cost of implants for patients. Physicians in the Tucson Orthopaedic Institute collect national data on implants to assess their overall value for different patients. They also educate themselves on the price of implants and assist the hospital in negotiating better prices with vendors. Over four years, the physicians helped save the hospital $20 million in implant costs without eliminating any vendors. "In most institutions, there is an insidious introduction of expensive technology no one is really keeping an eye on. It's easy for this technology to be inserted, and much doesn't have any value," Dr. Slagis says. "Heeding and understanding that as physicians has [caused] a dramatic change."
Determine payment system
While the physicians helped bring $20 million in savings to the hospital, these savings did not translate directly into payment for the physicians, according to Dr. Slagis. Instead, physicians and the hospital had to discuss a fair way of compensating each party for meeting metrics and performing management duties — one of the most difficult tasks in establishing an SLA. One way to facilitate fair payment is to document physicians' time spent in management and what specifically the physicians did during that time, Mr. Katz says.
Under TMC's SLA, reimbursement for meeting metrics is based on complete or partial achievement of a metric goal. For example, Mr. Katz says surgeons could receive 100 percent payment for meeting a certain metric, such as surgeon timeliness, in at least 95 percent of cases. If the metric is met in only 93 to 94 percent of cases, payment may be reduced to 80 percent; 90 to 92.9 percent achievement may garner 40 percent payment; and below 90 percent may receive no payment. This system incentivizes physicians to continue to improve on each metric.
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The first step in forming an agreement between a physician practice and a hospital is to change the organizations' attitudes toward each other. "The reality for most places is that there is an adversarial, non-collaborative relationship between hospital administration and physicians, which is not productive in achieving goals for patient care," Dr. Slagis says. The concept of the SLA at TMC was spurred by a change in hospital leadership and a realization, on both sides, that "a collaborative effort would be helpful in producing a better product. They had to change that attitude. Physicians had a considerable amount of knowledge to apply to the healthcare process, and could be effective partners in improving the overall quality of care and profitability for the hospital," he says.
Physicians at the Tucson Orthopaedic Institute also needed to change their attitude toward the hospital. "The physician attitude at most hospitals is a civil servant attitude: Do your work at some entity you don't really care about and then leave," Dr. Slagis notes. "That attitude had to be changed." Engaging physicians in the management of a service line required that they be invested in the outcomes and believed that a partnership could be successful. If members of the agreement do not believe that working together to achieve common goals is possible, the SLA is likely to fail. "My suggestion is don't enter into [an SLA] unless you have real leadership in hospital administration and the physician group, and you commit to developing a high quality product, which is the orthopedic service line at the hospital," he says.
Partnering for patient care and quality specifically is essential to SLA success, according to Mr. Katz. The decision should not be solely financially motivated, but should be driven by a desire to improve quality of care. "It's about process and efficiencies, not dollars. You need to focus on the process and how [the hospital] views physicians as partners and physicians view the hospital as partners," he says. "If you [get] cost reductions associated, good, but focus on improving quality and improving efficiency. If those aren't what you start with, you shouldn't start."
Agree on metrics
Dr. Slagis and Mr. Katz say one of the biggest challenges in creating an SLA is agreeing on metrics by which to measure the physicians' and hospital's success. The hospital and physician group have to agree on not only what to measure, but also how to measure it, what the goal is, who is responsible for achieving the goal and who is responsible for measuring. Some examples of metrics that TMC and the Tucson Orthopaedic Institute agreed on include surgeon arrival time in the operating room, surgical care improvement process compliance, patient satisfaction, utilization of appropriate implants and turnover time.
While metrics are difficult to agree upon, discussing these issues helps strengthen the relationship between the hospital and physicians, Mr. Katz says. "There may be times where [the groups] are diametrically opposed to a particular metric. Working through those conversations really helps you build a partnership." In fact, Dr. Slagis suggests that while metrics are essential for measuring performance and tracking the effectiveness of interventions, how the hospital and physicians create the metrics are equally, if not more, important. "If it's not a collaborative effort, it's not going to be effective, and you're not going to build a bridge of collaborative and successful outcomes. Metrics are significant, but their development and how they're attained are a more significant problem," he says.
Commit to management
A key tenet of a service line agreement is that physicians play a large role in managing the service line. Understanding the true scope of management responsibilities is critical before entering an SLA. "Management is not just having meetings," Dr. Slagis says. "It's an enormous amount of work, and it has to be well documented and agreed upon in advance so everyone knows what they're in for." TMC and Tucson Orthopaedic Institute's SLA includes 52 major management items, including supervising staff, participating in hiring and firing, participating in third-party contracting with vendors or physician services and negotiating with the anesthesia group. Dr. Slagis says the SLA is a new hospital-physician relationship because "the expectation is physicians bring a valuable product to management of the service line at the hospital in terms of management skill and knowledge. They're expected to work hard for it and produce a good product."
One area physicians in the orthopedic group spend a significant amount of time is in the supply chain, particularly the type and cost of implants for patients. Physicians in the Tucson Orthopaedic Institute collect national data on implants to assess their overall value for different patients. They also educate themselves on the price of implants and assist the hospital in negotiating better prices with vendors. Over four years, the physicians helped save the hospital $20 million in implant costs without eliminating any vendors. "In most institutions, there is an insidious introduction of expensive technology no one is really keeping an eye on. It's easy for this technology to be inserted, and much doesn't have any value," Dr. Slagis says. "Heeding and understanding that as physicians has [caused] a dramatic change."
Determine payment system
While the physicians helped bring $20 million in savings to the hospital, these savings did not translate directly into payment for the physicians, according to Dr. Slagis. Instead, physicians and the hospital had to discuss a fair way of compensating each party for meeting metrics and performing management duties — one of the most difficult tasks in establishing an SLA. One way to facilitate fair payment is to document physicians' time spent in management and what specifically the physicians did during that time, Mr. Katz says.
Under TMC's SLA, reimbursement for meeting metrics is based on complete or partial achievement of a metric goal. For example, Mr. Katz says surgeons could receive 100 percent payment for meeting a certain metric, such as surgeon timeliness, in at least 95 percent of cases. If the metric is met in only 93 to 94 percent of cases, payment may be reduced to 80 percent; 90 to 92.9 percent achievement may garner 40 percent payment; and below 90 percent may receive no payment. This system incentivizes physicians to continue to improve on each metric.
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