6 Essentials for Thriving Orthopedic Joint Ventures

Written by Molly Gamble | June 18, 2012 | Print  |
At the 10th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago on June 15, James T. Caillouette, MD, surgeon-in-chief at Hoag Orthopedic Institute in Irvine, Calif., spoke on the most effective best practices for orthopedic practices. The Institute is a physician-owned orthopedic hospital that operates in a joint-venture with Hoag Memorial Presbyterian Hospital in Newport Beach, Calif., and approximately 35 physicians specializing in orthopedics.

1. Create true alignment through trust. Dr. Caillouette said 50-50 governance has helped the institute reach alignment and avoid major problems. "Everybody ultimately has the same goal. I think one of the benefits of our community hospital and our partner in this enterprise was that they recognized it should be physician led," he said. "They recognized the value in that. They recognized 85 percent of the cost is driven by the physicians. They also recognized that physicians, nurses and physical therapists had deep knowledge in how to create best outcomes at low costs."

2. Create a physician-led enterprise. At Hoag Orthopedic Institute, physicians are the only people to negotiate with vendors, which Dr. Caillouette calls "a vendor's worst nightmare." When you have orthopedic surgeons, it's a different game from negotiating with supply chain managers. "We can use our understanding of value in terms of how we're going to drive this enterprise. That's been very enabling for our nurses and therapists. Everyone has an opportunity to contribute to creating value."

3. Culture trumps everything. Dr. Caillouette said leadership should work hard early on to establish a culture that is physician- and value-driven. Physicians are actively engaged in every level of care at Hoag, he said. "Through all the various elements of the hospital, including where they sterilize implants, we sit down on a weekly basis with all employees and talk about problems, solutions and ideas. We wanted a culture where [the phrase] 'think different' really helps drive the culture," said Dr. Caillouette. "You want to have accountability and creativity at the same time." He said leaders should aim to create cultures where employees aren't hesitant to demonstrate creativity.

4. Physicians have to think beyond being orthopedic surgeons.
If physicians take responsibility to lead, they have to go back to school and learn, said Dr. Caillouette. Specifically, he recommends physicians broaden their knowledge base and read about healthcare administration and macroeconomics. Dr. Caillouette recommended authors including Michael Porter, Clay Christensen and Regina Herzlinger as some of the most educational healthcare business writers.

He hailed Ms. Herzlinger, a professor with Harvard Business School, for her powerful insight and commentary on the future of patient-centered healthcare. "I think it's important that we work on looking at outcomes from a patient perspective, not a surgeon's perspective. Cost is not just the cost of the inpatient episode, but the global cost. The cost from the moment they call you to make the first appointment to the end of their physical therapy appointments," said Dr. Caillouette. "If you start to do this, and drive you enterprise with all these things in mind, it can be transformational."

5. Understand financials deeply. If physicians are charged with leading the enterprise, they have to understand financials. Dr. Caillouette said most people tend to lock into the cost-side of the business equation, but he recommends an equal focus on revenue as well. "Don't be afraid to ask questions to the CFO and supply management team," he said. "'Why? Why are we paying so much for this? Why are these costs going up?'"

Dr. Caillouette said physicians who are detail-oriented and enjoy the task of grinding numbers are valuable assets to the team. These physicians can better understand, from a care delivery standpoint, the implications of switching from one product to another. "The cheapest product doesn't necessarily create the greatest value. If it potentially risks outcome, you will ultimately drive down value," he said.

6. Think long-term. When Hoag founded its ASC in the 1990s, Dr. Caillouette said he pushed to partner with the hospital. "We could have taken 100 percent of equity in the ASC. In the long-term, it ended up being an 80-20 split. At one point, it was a 50-50 split. But I believed the future would dictate efficiency," he said. Dr. Caillouette defines efficiency as reducing the friction between the various parties involved. "In order to do that, we needed to let everybody have a stake, whether or not the [physicians] liked that. Ultimately they went along with it, and now, having that partnership for that decade allowed us to partner on a much greater scale."

More Articles on Hoag Orthopedic Institute:

Hoag Orthopedic Institute Launches Bundled Payment Model for Knee Replacements
Success With a Physician-Owned Orthopedic Hospital: 7 Things to Know
10 Surgery Centers With Total Joint Replacement Programs

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