Physician-Hospital Organization Case Study

CONTRACTUAL ARRANGEMENTS:
This alignment option involves a series of contracts or agreements between the physician and physician group with the hospital or health systems which involves wide range of agreements like on-call arrangements, physician recruitment, medical directorship and stipends, clinical co-management services, customer service programs, professional service arrangements, legal partnerships and joint ventures with predetermined payment methods. When compared with physician employment, this alignment model exhibits low degree of integration and the agreement between the both parties stipulates the list of functioning services and method of compensations and incentive payments using pre-determined incentive metrics and quality

outcomes. Each contract arrangement varies from one another in terms of level of integration, compensation methodology and provision of clinical and managerial services. On-call arrangements between the hospitals and physician group ensure the adequate physician coverage in various emergency department and inpatient services which involves per diem on-call pay strategy and activation payment methods. Medical directorship enables to hospitals or physician practices to use the expertise of physicians who have excelled in their department and service provisions and use their skill in allowing to adapt through effective programs and link to achieving positive outcomes. Legal partnerships between the two parties allows to share risk and at the same time either party can use other party’s skill in developing successful strategy in performing specific healthcare services for example ambulatory care. Professional service arrangements is the emerging trend in current healthcare market to sustain the market share by increasing the volume is either an integration model where it is owned by a hospital or health system and operates a physician clinic by contracting with independent physician group to render professional services. In delivering services to hospital-owned clinic by physician group, the compensation or payments are contractually dependent on the professional services rendered with involving multiple approaches in determining the payments such as base salaries, per diem payments, and production models. Most preferred professional service arrangements are related to provision of services through radiology, pathology and anesthesiology departments. These professional service arrangements are beneficial for both physician and hospitals as reason for the financial and operating performance in response to market imperative under new healthcare reform process in integrating the quality and efficiency improvements with hospitals enabling to leverage their infrastructure, payor contract and provider based status while physicians have a facility to receive fair market value compensation.

SERVIVE-LINE CLINICAL CO-MANAGEMENT:
Co-management is a legal agreement between a hospital and practicing physicians who can work together in medical groups by recognizing the participation rewards of working together by their efforts to developing, managing and improving the quality and efficiency under an enterprise with both the parties being independent. Co-management is the quick and proven strategy for implementing hospital- physician collaboration with agreement based on the predetermined fee to the clinical and/ or management services offered by the physician or physician group to the hospital for a period of time. Under this arrangement, the service level agreement between the both parties define the specific quality requirement, operating and financial goals. Co-management arrangement provides the hospital in developing a new program or care model in the community either through contracting for clinical or management services, managing entire service line such as cardiology, orthopedics, imaging center, cancer therapy, etc. or contracting for ambulatory services. Usually, the price determination is tied to work effort or predetermined baseline prices, but in times of at risk under nonperformance it is related with equity return rates. Since, this arrangement possess such risks of regulatory scrutiny to both parties, the whole arrangement requires to be legal and regulatory compliant which requires expert counsel for both hospitals and physicians.

JOINT VENTURES:
These are a part of contractual agreement where a hospital or healthcare organization will approach for agreement with the physician group or independent practicing physicians to have an advantage of shared benefits under the contracting agreements to work under a single enterprise. These joint ventures may range from leasing arrangements, purchased services arrangements and contracting outpatient services. These agreements enables to have equity in terms of capital investments, responsibilities and sharing risks and revenues by entering into a financial partnership between the both parties. Joint ventures are often entirely regulated under legal considerations and the venture can be a limited liability corporation or partnership involving either a single project i.e. functioning for single service line or for operating different levels of services. Due to the legal considerations, the agreement terms should exhibit compliance between the both parties and several federal as well as state laws comes in the operating function like Stark law and anti-kickback laws. Typically involved service lines under these joint venture agreements are ambulatory surgery centers, outpatient services, imaging and endoscopy facilities and urgent care facilities. Considering the reduced reimbursements by Medicare Ambulatory surgical centers are suffered and shown to hinder contracts under the new healthcare regulations.
PHYSICIAN-HOSPITAL ORGANIZATION: (PHO)
Physician- Hospital Organization is formed by hospital and physicians or physicians group for obtaining as well as negotiating contracts with the insurance plans and employers.

Through this organization hospitals and small group practices can be provided with better reimbursements, efficient claim management and better delivery of care by negotiating with the payors and obtaining better health plan contracts. PHOs serve a messenger role between the providers and payors by submitting the fee schedules to the network physicians and enabling efforts to have contracting terms between the providers and payors. Traditionally, the contracts were between the hospitals and payors or small group practices and payors with PHOs as a third party or messenger, but with the emerging trend of clinical integration between the physicians and hospitals PHO enables both the parties involved in the contact agreement which provides better bargaining leverage in negotiation as the collaboration will lead to controlling hospital costs and improving the quality. With the current Medicare and Medicaid payment models involving bundled payments, global payments and episode based payments along with clinical integration between the physicians and hospitals, this Physician – hospital organization arrangement reduces the adversarial or confrontational risk involved by making contracts less complex and reducing the costs by greater cohesion and cooperation between the both parties compared to traditional PHO independent contractual agreements with the insurance companies and payors. Most important concern with the PHO service model is the potential of antitrust liability in the establishing fee schedule and contracting as price fixing arrangements in between the competitors is considered offensive and with the clinical integration between the physicians and hospitals can resolve such issue. Under these arrangements, ownership and governance of the PHO is given emphasis enabling that both the

hospital and physician group has equal responsibility that provides physicians to have power in influencing the contracting decision processes that affect the medical practices.