Multispecialty practices (MSPs) continue to grow in number, size and influence as a component of the U.S. healthcare delivery landscape and have a range of affiliation models to consider in relation to local hospital or health system partners. Physician leaders, executives and board members alike will want to assess the pros and cons of initiating or maintaining a hospital affiliation as the strategic implications of such affiliations impact culture, scope of service, profitability and more.
Range of Relationship Models
From total independence through employment, multispecialty groups have a spectrum of models available with regard to hospital or health system affiliation. At one end of the spectrum, physicians practice independently, unaffiliated with a hospital and providing surgeries and procedures in office-based or ambulatory settings. Next on the spectrum are independent practices with open referral relationships and admitting privileges to multiple hospitals, allowing maximum flexibility on how care is provided and the scope of services which can be performed in office, surgery center or inpatient settings. Tighter affiliation with one hospital system may enable participation in a hospital-sponsored, clinically integrated network to benefit from joint contracting, health system infrastructure, tighter referrals, data sharing, and care coordination services. At the other end of this spectrum are exclusive affiliation to one hospital system or ultimately employment of the group practice by the hospital or its medical group.
Most independent MSP groups are not positioning themselves to health plans as an alternative delivery system that offers better outcomes at lower costs to bring long-term sustainable value to the patients they are serving. A study from the National Bureau of Economic Research published in 2019 found multispecialty practice “decreases Medicare-financed per capita annual medical expenditures by approximately $1,600 relative to [single specialty practice] SSP – a 36% reduction. The reduction is concentrated primarily on hospital spending and on patients with two or more chronic conditions. Taken together, these results suggest that MSP is more effective at keeping relatively sick patients out of the hospital. Our results also suggest that multispecialty group practice attracts less healthy patients.”
In demonstrating value to health plans and patients, MSPs by design have the flexibility to develop clinical integration within their group, allowing tighter management of processes to refer patients seamlessly between primary care and the surrounding specialty services. Given that integration, there is less variation of quality and cost than specialists might experience if they are working in several hospitals.
Depending on the specialty services involved, there can be benefit for MSPs having their own outpatient facility. Foremost is control over scope of services to be offered and the ability for clinicians to pursue sub-specialty services, working with their clinical peers to implement guidelines and protocols for how care will be delivered and coordinated. The ability to set schedules, establish a unique culture and parameters for work-life balance are some of the commonly cited beneficial by-products of avoiding a strong hospital affiliation.
On the flip side, there are potential benefits for MSPs to consider a hospital affiliation, including reduced overhead costs borne by the group, reduced administrative burden for front office and back-office functions, economies of scale in the purchase of supplies or in the acquisition of technology. Participating in a hospital network for the purposes of managed care contracting may increase possible market power with health plans, though this is very dependent on local forces, as well as the cost and quality profile of the hospital in question. As noted, participation in a clinically integrated network or accountable care organization may be pursued regardless while remaining independently employed.
Mature multispecialty provider organizations realize they cannot be everything to everyone. If they have invested within their practice to develop the systems, services and human resources to offer high quality, cost effective care, they are in a position to work with the best of the best, whether that is independently or in affiliation with a hospital partner. It is important to emphasize that decisions regarding independence or affiliation are associated with many unintended consequences which can have significant impact on the practice’s success and even viability in the long term. Given the long-term strategic and financial implications, it is strongly recommended that these decisions are made with a thorough and thoughtful process assisted by experienced outside trusted advisors who are able to guide the process to an optimal outcome.
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