Physician employment models over the years have taken more turns than a pinwheel. Today, with many organizations swelling their ranks of employed physicians, how these agreements are structured will have a lot to say about whether the relationships will endure. Marc D. Halley, president and CEO of Halley Consulting Group, Westerville, Ohio, has spent a quarter century providing management and consulting services in this area. In his recently published book, Owning Medical Practices (AHA Press, 2011), Halley urges health care organizations to pay careful attention to how they engage physicians in operational governance. He discussed this issue with Bob Kehoe, H&HN contributing editor For more about physician relations, see "True Partners".

What is the best way for hospitals to engage physicians in governance?

The opportunity to engage physicians in new employment relationships differs and has some advantages over the medical-staff model. We talk with hospitals and health systems a lot about being physician-led. In physician-integrated models, organizations need to be partnership-led, with a mutual understanding and integrated strategy that combines the best of what primary care and specialty medical practices have to offer with what acute care and post-acute settings offer.

The employment model provides an opportunity to engage physicians in governance in ways that previous models did not. We do that through a council model.

How should the council model work?

It is geared toward the operational governance of the employed-physician model. It is based on the premise that physicians should be partners in the process of developing a solid, integrated strategy.

The council model is not a democratic government. Its decisions are legitimized by the presence of the board-appointed fiduciary—the hospital CEO—who ultimately has bottom line accountability and veto power. Ideally, we want the CEO to partner with the employed physician leaders to make good decisions around the hospital-owned, physician-practice model.

Operational governance occurs at two levels. The first is at each practice site. For decades now, providers in well-managed medical practices have come together one, two, or three times a month to review how they are doing, what is working and not working, and then the practice council instructs managers on what they want to have happen. For some reason, when physicians are employed by a hospital, leaders don't think we need physicians engaged in that same manner, and of course we do. This practice operations council is what makes an individual practice work.

So, to make things work in a family practice or in a general surgery practice, many of the decisions need to be made, implemented and supported at the practice level. But there are additional decisions that need to be made in a hospital-owned network of practices that will affect all practices in the same way. For example, we're going to select one practice-management system, one employee-benefits package, we're going to have one physician-compensation model, one electronic medical record, and so on. That second level of governance, the network operations council, includes both physicians and the CEO.

What authorities and limitations should the network council have?

A network council is designed to provide guidance on policy and major decisions that will affect all practices in the network. The council in most of our settings discusses clinical quality, for example, and has the authority to approve certain initiatives because of the CEO's presence.

That council has oversight of clinical quality standards and establishes policy around best practices, which is delegated to the practice operations councils for implementation. The practice operations councils deal with practice-specific issues like weekly staffing. At the network level, discussions might focus on building a network culture and strengthening the referral path across network practices.

What's the organizationwide benefit in this structure?

It takes the lead in decision-making that ultimately has a positive effect on the organization. Other independent physicians can participate in these benefits. Thus, decisions made by the network council set or increase the performance standards on clinical and service quality that are acceptable within the entire system.

Ideally, what should be the makeup of the OPERATIONS councils?

Each practice operations council includes all the employed physicians and mid-level providers in the practice site, as well as the network executive. This model helps ensure provider and management engagement. The executive then works with the practice manager to make sure the practice council recommendations are implemented effectively.

At the network operations council level, we usually need six physicians, one of whom is chairman. The chairman is a partner with the hospital CEO, one of the three executive members of the network council who legitimize the business of the council. Also on the council is the CFO, whose participation in the decisions is critical, because he or she will help to arrange financing for council decisions and will understand the context; and one other executive, perhaps a chief medical officer or a chief operating officer.

How should physicians be selected for the network operations council?

We recommend initially that the CEO select an employed physician who is an outstanding leader. Ideally, a highly productive primary care physician makes a great chairman, although we've seen some specialists who are skilled leaders as well.

Ideally, these two sit down with network leadership and select four or five additional physicians across specialty types based largely on their leadership abilities. We limit the number of physicians to six because it's not a one-person-one-vote issue. We need a group that represents the perspectives of the invasive specialists, primary care and medicine subspecialties that can make good decisions together at the network level.

After the initial network operations council has been formed, we usually recommend that every two years physicians be rotated and replaced. Usually a council selection committee recommends new members based on their leadership abilities. This way we train more physicians in leadership.

How can organizations develop a shared vision of leadership?

One of the first responsibilities of a new network operations council is to meet together and develop an organization paper—a compelling vision—that defines who we serve, our services and standards, and how we treat our human resources. We address what we can do together to make sure that our hospital, specialists and primary care physicians are successful in addressing community need and competing effectively.

The compelling vision clarifies where the organization is headed over the next three to five years. The vision statement can be used to help recruit new physicians or qualify those established practices that express interest in joining the hospital-owned, medical-practice network.

Are there any other key layers to this structure?

Network operations councils usually have subcommittees, where there is legitimate work to be done. A physician member of the network council chairs each subcommittee. For example, the network chairman may appoint a physician member of the council to lead the quality subcommittee, which may meet once or twice a month. The subcommittee chairman invites other physicians from practice operations councils who have an interest in clinical or service quality issues to participate on that subcommittee.

Every mid-level physician in the organization is involved in operational governance at some level. The subcommittees do their work usually based on a charter that's approved by the network council; their decisions or recommendations then go back to the network council for approval before they can go into the practices for implementation.