Health system executives rank physician alignment as one of their top near-term priorities. As the market shifts toward financial incentives for quality, cost control and experience, closer collaboration between physicians and systems becomes a necessity. So it is not surprising that alignment is a top concern: Even organizations that are primarily focused on fee-for-service strategies are reconsidering physician alignment with an eye on the value-based future.

Too many organizations, however, are approaching alignment with outdated strategies and miscalculated priorities.

Until recently, top-line economics were driven by fee-for-service metrics. Alignment objectives focused on supporting admissions, referrals and procedures. Alignment-related decision-making was often dispersed among service-line, facility and system leaders. As a result, many organizations lack a consistent systemwide alignment strategy and have no centralized means to monitor the effects of the various strategies they use.

What’s more, our research shows that employment, a key alignment strategy in recent years, does not always result in the quality, efficiency and patient-experience performance expected.

Five principles

To be successful in the value-based market, systems must approach alignment with a considered and flexible approach. Each system will need to develop a customized portfolio, made up of a mix of alignment models and tailored to local conditions.

From our market experience, we have identified five key principles of alignment. Some of these principles affect the design of alignment strategies, others, the implementation of them. Adhering to these principles will enable success whether a system is well on the way to fee-for-value, still in a predominantly fee-for-service environment or operating in a hybrid model.

  1. Get early buy-in: Health systems must work collaboratively with key constituencies, including employed and affiliated physicians, to set strategic objectives for the system.
  2. Identify physician partners: Different physician characteristics are required for different strategies. Systems must dive deep into physician data to identify the best-matched candidates.
  3. Develop a portfolio of strategies: There are more avenues to alignment than employment. An alignment strategy should include a combination of mechanisms, and systems should be comfortable operating with multiple models.
  4. Give physicians a more powerful voice: To drive the change required, physicians must be engaged and empowered. Take steps to meaningfully expand physicians’ voice.
  5. Update your incentive model: Creating an incentive mechanism is complex, but alignment will fall flat unless physicians can share in its rewards.

1. Get early buy-in. The first step in executing an alignment strategy is defining the system’s overall strategic vision. For example, a system transitioning to fee-for-value will need to define the vision, then spell out what clinical capabilities are needed, how contracting structures may need to evolve, what strategic partners must be engaged and so forth.

Physicians should be invited to participate in this planning process. System leaders who take time to talk with physicians will develop a deeper appreciation of their challenges and gain physician advocates to support rollout of the new strategy. Conversely, systems that conduct planning without physician input lose trust, and subsequent alignment attempts start off on shaky footing.

In our research, we found some systems are signing compacts with their care teams on core principles and tenets of operations, thereby ensuring that there is explicit agreement on the strategy and needed changes.

2. Identify physician partners. The system must understand the population it serves (or is likely to serve) through its value-based contracts and what is needed to attain its strategic vision. The system must identify key physicians who will be advocates and leaders in design and deployment. At the same time, noisy dissenters must be identified, then left behind.

In a value-based model, outcomes, managing cost of care, average length of stay, quality scores and patient satisfaction are arguably the most relevant metrics. But most systems do not currently analyze providers’ performance at this level of detail. Despite the challenges of this data acquisition and analysis, systems must continually and diligently examine each physician’s practice patterns and behaviors, as these determine a system’s success.

3. Develop a portfolio of strategies. Employment is a common strategy of choice for systems because it seems the most direct path to drive physician behavior. However, many systems now understand employment does not always equal alignment. Often, highly engaged independent physicians are the ones most capable of driving performance.

Rather than committing wholly to a single alignment model, systems should be open to a portfolio of models. With some physicians and physician groups, employment will make sense; with others, co-management agreements (in which physician groups contract with a system to manage a service line) or bundled payments will be effective; and with some, less sophisticated mechanisms such as medical directorships (properly constructed) or committee assignments will be sufficient to obtain alignment.

The alignment “recipe” will also vary based on each system’s strategic objectives and local market dynamics. For example, employment may be best in a market with a fragmented physician base; co-management agreements are better suited for a market with large, influential physician groups.

4. Give physicians a more powerful voice. Too often, physicians are isolated from strategic decisions and physician leaders have a limited scope of authority. For long-term success, physicians must be empowered to act and lead change. Currently, roles such as directorships and department chairmanships are often given to physicians who drive facility activity. These physicians, however, may not be the best choices for value-based payment models. Some systems will need to change leadership assignments to better connect strategic goals with physician goals. And some will need to create entirely new leadership roles. In many cases, it’s not just that the wrong leaders are in place, it’s that the right positions don’t even exist.

For example, “extensivists” (or “intensivists” or “complexivists”) can focus exclusively on patients with a complex set of issues. The success of this role is judged on reduced admissions and fewer procedures — quite the opposite of legacy roles. Similarly, systems may consider organizational structures in which physicians assume responsibility for segments of the population, such as patients with Medicare Advantage or frail elders.

Systems must also introduce more channels for physician input and feedback, then demonstrate action on that feedback. Simply collecting opinions is not enough; leaders must be accountable for and demonstrate action on the suggestions.

Finally, systems will need to find ways to engage physicians who do not have admitting privileges and to collaborate with physicians who work only in ambulatory care settings or post-acute facilities. They are critical stakeholders in value-based reimbursement.

5. Update your incentive model. Compensation is, obviously, an important tool for reinforcing and rewarding desired behaviors. Compensation agreements must be transparent about measurements and based on market comparators. Ideally, the number of incentive-related metrics should be limited (less than five is optimal), and each should be measurable and reported to the physician in near real time.

While compensation is important, it alone cannot drive the change required. Systems are learning that physician culture is grounded in strong internal motivation and personal responsibility. Outcomes can often be realized through nonfinancial metrics — establishing clear beliefs for a mission-oriented goal, creating a culture where collaboration among care team members is expected and actively supporting physicians by monitoring the “right” metrics such as overall patient outcomes.

Systems need an incentive plan that is flexible enough to serve many physician specialties but standard enough to avoid potential one-offs.

Essential work

To gain a clearer understanding of just how much work there is to do, system leaders can ask themselves these alignment strategy questions:

  • Do you know what your system is spending on physician alignment?
  • Can you identify the physician types — even down to individual doctors — that you will need to transition to value-based payment?
  • Which competitors are better positioned to gain alignment with those doctors? Why?
  • Are you prepared to weather the storm as you change alignment strategies and your aligned proceduralists see their roles change?
  • Are you ready to proactively manage this transition among medical staff leaders? In the doctors lounge? In the operating rooms?
  • Do you have the capability to capture the necessary new data streams, then drive effective decisions off them?

Physician alignment can be difficult to navigate, and it is often contentious. It may mean picking “favorites” among physicians, and it likely means eliminating some long-standing governance structures and norms to make way for new ones.

The process takes time to design, socialize and implement. The switch cannot be flipped overnight. But systems that approach their task grounded and guided by the five principles of alignment improve their chances of success.

Bruce Hamory, M.D., is the chief medical officer of the Health & Life Sciences practice of consulting firm Oliver WymanGraegar Smith is a principal at Oliver Wyman and a member of its Provider practice. Rohit Singh is an engagement manager with the Oliver Wyman Provider practice.

Authors’ noteRead more about physician alignment strategies at Oliver Wyman Health, a digital community of innovators convened by the Health & Life Sciences practice of Oliver Wyman.