Keys to Success as an ACO: Model Physician Relations Maintaining Entrepreneurial Incentive and Self-Direction

By Javon R. Bea, President and CEO, Mercy Health System | July 19, 2013

Recently many journal articles and presentations have discussed how important it is under the Affordable Care Act to “get together” with physicians. However, those doing the espousing are often those whose actual physician integration experience has been in theory only. Most have never built and run a hospital-physician integrated system.

Hospitals following this theoretical espousing have led to an average net loss per physician of $190,000 nationally. In all too many cases the wrong approach has been used probably because hospital chief executive officers are listening to theorists’ perspective.

Over 20 years ago, I developed and implemented a physician partnership model at Mercy Health System in Janesville, Wis. The model allows physicians to emulate the private or group practice of medicine, all the while facilitating true vertical integration with the 501(c)(3) hospital or health system. To the IRS, the model constitutes employment, but the writing of the legal “professional services agreement” allows physicians to continue to direct their practices. Javon Bea

This is a key difference from most physician employment contracts. Physicians don’t feel like some MBA is trying to practice medicine and turn them into time clock punching employees.

Also important is a compensation plan based on 94 percent on productivity, including care provided under capitation. Physicians are compensated with a portion of their professional fees only, with no payment to them for the facility component of the ancillary charge from the physician office, which covers expenses such as equipment and staff. But they will get the professional service component. Compensation then is monitored to ensure it is in line with published reasonable compensation to production ratios for physicians of the same specialty.


Categories: Insurance

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