A few years ago, a client engaged us to conduct an evaluation of their multi-specialty, multi-site group practice, which was organized as an integrated component of a local health system. This multi-site network suffered from high physician turnover and annual financial losses in the millions. As we began to delve into the everyday workings of the practices, we found that the physician CEO who managed this network had an autocratic leadership style, and the providers had little input into decisions that affected their daily lives. The practice management team gave inadequate attention to clinical or service quality. Performance expectations were unclear. Provider productivity varied dramatically, and no one was held accountable for performance improvement. As a consequence, the individual providers felt no concern for practice or enterprise performance.
We’d seen this scenario many times, and we quickly zeroed in on the fact that the providers’ indifference to the success of the organization was hindering performance improvement for the entire network.
Most hospitals and medical practices today have already integrated or at least anticipate the need to work more closely than ever before. Increasing numbers of physicians are employed directly by hospitals or organizations capitalized by those hospitals. In many cases, however, though the legal structures are in place, these integrated enterprises have not yet seen the levels of physician engagement or financial success they were hoping for. In fact, many—perhaps most—hospital-owned medical practices continue to post significant loss, which drains precious strategic capital. Many hospital CEOs and their board members express increasing frustration over this shortfall, which is often regarded as simply a “cost of doing business.”
The truth, however, is that hospital-owned medical practice networks can and should be financially viable enterprises. Ideally, these hospital-owned practices should perform as well as private practices in the same specialty within the community—and private practices have to break even. So, what can we learn from private practices about engaging physicians in driving organizational success? First, let’s take a look at the providers themselves. In order to engage physicians, it is important to connect with them on their terms.
Connecting with Knowledge Workers
Physicians are classic examples of “knowledge workers,” a term coined by Peter Drucker, famous management theorist. Drucker noted that knowledge workers are independent thinkers who cannot be bossed—even if they are on the payroll. Like attorneys, engineers, and other bright professionals, doctors own the means of production in their knowledgeable minds and skilled hands. Even doctors cannot order other doctors about. (Just ask any chief medical officer who has made the mistake of trying to do so!) In our experience, the only sustainable way to help physicians achieve their potential in serving their patients is to engage them as partners in practice and enterprise success. Likewise, physician engagement is the only way to hold physicians, other providers, and staff accountable for performance in terms of clinical quality, service quality, productivity, and practice financial viability.
The Independent Practice Approach
For decades, successful independent group practices have engaged physicians as partners in decision-making. The partners have counseled together to make decisions for the benefit of the group. These independent physicians have funded their decisions with their own capital, and they have held each other accountable, as peers, to support their practice managers during the implementation process. We call this decision-making model operational governance, and the successful groups we call operations councils.
Many of the same principles of operational governance can apply in hospital-owned medical practice settings as well. The principles for engaging physicians (and other licensed providers) in decision-making certainly apply. Operations councils in hospital-owned medical practice networks provide an ideal opportunity for physicians to become involved in directing practice management and holding each other accountable, as peers, for supporting implementation.
In the second part of this post, we'll address two levels of operational governance and offer insight as to why the council model works.
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