Hospital-Owned Medical Practices: Managing for Performance

    Posted by Marc D. Halley, MBA on Dec 15, 2015 8:30:00 AM
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    This post originally appeared on the MedCity News website on December 6, 2015.


    On a recent assignment, we encountered a hospital client who had built up a bureaucratic maze of medical directors and executives tasked with steering both the business and clinical sides of the hospital’s owned medical practice network. Unfortunately, rather than facilitating smooth operations, the additional layers of management slowed the decision-making process, created confusion for providers and support staff, and produced inconsistent operating performance from clinic to clinic.

    At the client’s request, we provided training on operational governance and introduced our council model to the physician network. As they began to implement our training, the physicians and other providers became engaged as peers and as partners, providing the positive peer pressure and clinical direction necessary for day-to-day operations within each individual practice and across the entire medical group.

    In implementing this new system of operational governance, our hospital client noted that many of their traditional medical director roles had become superfluous. As a consequence, they asked for our help in creating a streamlined and effective implementation management infrastructure that would support the new operational governance model and perhaps even allow for the elimination of these unnecessary director roles.

    Such a request is not uncommon; we have interim managers out in the field who are seeing similar situations on a regular basis. What we’ve learned from being on the ground is that, as we mentioned in the previous article, hospital-owned physician networks can benefit greatly from studying successful independent practices and applying what they learn to their own infrastructure.

    Let’s take a look at some of the principles of management that work well for independent practices and examine how those principles can apply in a medical practice network setting.

    Practice Managers as Implementers, Not Bosses

    The first principle has to do with the way we view the role of a practice manager. Over many decades, successful independent medical groups have engaged physicians as partners in the decision-making process. These entrepreneurs fund their decisions with their own capital and then turn to a competent practice manager to implement those decisions. The manager does not own the practice but is authorized by the owners to act on their behalf, directing the support staff members in accomplishing the owners’ objectives. The physician partners provide the direction and the support, or sponsorship, for management, and the practice manager is the implementer of partnership decisions.

    In our experience, the operational governance model should drive the design of the management infrastructure. Management is, in fact, the implementation arm of physician/executive partnerships at the group practice and individual practice levels. It is important to emphasize that, within such an arrangement, practice management does not own the practice or “boss” the physicians. Instead, practice management takes its direction from the operational governing partnerships and then works with support staff to implement those decisions with the governing partnership’s support.

    Implementation Management in a Flat Structure

    The second principle we have gleaned from successful independent practices regarding an effective management infrastructure has to do with the structure itself. Based on our extensive interim management experience, we know that most hospital-owned practice groups or networks are made up of solo or small group practices in separate offices, with unique cultures, and accounted for as separate cost centers.

    Most practices have an assigned practice manager who is embedded in the practice as a working supervisor. Given the nature of the medical practice business, we have found that improving performance requires an implementation management structure that is flat, with a wide span of control. Essentially, this means that we eliminate the typical middle management scenario, and every employee within a practice reports to the practice manager. The practice manager, in turn, reports to either the network executive or the region director, depending on the size of the organization.

    When hospital-owned medical practices understand and implement these independent-practice principles, they become much more effective at streamlining the management function, and their physicians become more engaged in practice operations.


    In the next post, we’ll discuss the recommendations we used to help our hospital client implement these principles within their large and growing physician network.


    Topics: Operational Governance, Interim Management, Physician Practice Management, Engaging Employed Physicians

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