Engaging_Employed_Physicians_Transcript

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TRANSCRIPT
Engaging Employed Physicians
in Financial Performance Improvement
for Hospital-Owned Medical Practices
KEY POINTS
1) Initiating and nurturing a thriving communication
process and culture of accountability with the
physicians in your network.
2) Intellectually and emotionally engaging physicians
in building the ﬁnancial and operational viability of
your owned medical practice.
3) Building your owned medical practice network to
make signiﬁcant strides toward market leadership.
LIVE TELESEMINAR WITH:
Marc Halley
President and CEO
Halley Consulting Group
and author of
Owning Medical Practices:
Best Practices for
Sustainable Results
Katrina Slavey
Network Executive
Halley Consulting Group
A successful practice requires the
engagement of physicians to improve
clinical quality, service quality, productivity,
and financial and operational viability.

Ralph
Harding: Good afternoon, everyone. This is Ralph Harding, your host
for this exciting one-hour seminar with our guests, Marc
Halley and Katrina Slavey. Marc Halley is one of the leading
authorities in the nation on strategy and performance
improvement for physician networks, and Katrina Slavey is
our resident expert at the Halley Consulting Group on truly
engaging physicians in financial performance improvement.
Today we will be visiting with Marc and Katy about how
to successfully engage physicians in financial performance
improvement in hospital-owned medical practice networks.
As a result of attending this seminar, you will learn the
time-tested critical success factors for initiating and
nurturing a thriving communication process and culture
of accountability with the physicians who are part of
your network. You will learn how to intellectually and
emotionally engage employed physicians in building the
financial and operational viability of your owned medical
practices, and you will also learn how these factors will
help you to build your owned medical practice network so
you are making significant strides toward market leadership
in the next 12 months.
The content of our discussion today is driven by the dozens
of thoughtful questions that you as healthcare professionals
posed to Marc and Katy during our Ask Campaign. We will
be addressing just as many of your questions as we possibly
can during this 60-minute broadcast; however, all of the
questions submitted during our Ask Campaign that we do
not answer during the broadcast will be answered by Marc
or Katy either by phone or email.

First of all, let me call your attention to the blue handout
link in the upper left hand corner of your screen. Please
print the handout and be prepared to take copious notes
on the clear counsel that we will be receiving from Marc
and Katy today on this very important topic.
Before we begin the interview, let me provide you with a
view of Marc Halley’s rich background in healthcare, and
then I will ask Marc to introduce Katrina Slavey.
Marc D. Halley is President and Chief Executive Officer of
Halley Consulting. Marc has provided management and
consulting services to medical practices for more than 25
years and has worked with a variety of specialties including
hospital-owned practice networks across the United States.
He has negotiated numerous contracts to acquire medical
practices on behalf of hospitals in highly competitive
environments, served as senior operating officer of primary
care networks, facilitated the financial turnarounds of
hospital-owned medical practice networks, and worked
with physicians to take primary care networks into
risk-sharing arrangements including carrier contract
negotiations for a 100-physician primary care panel.
Marc also developed and implemented numerous models
and tools to assist physicians and managers to track and
improve medical practice operations. His supervisory
training program has been taught to medical office
managers around the country. Marc is a frequently
requested speaker addressing governing boards, senior
executives, physician groups, management teams, and
national organizations.

Marc’s ﬁrst book, The Primary Care – Market Share
Connection: How Hospitals Achieve Competitive Advantage
was released by Health Administration Press in March 2007.
In December 2007, Marc contributed to a three-volume
set titled The Business of Healthcare. He was also a
contributor and co-editor of The Medical Practice Start-Up
Guide, released by Greenbranch Publishing in August 2008.
His newest book, Owning Medical Practices: Best Practices
for Sustainable Results, was released by The American
Hospital Association’s AHA Press in January 2011.
Marc received his Bachelor of Science degree from Weber
State University in Business Administration Management
and his Master of Business Administration degree from Utah
State University.
Marc, we are delighted to have you and Katy on the call.
Will you please help us and our listeners to know more
about Katy’s experience?
Marc
Halley: Thank you, Ralph. It’s a pleasure to be here, and yes, I’d
be happy to do so.
Katrina Slavey has been working hands-on with medical
practices for more than 15 years. Of note, she served as
the Director of Regional Operations for a hospital-owned
network of 10 practices, 28 multi-specialty providers,
and more than 100 employees. During her tenure she
developed a proven track record for identifying and
implementing key strategic initiatives across the network
and driving operational performance improvements at all
levels, from ﬁnance to employee motivation.

Katy has also successfully transitioned that same practice
network to a new billing platform which greatly improved
their revenue cycle management. She also established
an incentive program to improve point-of-service cash
collections.
Katy is experienced in all facets of new practice start-up
including physician credentialing and hiring and training
management and support staff. She is currently pursuing
her Bachelor’s degree at the University of Richmond and
serves as a network executive for the Halley team.
Ralph: Thank you, Marc. Katy, welcome to the call today and
thank you for being here with us.
Katrina
Slavey: Thanks, Ralph. It’s great to be here! Marc, thank you so
much for that introduction.
Marc: You bet.
Ralph: You will both be interested to note that there are 91
healthcare professionals from every region of the country
who have joined us today for this most valuable seminar,
so we’re excited to get started.

Listeners, all of you know from experience that fully
engaging physicians in all facets of performance in the
practices where they work and serve is a key component
of growing sustainable hospital-owned medical practice
networks. Successful practice requires the engagement
of physicians to improve clinical quality, service quality,
productivity, and financial and operational viability.
Most of the principles we will discuss today apply not only
to the financial component, but also to every aspect of
practice performance improvement. So let’s get started
by presenting the first question from one of our listening
hospital executives.
She makes this statement and then asks an important
question:
“We are acquiring established practices and employing
experienced physicians, and we are recruiting physicians
who are completing their residency programs. Although
both types of physicians are new to hospital employment,
they’re coming to us with varied backgrounds and
experiences. How would you initiate the employment
conversation in each situation?”
Katy, would you like to answer this first question?
Katrina: Sure, I’d be happy to.
We recommend approaching each group with a little bit
of a different mindset. Those who have been in private
practice are accustomed to doing things on their own
timeline and it’s usually quickly and without bureaucratic

red tape. Establishing two-way communication that is open
and safe for the physicians who join the practice network
is absolutely key to the success.
That communication will include discussions about
philosophy because it does take some time for previously
independent physicians that owned a private practice to
learn to become a part of a system which is now a team
sport. That learning curve will include understanding
the mission and values of a system and how they can
contribute to the success of the whole. It also includes
accepting the responsibility to ensure that the now
hospital-owned practice operates as well as private
practices in the same specialty.
Experienced physicians are used to producing at certain
benchmark levels because they’ve been in a situation
where compensation is dependent on how many patients
they’ve treated each day. We certainly don’t want to do
anything that would create barriers to their productivity
and their commitment to treat the same number of
patients per day.
Another important part of the critical communication
process has to do with functional integration; in other
words, helping them become a viable and contributing
component of a hospital-owned medical practice network.
Helping physicians understand the beneﬁts of their new
situation is signiﬁcant. For example, discussions about
the fact that as partners in a group or a network of
physicians, they will have more bargaining power in payer
negotiations.
The second group of physicians are those that are fresh

from residency; they’re already used to operating within
an academic system and the bureaucracy. They now
need to learn how to function independently in terms
of efﬁciency and effectiveness to drive much higher
productivity levels.
Again, open communication to set expectations is critical
from the beginning so the physicians know that you care
about their success and that you’re focused on how you
can assist them to attain your common objectives. They
know how to practice medicine, now they have to learn
how to practice medicine. Tactics may even include pairing
them for a few hours with an experienced physician
who can mentor them in a productive practice setting.
Ultimately, the physicians want to do what they were
trained to do, and that’s to treat the patient.
The administrative burdens really fall to the administrative
staff; it’s a partnership and those lines of communication
always need to be open and clear.
Ralph: Excellent response, Katy. Very helpful.
Listeners, you will notice that the key points from the
information Katy has just provided are on page 2 of your
handout.
Marc, here is an excellent comment and question from one
of our health system executives that I think you will enjoy
answering. He says:

“We are acquiring practices in order to strengthen our
market position. How will healthcare reform increase the
need to engage our physicians in the financial performance
of our network?”
Marc: Well, Ralph, that’s a very perceptive observation and
question. Quite frankly, the situation in which hospital and
health system executives find themselves makes engaging
these physician partners in performance improvement
absolutely critical for the following reasons.
First, let’s begin by discussing the risks and opportunities
faced by all healthcare providers. Regardless of what
happens on Capitol Hill, regardless of who ends up in the
White House or even the decision of the Supreme Court,
we know that there are three fundamental trends that are
forever changing the face of healthcare delivery.
The first is declining reimbursement. Regardless of
what happens with healthcare reform, we all know that
reimbursement is headed down. We will be asked to do
more with less and we’d better get prepared to do it now.
By the way, we are still expected to maintain and now
even improve high levels of clinical quality and service
quality in order to earn this increasingly paltry sum.
Second, healthcare is currently headed toward, if we’ve
not already achieved, 18 percent of our nation’s gross
domestic product, which means that as an industry we
are very visible at both federal and state levels. Now
that visibility, of course, brings increasing regulation, and
increasing regulation comes with an increased cost of
compliance. So the very institutions that are asking us to

reduce the cost of healthcare are part of our increasing
costs, as well as others.
Third, and this third major component of what we call this
healthcare “perfect storm”—declining reimbursement,
increasing costs, and 78 million baby boomers, the ﬁrst
wave of whom turned 65 last year. Baby boomers are
descending on the healthcare industry in unprecedented
numbers and we are not going to grow old gracefully; I am
proudly a member of that group. We want a pill to make
us skinny, we want our broken or worn parts replaced,
and remember, we were raised watching M*A*S*H where
“Hawkeye” Pierce always saved the day. Dr. Pierce set a
very high standard for real doctors.
Now given these underlying trends, there are several key
implications which again, force us to the table with our
physician partners. First of all, we’ve mentioned lower
reimbursement and certainly more regulation. In addition,
we have to continue not only providing high quality clinical
care and caring, but now we have to prove that we’re
providing that clinical quality; hence, the need for an
expensive electronic health record.
Next, we’ll see fewer larger systems of providers,
meaning consolidation among physicians and physician
groups among hospitals and then between the two. In
fact, we’re already seeing this industry consolidation as
providers circle the wagons in order to survive. We’ll see
increasing levels of what we call market management by
wise hospital CEOs who are looking at their markets well
beyond the borders of the hospital campus. We discussed
the role of the market manager and that concept in
depth in previous seminars and a few publications. Those

teleseminars are certainly available for our listeners on the
home page of our website.
Next, we’ll also see increased competition for the right
patients, those who can pay for their services. Now
obviously, hospitals have an ethical obligation to care
for all who present with legitimate ailments, regardless
of their ability to pay. Besides, it’s not only ethically
appropriate to meet the needs of the uninsured and
underinsured, it’s also good business. Otherwise, they end
up much sicker in our emergency rooms, which of course is
a detriment to the patient and to the hospital and to the
community.
At the same time, we realize that we’ve got to make
sure that we also have access to those who can pay for
their services, because we have to protect our ability
to generate capital within our acute care settings so
we can continue to provide the level of service that our
communities require.
Now, of course, the implications of these industry trends
and others on the need for controlling our costs and
increasing our productivity are obvious. With reduced
reimbursement and increased costs, we’re going to
have to manage both in new ways. We’ll need to reach
unprecedented levels of productivity to accommodate
more demand while remaining ﬁnancially viable.
For example, we see family physicians today who are
implementing what is called Family Team Care. Dr. Peter
Anderson has implemented what we call “highest and
best-use stafﬁng” to make sure that the physician does
what only a physician can do, and delegates everything

else. Those family physicians who have successfully
implemented Dr. Anderson’s model have increased their
productivity from, say 28 or 30 patients a day, the more
traditional busy practice, to between 40 and 45 patients
a day with improved patient satisfaction, improved
quality measures, increased nurse satisfaction, increased
physician satisfaction, and of course, having the benefit of
a significant improvement in the bottom line.
Finally, both physicians and management will need to
rigorously measure and monitor and improve performance.
We’re going to have to work together to effectively
manage the business side of healthcare which, of course,
will affect how we provide the clinical side of healthcare.
One of the reasons we asked Katy to join us today on
the call is because she has years of experience in the
trenches working with hospital executives and physicians in
hospital-owned medical practices to achieve these types of
productivity and quality care improvement.
Ralph: Thank you, Marc, for the outstanding information.
Listeners, page 3 of the handout has a bulleted summary
of key points from Marc’s answer, and then if we turn over
to page 4, the answers for the box at the top of the page
are “business” and “clinical.” So that box will read, “How
we manage the business side of healthcare will affect our
ability to provide the clinical side of healthcare.”
Katy, here is a question from one of our listeners who is a
health system financial officer that reflects challenges that
I know that you have faced. He asks:

“When physicians have already been in private practice,
they sometimes tend to argue or question the credibility
of financial information presented to them. How do you
develop credibility and trust for the health system staff
and the data we provide?”
Katrina: You are so right, Ralph. I’ve experienced physician concern
over the numbers, and really, it’s important to know why
the situation occurs in the first place, as well as how to
respond to it.
First, I think it’s important to acknowledge that some
financial and statistical reporting that we see for hospital-
owned medical practices is both confusing, and quite
honestly, sometimes irrelevant. Some reporting models are
simply extensions of a hospital general ledger footprint
and have little to do with the unique medical practice
business.
In some settings, physicians rarely see more than their own
productivity numbers along with the frequent admonition
that they need to work harder because the practice is
losing money. Experienced doctors are sometimes stunned
to learn that the practice that they used to own is now
losing somewhere between $80,000 and $100,000 per
physician per year. Private practice physicians are usually
used to dealing with cash, and that can be reconciled to
the checkbook.
Most hospitals are operating on an accrual accounting basis
which addresses gross and net revenues and tries to align
expenses with revenue generation. Some allocations, even

those that are consistent with GAAP accounting, raise
questions because they were never part of the financial
reporting picture in the private practice.
We use a two-net-income-line income statement. This
allows for easier comparison with private practice and
other external benchmarks so those accounting issues can
be addressed and more easily understood by physicians
and by management. In fact, Marc wrote an article on this
subject that was published in hfm in October of 1999, and
really, it’s still relevant today.
Assuming the financial reporting is appropriate, one of
the very first things we do is set up a Practice Operations
Council where we have all of the relevant parties, and
that’s the physicians, the finance staff, the practice
manager, the regional director if applicable. On a monthly
basis, we critically review the financial reports in detail.
That means we go line by line, making sure that the
physicians understand the source of all of the financial
information. We ensure that we have access to the source
data so we can drop right back to the doctor’s schedule
if necessary in order to have an open, honest, and
transparent conversation.
If we can’t respond to a physician’s inquiry we say, “I don’t
know, but I’ll look into it and I’ll get back to you,” and
then we have to do it quickly so that we promote trust
both with us and with the numbers.
Most the time physicians are very good about tracking
their own productivity. If our numbers match theirs,
then that’s half the battle. We then have to be willing

to engage in open dialogue to ensure that the physician
can be comfortable with the data and the report and the
presenter.
Once we’ve established trust in the data and then the
management, we can enlist the physician’s help in terms
of where we go from here: what’s working, what’s not, and
how we can best meet their needs as physicians as well as
those of the patients.
We have to be willing to be present, to have honest
conversations, and to go through each level of detail, line
by line, to establish a trust for the information rather than
sitting there trying to sell the information.
Ralph: So true, Katy, thank you. That was an excellent and very
thorough explanation.
Listeners, please look at your handout on page 5. The
answer for the box there is “practice operations.” So the
box will read, “Set up a practice operations council where
you review the ﬁnancials in detail.”
Marc, listen to this very prescient comment and question
from a hospital executive. She says:
“Many of our hospital and health system leaders still
believe that downstream revenues from patient referrals
and admissions more than offset the losses being incurred
in our hospital-owned medical practices. Still, we are
seeing increasing pressure from our board members to
address those losses. Honestly, I’m starting to ask myself,
‘What have we done to ourselves again?’ Please respond.”

Marc: I appreciate this candid question. We’re hearing the same
thing from board members. As we respond to this question
we often ask our hospital clients a few key questions in
return.
First, aren’t our employed physicians just as smart and
capable as their private practice counterparts who
generate enough revenue to maintain viable practices
while still taking home a market rate of pay? What are we
doing to prevent our physicians from achieving this same
standard?
Second, didn’t we have those same downstream revenues
before we owned the practices we’re now subsidizing at
levels approaching $100,000 per employed physician per
year?
And then thirdly, don’t we ultimately need to be concerned
about downstream “capital,” which we can actually
invest, rather than downstream revenue? I understand
the arguments about contribution margin, but ultimately,
our business efforts need to generate an operating margin
adequate to maintain and grow our integrated model if
we’re going to continue to meet community need. We have
to quit wasting dollars on avoidable operating losses in our
owned practices.
In the late 1990s, many hospitals dubbed the ﬁrst cycle of
medical practice ownership as a failed strategy. Some tried
to divest of their practices, even giving them back to the
doctors. Others simply capital starved their hospital-owned
networks while looking for some other silver bullet.

Today, there are several factors that will, we think,
preclude hospital executives from giving up and divesting
of their hospital-owned practices like some did at that
earlier day.
First of all, it’s better understood now that there are risks
of losing market share when you divest of primary care
practices. The patients go with the physicians.
Second, the need to secure hospital service lines by
employing selected specialists is also clear. For their part,
employed physicians, both old and young, have little
interest in returning to the risks and increased complexity
of entrepreneurial settings.
Still, hospitals can only grin and bear for so long annual
operating losses approaching six figures per employed
physician before they need to take action. Some hospital
executives have discovered how to solve financial
performance challenges in their hospital-owned medical
practices by engaging their physicians as partners in the
process.
This is very important. Certain network-wide initiatives
of course, like an improved billing system, will certainly
improve the performance of the medical practices a
hospital owns, but experience has demonstrated time and
time again that hospital-owned medical practice networks
only achieve financial viability one practice and sometimes
even one physician at a time.
The basis for such performance improvement is found
in the successful private practice model. For decades,
for example, physicians in successful independent small-
group practices have met once or twice a month either

before or after clinic hours to counsel together about the
practice. They’ve reviewed things like cash flow, their
ability to meet a payroll, they’ve discussed support staff
issues, they’ve voted on equipment acquisitions, they’ve
established policies and addressed other issues affecting
their practice and their patients and their quality of
practice life or work life. They’ve then instructed their
office managers to implement their decisions.
Now, in successful private practices, those decisions have
been sponsored or supported by all of the physicians even
if they weren’t popular with some of the support staff. If a
physician partner told his nurse after the meeting, “Oh, we
just approved a policy, but you don’t have to worry about
it,” his peers would hold him accountable in the next
meeting and insist on both private and public support of
group decisions.
Such Practice Councils, as we call them, have usually
been associated with higher practice performance and low
physician, management, and staff turnover. They’re also
characterized, if they’re successful, by effective dialogue,
which yields decisions around what is right for the practice
rather than who is right.
For some reason, once hospitals acquire these successful
independent practices, the Practice Council meetings
seem to be held only infrequently, if at all, and often
without any financial or statistical information. Physicians
disengage from the business side of the practice and
hospital executives or their designees try to become the
“bosses.” Evidence suggests that this approach does not
work.

Katy, would you like to provide your perspective on this
question?
Katrina: Absolutely. Thanks, Marc, I would.
As I mentioned earlier, reengaging physicians in what we
call the Practice Operations Councils is key to financial
performance improvement at the practice level.
The Practice Operations Council, or we term it a POC, is
a partnership between all of the physicians and midlevel
providers in a single practice location and the practice
management executive to whom the office manager is
accountable. As in successful private practices, the POC
meets at least monthly to review practice performance, to
discuss support staff issues, to identify equipment needs,
to establish practice policies, and to address other issues
affecting their practice and their patients.
POC members develop specific tactics to enhance revenue
and to control expenses, and those tactics are recorded
in my favorite tool: a Site-Specific Action Plan, also what
we call an SSAP. This Site-Specific Action Plan becomes
the tool that the POC uses to direct and hold the office
manager accountable. It includes each performance
improvement tactic, the anticipated financial implication
of that tactic, as well as responsible party and the due
date.
Between POC meetings, the practice management
executive assists the office manager on a weekly basis to
implement the SSAP tactics. We recommend establishing a
Practice Operations Council in each practice or department

or cost center within a hospital-owned medical practice
network. Even solo-practicing physicians should have a
monthly POC meeting with their office manager and their
practice management executive.
Each POC establishes and maintains a Site-Specific Action
Plan to drive the performance improvement and obviously,
as POCs tackle clinical quality and service quality issues,
those performance improvement tactics are also included
in the plan.
Ralph: Marc and Katy, thank you for the excellent information.
Listeners, on page 6 of the handout, you will see the key
questions that Marc mentioned in his remarks. Then if you
will turn over to page 7, we have two answers to fill in
there. The answer for the first box is “monthly.” “The POC
meets at least monthly.” The answer for the second box
is “weekly.” “The practice management executive assists
the practice manager on a weekly basis to implement SSAP
tactics.”
Katy, this next very perceptive question from one of our
listeners is perfect for you to answer. He asks:
“What is the most important tenet to bear in mind
when engaging physicians in financial performance
improvement?”

Katrina: Excellent.
I believe that integrity is the key, and communication is
the mechanism. As long as we are honest and transparent
with the physicians we will be able to maintain their trust,
and as I mentioned earlier, if we are asked a question and
we don’t know the answer, we need to tell them straight
up, “We don’t know, but we’re going to ﬁnd out.” This
simple return and report is so important, and yet it is so
often neglected.
As a regional director, I partnered with nearly 100
physicians in multiple locations, and I was accountable for
approximately 250 managers and support staff members.
Every single person on my team had my cell phone number.
Because they had it, they knew that they could get to me
if they needed me, and they knew that I’d be open and
honest with them. And that cell phone was really used
because performance expectations, responsibilities, and
personal accountability were very clear for all of us.
The Practice Operations Councils set clear expectations,
timelines, and the responsible parties. Individuals felt
accountable from the physicians to the receptionists and
we felt jointly accountable as a team for the success of
each of our practices. Our Site-Speciﬁc Action Plans drove
the development of a culture of accountability.
My key roles involved partnering with the physicians
as a member of each POC, and then supporting the
managers and support staff to ensure the successful
implementation of all of the SSAP initiatives and tactics.
Our success translated into success for everybody, all of
the stakeholders including (and especially) our patients.

Ralph: Katy, thank you for that very informative response.
Listeners, let’s review the handout on page 8 and ﬁll in
the blanks at the top of the page with “integrity” and
“communication.” So that box will read, “Integrity is the
key, and communication is the mechanism.”
Marc, one of our health system CEO listeners asks:
“Engaging physicians as partners practice by practice
sounds good, but some physicians became employees
to avoid the business side of medicine. What if some
physicians are not interested in engaging?”
Marc: Ralph, that’s a common question we face. But honestly,
in my experience in multiple settings across the country,
most employed physicians are begging to be more involved
in decisions that affect their daily practice and daily lives.
And then there are a few, of course, that refuse to become
good partners. Regardless of their clinical skills or volume,
they are “C” players rather than team players, and “C”
players are a huge resource drain in terms of their peers
and management energy. Consequently, our solution in
today’s rigorous, competitive environment is not to allow
those “C” players to remain.
As for new physicians, we’ve long advised those in
residency programs that the day they leave their training,
they’re in business. Those who fail to engage in the
business side of medicine will become victims of the

business decisions of their physician partners or well-
intentioned administrators whose decisions will affect their
clinical practice.
So getting involved certainly doesn’t require an MBA, but
it does require a willingness on the part of physicians to
learn a few basics and certainly to engage in dialogue
around what is right or best rather than who is right or
best. That kind of engagement should be a condition of
employment. It also requires a willingness to learn certain
performance indicators that raise questions about issues
of clinical quality or service quality or productivity or
ﬁnancial viability. Those measures or core indicators across
all of those critical areas should be of great interest to
physicians who want to partner with us.
The MGMA Connexion published an article we wrote in
2010 describing industry trends and the resulting business
imperatives we discussed, and those imperatives should be
of interest to all physicians and managers.
They included, ﬁrst, the need to capture and retain market
share, which of course, occurs in primary care practices.
Second, not only providing but proving that we are
providing high levels of clinical quality and service quality.
Third is amassing capital that we can invest in people and
technology and facilities. Just try and implement an EMR
without capital.
And then fourth, the imperative to achieve unprecedented
levels of productivity. The rigor required to address those

business imperatives also requires much more energy and
focus than ever before on the part of both physicians and
management.
Practice success can no longer be left to chance or
to a laissez faire approach in our opinion. Physicians,
managers, and staff have to work together to stay ahead
of simultaneously declining reimbursement, increasing
costs, and increasing demand. Let your competitors hire
physicians who aren’t interested in partnering with you on
both the business and the clinical side.
Primary care physicians and their practices must be the
physicians of choice who attract and maintain market
share for the rest of the integrated delivery system,
and every integrated delivery system needs a very clear
primary care strategy.
Specialty physicians and their practices must be the
specialists of choice who can attract patient referrals from
PCPs through excellent access, great communication, and
past patient experience, let alone providing top clinical
quality.
Hospitals, with the help of hospital-based physicians and
supportive departments, must be the hospitals of choice
that are attractive to referring physicians and their
patients.
These things don’t just happen by chance. Again, such
excellence requires rigorous attention to detail, rigorous
performance measurement, and rigorous process
improvement. I think the next few years might be a bit
rigorous.

Success in the midst of the perfect storm and of healthcare
reform will require the very best of physicians, of
midlevel providers, of managers, of support staff, and
of hospital executives, and such teams can ill afford the
need to cover for or drag along “C” players in what will
be increasingly a team sport requiring both individual and
joint accountability.
Ralph: Thank you, Marc, excellent response.
Listeners, please review your handout on page 9 and note
the very important information we have provided for you
there from Marc’s comments.
Katy, here is a very good question for you:
“In your experience, what has been the most effective
way to keep physicians involved in the process of ﬁnancial
performance over the long term?”
Katrina: When I’m serving as a practice network executive or a
region manager, it is critical that I’m visible in all of my
assigned practices, and that’s where I also have my POC
membership. I’m in each of my practices on a weekly
basis, each member of the staff knows me by name, my
physician partners know that I’ll be checking in to ensure
that management is implementing according to the Site-
Speciﬁc Action Plan.

Again, I cannot stress enough: that is my favorite tool!
That Site-Specific Action Plan identifies where we have
been in terms of the revenue, expenses, and our visits.
Working with the POC members, we establish targets and
tactics in the areas of clinical quality, service quality,
productivity, and operational and financial viability. Most
of the tactics do have a financial impact and a timeline
attached to them. So each month, the POC reviews our
performance including the practice income statement to
ensure that we’re actually achieving our targets within the
budget and the timeline.
If we have a financial target, for example, reducing our
monthly loss by $2,000, the POC establishes tactics to
achieve that target. Some tactics may decrease expenses,
and in some cases they actually may increase our expenses
if we’re trying to enhance our productivity. Others
may increase revenues. The financial impact of each
is recorded, and during the next few months, the POC
looks for evidence of the impact on the practice income
statement. If we achieve the target, we set additional
targets. If not, then we establish additional tactics.
The beauty of the SSAP and the secret to getting
everybody on board is tracking and sharing the targets,
the tactics, and the results. For example, with one of my
assigned networks, we realized a $2 million improvement
in operations in a year’s time. Even more importantly, we
also hit the world class 95th percentile of the employee
engagement survey because everybody was involved in the
process, and not only were they involved, but everybody
was excited about it.

Ralph: Thank you, Katy, great information.
Listeners, we are now on page 10 of the handout, and the
answer for the box at the top of the page is “visibility.”
“Your visibility in the practice and regular interaction with
the physicians is the most effective way to keep physicians
engaged.”
Marc, I’ve been hoping that one of our listeners would ask
this next question:
“Could you please address the issue of mission-based
practices as it relates to physician engagement in financial
performance?”
Marc: Sure, Ralph.
We realize that there are some practices that will not
achieve the private practice standard of financial break-
even. What we call mission-based practices, or potentially
those that are heavily dominated with Medicaid or
uninsured patients, may have a difficult time breaking
even unless they become Federally Qualified Health
Centers.
There are also some specialty practices that are required
for our service lines, but there isn’t enough business in our
entire service area to support, say three of the specialists.
We may only be able to support 2.5, but we’re still
searching for that .5.

Still, we don’t need to have a disproportionate share
of the underinsured or uninsured in all of our practices.
Successful private practices must manage their payer
mix. They have to in order to survive. Networks of
hospital-owned practices certainly have the advantage
now of never turning a patient away. Instead, we can
redirect patients who qualify to designated practices
located, equipped, and staffed to do a better job of both
identifying and meeting the needs, wants, and priorities of
those who are underserved or uninsured.
Some mission-based practices, for example, employ more
nurse practitioners who are more effective educators
and who take more time with patients than a traditional
physician visit. Some of those same mission-based
practices provide a social worker to help patients with
special needs or a WIC program to support improved
nutrition.
These are things that would not normally be found in a
traditional primary care setting. No one wants patients
with legitimate medical needs to end up in the emergency
room in crisis because we failed to do a good job of
providing access in primary care settings.
Ralph: Thank you, Marc, excellent comments.
Listeners, you will notice that the information from Marc’s
answer is summarized on page 11 of the handout.
Katy, here is a great two-pronged question for you:

“Once you’ve engaged the physicians and utilized the
tools, what is the expected turnaround time for a practice
to show improvement? Alternatively, how do you know
when it’s time to cut your losses and walk away?”
Katrina: Great question, Ralph.
One of the most challenging situations we face is a client
with unrealistic turnaround expectations, and certainly
some challenges can be rectified and performance
improvement can be seen rather quickly, but getting
practices back to the private practice gold standard can
sometimes take months, if not years, really. Most of the
time, financial decline didn’t happen overnight, nor are
the problems going to be fixed overnight.
Depending on the circumstance, we often see four to
six months dedicated to preparing the infrastructure,
including developing operational governance at each
practice and at the network, implementing improvements
and performance reporting, building and training the
management team, and implementing key network-wide
initiatives in revenue cycle or compensation models.
During the second half of the first year we often see trends
begin to move in the right direction due to network-wide
and site-specific actions. Established practices tend to
move to break even fairly quickly because they already
have patients or referring physicians providing them new
patients.
New primary care practices can take two years to reach
breakeven and sometimes requiring an investment of

$300,000 to $500,000. Of course, once viable, that new
practice, the return is many times the initial investment
over the next 25 or 30 years.
Sometimes performance improvement from a network
perspective means closing a location, moving providers
and staff or terminating the employment of a physician.
These challenging decisions involve an objective view
of the market, the circumstance, and all of the people
involved. Like other critical decisions, physician leaders
should be engaged in the evaluation and determination.
Special interests of private agendas that run counter to
sustainable strategy and rational choices must be openly
discussed. Part of the $2 million performance improvement
I referenced earlier was the decision to close the very first
practice that had joined that particular network.
Really, when no additional revenue opportunities are
available, when there are no more expenses to reduce
without negatively impacting clinical quality or service
quality, and when more viable alternatives exist to meet
the community need, it may be appropriate to conserve
precious capital for opportunities with greater return on
investment.
Ralph: Thank you, Katy, superb answer.
Listeners, on page 12 of the handout, fill in the blank with
the words “over the first year.” “The expectation is that
you will be trending in the appropriate direction over the
first year.”

Marc, our next listener asks a question that is increasingly
common in this era of healthcare reform. She asks:
“How do you involve providers in the move from volume
incentive contracts to agreements based on a mixture of
volume quality and value-added activities?”
Marc: Well, Ralph, this is a very, very timely question. We’re
getting this question frequently now as we participate
with our clients in developing compensation models for
physicians.
First, it’s important to understand that seeing patients
is the secret to success in the medical practice business,
regardless of the payment method. So under previous
capitation models, for example, the most successful
practices were the busiest.
Primary care practices that were most successful had wide
open patient panels and extended hours that promoted
access in that ambulatory setting. Those busy practices
kept patients out of the emergency rooms and they also
spread the risk of the occasional outlier across a very large
patient population in busy networks. Then those physicians
referred to selected specialists who were the most
effective and efﬁcient while still providing great care and
caring and those specialty practices and physicians became
the busiest.
By most deﬁnitions as we look at accountable care,
accountable care organizations or ACOs, most of them look
like capitation with more reports. Sure, our reimbursement
will be impacted by clinical quality measures and service

quality measures which we now must prove, but the key
to success will still be seeing the volumes necessary to
capture and care for an adequate patient population. The
most important thing a physician can do toward that end
is to see patients, and of course, to do a great job in doing
so, clinically and from a service perspective.
The most innovative compensation models we’ve seen in
the last 18–24 months actually attach the quality scores
to additional pay per work RVU, or relative value unit.
The logic of course, is that the busiest physicians have to
provide both high quality care and caring more often than
those who don’t see as many patients.
So a physician receiving, say—and I’m pulling this number
out of the blue—38 dollars per work RVU, might see an
extra dollar per work RVU for achieving certain clinical
quality targets or an extra amount per RVU for meeting
certain service quality standards. Again, the key to success
regardless of the payer model will be volume.
Some of our clients have also asked about attaching
physician compensation to the bottom line. We don’t
usually recommend doing so for employed physicians; we
don’t ﬁnd it necessary, frankly. Instead, we make managing
the bottom line a POC (Practice Operations Council) and a
management function, using the Site-Speciﬁc Action Plan
as the accountability tool.
Physicians and management in those practices understand
that if they fail to achieve their bottom line targets, the
practice will be closed. That usually provides adequate
incentive to accomplish the task without diluting the
physician compensation model with factors that don’t
affect volume.

If an employed physician wants, for example, a more
expensive clinical resource, he or she has to justify that
to his partners on the POC and talk about how he’ll use
that extra resource to generate enough volume to offset
the additional cost. Sounds a little like successful private
practice, doesn’t it?
Ralph: It does, in fact. Very similar to the gold standard
accountability model we discussed earlier. Thank you,
Marc.
Listeners, on page 13 of the handout, the box at the top
of the page should read, “Seeing patients is the secret to
success in the medical practice business regardless of the
payment method.”
Marc, several questions received during our Ask Campaign
related to holding physicians accountable to act in ways
that benefit the whole.
How do you create what you have called a “culture of
accountability?”
Marc: This is another significant question for those interested in
creating a physician network that is functionally integrated
rather than just structurally integrated. Rather than just
being able to throw up an organization chart and show
where all the boxes fit, they actually work together.
First, it’s important to understand that physicians are
what management guru Peter Drucker calls “knowledge

workers.” They cannot be supervised or “bossed” like
other workers, he says. They control the means of their
production through their knowledge and their practiced
skills. They’re mobile and they’re trained to render
independent professional judgment. Even physicians have
a hard time bossing doctors, which is why CMOs and VPMAs
have struggled to do so when they’ve had that assignment.
At the same time, while you can’t boss doctors, like all
team members, employed physicians have to be held
accountable for their outcomes and for their behavior.
Otherwise, they can become a detriment to an integrated
organization.
Again, the ﬁrst line of accountability is found in successful
private practices, and that is peer accountability. Those
physicians who wanted to stay and play in the sandbox
played by the rules or their peers called them on it.
Now obviously, this peer accountability does not occur in
dysfunctional practices, which is the very reason that they
tend to have higher turnover and poor performance.
In an employed physician setting, there is one additional
critical level of accountability that helps govern the
network of practices. We call that a Network Operations
Council, or NOC. The Network Operations Council includes
up to six employed physicians who are carefully selected
for their leadership ability from among the Practice
Operations Councils, and one of those physicians, a full-
time practicing physician, is selected by the hospital CEO
to be the chairperson of the Network Council.
In addition, the NOC includes the hospital CEO as a
business partner, and the board-appointed ﬁduciary—the

buck stop, if you will. He or she is the legal employer of
the physicians and the one who signs their contracts and
their paychecks.
The NOC also usually includes the hospital CFO and
potentially one other executive. This combination of legal
authority and clinical expertise is the perfect place for
ultimate knowledge worker accountability.
The NOC establishes the vision in support of an integrated
strategy, it establishes performance expectations for the
practices and the POCs, it develops some network-wide
policies, and then it holds the network executive, who is
the senior operations ofﬁcer, accountable to make sure
those are implemented in each of the POCs.
Issues that cannot be resolved at the Practice Operations
Council level between the physicians and the network
executive or region director, whoever is the partner in that
particular council, end up being elevated to the NOC. The
physician chairperson then of the NOC, and the hospital
CEO, a clinician, and the legal authority then make a visit
to the offending practice where the issue is either resolved
or the physician contract is terminated. As you can
imagine, such meetings are rare because the POCs prefer
to solve their own issues locally and again, it’s important
to realize, this type of rigor will be required of those
integrated organizations that expect to succeed through
the perfect storm.
Another critical role of this Network Operations Council is
to review the performance of every physician and midlevel
provider as their contracts come up for renewal. The NOC
recommends the continued employment or otherwise of

each individual provider, physician or midlevel, and while
ultimately the decision rests with the CEO as the board-
appointed ﬁduciary in employment models, wise CEOs
listen very carefully to their physician leadership about
whether or not to extend a contract.
We’re often asked how we evaluate performance of
physician members, and we actually prefer using some
kind of one of the common 360 evaluation models that a
network executive can bring to the NOC before the CEO
signs the next contract or allows that contract to roll over.
The CEO will approach the physician chairperson during an
NOC meeting and say, “You know this physician and you’ve
seen his or her performance; is this somebody we want to
retain?” and if the NOC says, “Absolutely,” then the CEO
knows that he or she can comfortably sign or allow the
contract to roll over.
Ralph: Thank you, Marc, for the very valuable information.
Listeners, we are now on page 14 of the handout, and
the answer for the box there is “knowledge workers.”
“Physicians are knowledge workers who cannot be
supervised or ‘bossed’ like other workers, yet they
still must be held accountable for their outcomes and
behavior.”
Here’s an excellent question from our listening audience
that seems very appropriate for you, Katy:
“How do we maintain physician productivity in a changing
environment that includes an electronic medical record, a
patient-centered medical home model, increased quality
measures, etc.?”

Katrina: That’s a great question, Ralph, and the answer to this
question places special pressure on the Network Operations
Councils and on the Practice Operations Councils. In
today’s more rigorous setting, no strategy, decision, policy,
or procedure should be approved by an NOC or a POC for
implementation in a medical practice unless it can pass the
following four Critical Success Filters:
1. First, you have to figure, does this decision or policy
maintain or enhance clinical quality as defined by our
physicians and/or evidence-based medical practice?
2. Secondly, does the decision or policy maintain or
enhance service quality as defined by our patients and
their referring physicians?
3. Thirdly, does the decision or policy maintain or
enhance physician and midlevel productivity?
4. And finally, does that decision or policy maintain or
enhance operational (meaning our processes) and
financial viability?
If a strategy, decision, policy or procedure cannot pass
all of these four filters, why would we even consider
implementing it into these rigorous settings? The results
of ignoring these filters are disastrous EMR installations,
poor patient care and caring, frustrated and disengaged
physicians, and terrible revenue cycle performance, and
that’s just to mention a few.
Ralph: Thank you, Katy. Listeners, those four critical success
filters are listed for you on page 15 of the handout.

Thank you again, Marc and Katy, for joining us today and
providing the tremendous insights which I know will be so
valuable to our listening healthcare professionals.
Is there any parting thought you would like to convey prior
to the conclusion of this event? Katy, let’s start with you,
and then Marc can provide his comment following yours.
Katrina: Thanks, Ralph.
Really, I cannot stress open and honest communication
enough. We don’t need to know all of the answers; we just
need to be able to say, “We’ll look into it and we’ll get
back to you,” but developing that trust and having those
conversations from the very beginning. It’s all about the
relationship, and in the end, that’s what’s going to help
establish the targets and maintain the rigor that needs to
happen.
Marc?
Marc: Thank you. I would just close by reminding everybody on
the call that in our travels throughout the country, we find
very few legitimate reasons why hospital-owned practices
cannot perform just as well as private practice, and I’m
talking successful private practices. Sure, we can strip out
ancillaries and we can do things; everything that is done
can be fixed if we’ll put the energy into it and redefine
hospital-owned practices in terms of the private practice
gold standard.

Ralph: Thank you, Marc.
What is the best way for our listeners to contact Halley
Consulting to arrange for an organizationally specific
analysis of their health system, hospital, or group practice?
Marc: Ralph, we have a toll-free number for our listeners which
is 866-706-5373.
Also, our website address is www.halleyconsulting.com.
Ralph: Well, Marc and Katy, let me thank you both again because
this has been a most informative and valuable hour.
We’re grateful for you teaching us about how to engage
physicians in financial performance improvement for
hospital-owned medical practices by exploring deeply with
us, I think, the fundamentals of successfully partnering
with physicians. We’ve learned the time-tested critical
success factors for initiating and nurturing a thriving
communication process and culture of accountability with
the physicians who belong to our networks.
We’ve learned how to intellectually and emotionally
engage employed physicians in building the financial and
operational viability of our owned medical practices, and
we’ve also learned how these factors will help us build
our owned medical practice networks so we are making
significant strides toward market leadership in the next 12
months.

I think it’s also been extremely helpful to review the
current national trends in healthcare reform and how they
will impact the practice of medicine. Also very valuable
have been your insights about how to use the Practice
Operations Councils and Network Operations Councils
to better manage physician relationships and increase
ﬁnancial and operational viability in the entire integrated
delivery system.
So thank you very much, and special thanks to all of you
who are our listeners, for participating in the Ask Campaign
and for investing your time today to join this seminar.
For your convenience and the convenience of your
colleagues who may not have been able to attend,
a recording of this seminar will be available on the
Halley Consulting Group website, along with a written
transcript for your use. We will give you notice within
the next few days so you can visit the Halley site at
www.halleyconsulting.com and access this most valuable
information.
Until then, our most kind regards and appreciation for the
opportunity to be with you today.

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