Who Really Rules?

Philip Betbeze, for HealthLeaders Magazine , December 8, 2009
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The fall of Wayne Sensor shows that independent physicians can still control the levers of power . . . for now.

Hospital chief executives are discovering that they're often not the most powerful players in the room. Some are paying for that knowledge with their jobs, as independent physicians revolt against steps to employ more of their brethren.

Culture change is always a dicey proposition for CEOs who dare to try it—even for those who have built a legacy of trust over the course of a long-term appointment to a hospital or health system's top executive position.

Such change can take many forms, but perhaps the most divisive change CEOs are trying to implement at hospitals and health systems today involves the employment of physicians—always a contentious issue in an institution that has traditionally deferred to the wishes of its highest revenue-producing specialist physicians.

Wayne Sensor, touted by many (including this magazine) as among the vanguard of change-agent CEOs, became a former CEO just a few weeks ago at Omaha's Alegent Health in a dispute with independent physicians unhappy with his strategy of increasing physician employment. Never mind that three of the system's six hospitals had recently been named among the 100 "best value" hospitals by the Hospital Value Index. Ominously, patient revenues had dropped because unhappy independent docs changed their referral patterns in a highly competitive market. More recently, physicians at two of the system's largest hospitals, Bergan Mercy and Immanuel, took a vote of "no confidence" in their CEO. That was the end of Sensor at Alegent.

Meanwhile, similar tensions have been cited as a factor in the resignation of Mission Health System's Joseph F. Damore. He will step down in January after five years as CEO of the 800-bed medical center based in Asheville, NC. Mission, incidentally, was one of the 10 high-quality, low-cost hospitals that was invited this summer to Washington by four national healthcare improvement experts to describe their efforts to reduce medical costs in the 10 communities where they work. And those are just two recent examples.

What went wrong
At one time, employing physicians at most hospitals meant hiring a few "hospitalists" to round on patients in the hospital in consultation with independent physicians. With few exceptions, independent docs welcomed those additions. But now, many chief executives are developing structures similar to hospitals and health systems that have never wavered from employing physicians and which consistently rank among the highest value hospitals, lauded by politicians and policy wonks as examples to emulate. Sensor thought he had the backing of both the physicians and the board in his attempt. But ultimately, he was wrong.

"We had over 9,000 hours of physician involvement in the creation of the plan," Sensor says. "That really set in play what I would characterize as five years of transformation and innovation at a level that is perhaps unparalleled in other healthcare systems, particularly community healthcare systems."

Even though some docs and CEOs still don't understand it fully, any attempt at reworking these complex relationships is fraught with land mines, says Jacque Sokolov, MD, chairman and managing partner with SSB Solutions in Scottsdale, AZ, a firm that worked for several years with Alegent senior leadership and independent medical staff to implement the shift. Sokolov stresses that transparency is key to working with multiple constituencies and is the core element of success.

"It's tricky, because you have to be transparent, but you can't betray confidences," he says. "What is it that the organization wants to be in five years? You can't communicate that publicly because others might better compete against you. Management has to get buy-in that's specific enough to be understood, but not so specific that individuals can create a competitive response."

Sokolov points to the problem of the board backing the CEO's strategy through thick and thin, and that influential physicians can throw off even the best-planned long-term strategy. "Often times, independent physicians perceive employed physicians are being advantaged and thus require an inclusionary strategy of their own," says Sokolov.

In Alegent's case, even physicians at the hospitals that didn't participate in the no confidence vote against Sensor were surprised that things went south so quickly. Jeffry Strohmyer, MD, an independent physician and former president of Alegent's Midland Hospital medical staff, thought things were going so well with the transition that he was floored by the forced resignation.

"I'm still asking that question. What happened? It came out of the blue for us. We were doing so well, I thought," he says. "Bergan and Immanuel didn't have a clear [medical staff] leader. They're larger and have a lot more independent docs, but in my opinion, they were the ones who had the high-dollar stakeholders—ortho, cardio, backs and spine surgery. They had the high-impact dollars there. When management started stepping on those toes, that's when it hit the fan."

Transition is rough
Sensor himself says that in hindsight, perhaps he could have spelled out better what the long-term transformation to an employed model would mean for independent physicians.

"Alegent has 1,200 physicians, of which only 200 are employed and yet it experienced tremendous growth in the employed sector in the past five years," he says. "The environment is driving physicians to seek employment, and that creates tremendous pressure on the existing independent affiliated physicians. What does it mean to the ones who aren't employed?"

What it means is that because reimbursement economics haven't yet fully changed to support the patient care advantages of integration, high-dollar physicians have little incentive to support a change that will adversely affect them economically. Perhaps Sensor misjudged their buy-in. Perhaps some of those physicians ultimately felt that the shift wasn't completely transparent.

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