WHEN FORM FRUSTRATES FUNCTION
The Challenge of Retrofitting Physician Network Structure to Serve a Value-Based Care Performance Purpose
The adage is “form follows function”; except that in most health care enterprises today it doesn’t.?
More commonly, we see “form frustrate function”, a situation that is often especially acute in physician networks that were formed for contracting purposes from a pluralistic mix of medical practices, physician-hospital organizations (PHO) and independent physician associations (IPA).
Commonly, when contracting networks first formed, their “function” was to achieve the scale needed to contract for lives to manage. The network was a vehicle for individual practices to participate in contracts on better terms than they could negotiate on their own.? The value proposition of the network came from the aggregation of the practices, not necessarily the assimilation of those practices into a focused, high-performing system of care.?
The founding form of these networks was often defined by legacy legal entities or “pods” (I.e., PAs, PHOs) which once operated with a high degree of variability and autonomy.? Commonly, the legacy entities would set aside their differences for purposes of contracting – but not much more. Getting to agreement on matters of governance, IT platforms and investments in outcomes management programs were often uncomfortable exercises in balancing the efficiency of working together with a limited physician practice appetite to work as one. ??
Retrofitting contracting networks into clinically integrated networks and population health platforms remains a vexing challenge for physician and health system leaders.? The functionality required for clinically integrated networks to succeed in value-based care is not simply a matter of doing different things; it is a challenge to do almost everything differently, and in ways that force uncomfortable conversations and difficult change management on clinical teams.
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From Frustration to Facilitating a High-Performance Function
Broadly, at an industry level, we are at point where the form of our physician networks often frustrates the emerging value-based care functionality they now aspire to deliver. ?Certainly, the aggregation of a significant number of practices into a network is still a key factor in scaling solutions across larger populations. But it is performance at scale – not just scale – that ultimately determines the impact and earnings of the Network and its members. There are plenty of big but underperforming networks in the market.? As a network leader or strategist, the goal needs to be bigger and better.
I believe that this shift from an emphasis on scale to performance at scale can only be navigated when the pods that are encompassed within a Network understand and accept that they are interdependent in terms of incentive payment capture.? Autonomy (in the sense that my actions do not impact yours) and variability are no longer benign network attributes.? They have become a serious barrier to converting contracting networks into high-performing value-based care and population health enterprises.
Consider the largest physician networks in major U.S. markets. Most have aggregated enough practices to gain scale and position as an attractive market option for payers. ?Many struggle still to turn the corner from aggregation of those practices to assimilation into an interdependent operating system to fully realize performance incentive payments.? In most cases they have left millions more of incentive payment dollars on the table---funds that if earned would be distributed to Network member practices and aligned hospitals and specialists. Those funds represent a loss that is increasingly not just a missed opportunity, but a threat to individual practice viability and the sustainability of the Network as costs continue to rise and every dollar of value-based revenue takes on added importance.
The diagnostics on many of these networks reveal that their legacy business model form, or structure, is a root cause frustrating their clinical integration functionality and performance. In a perverse way, we’ve left in place the structural barriers to advancing the goal of retrofitting contracting networks into high-performing value-based care ecosystems, resulting in a series of unintended consequences including:
Physicians often voice frustration that their Network administrative costs are too high; that communications from the Network to the individual physicians is not clear or too slow; and that gating factors tied to earning value-based care incentives have become especially onerous. ?There is some validity to those frustrations; but the fact may be that the root cause of these concerns is the fragmented legacy organizational structure (form) that too often we are trying to preserve!
It is time to take a holistic and uncomfortable (perhaps) look at how we organize and operate. Transforming one without the other leads to frustration at the slow pace of progress.