The model maximizes efficiency and cost-effective operation to foster success in the current reimbursement environment while simultaneously providing enhanced patient care options and outcomes thanks to extraordinary coordination of care and information sharing.
Using this model, Bea has helped transform Mercy Hospital from a struggling stand-alone community hospital in Janesville, Wisconsin, with no employed physicians into a multi-state, vertically integrated health system with more than 800 W2 physician partners who care for patients at seven hospitals and 89 clinics and specialty centers throughout 15 northern Illinois and southern Wisconsin counties.
Bea was honored at MGMA’s 2019 Annual Conference with the MGMA Harwick Innovation Award, which recognizes and celebrates the success of an individual who has developed an innovative solution that positively impacts practices, providers and/or patients in their community.
I had the opportunity to sit down with Bea in New Orleans during the conference to discuss how this vertically integrated model helps ensure engaged physicians are delivering high-quality care while sustaining a growing healthcare business. “We were [making] $33 million in gross revenue when I started 30 years ago,” Bea noted. “And today we’re at $3.2 billion in gross revenue.”
Gans: Let's talk about how you built the W2 Physician Partnership Model, which relieves physicians from the administrative responsibilities of managing a practice, and let’s them focus on patient care.
Bea: Back in 1989, it was pretty controversial for stand-alone community hospitals to get into the physician business and employ physicians, and I really did not want to employ physicians in a traditional sense where they'd be paid guaranteed incomes or mostly guaranteed compensation. I really wanted to create a model that physicians would be compensated just like they would be in private practice and have control over their clinical practice but still fall under the umbrella of the 501(c)(3) organization.
I created a document that would meet the qualifications of employment in the eyes of the IRS but that would still allow physicians to begin the year not knowing how much income they were going to make — so that if they worked harder, they made more money. It was always based on a tiered compensation model, so that the more volume they produced, the higher their tier structure.
Essential to the model is an incentive called the PIP (physician incentive program), which is based on meeting quality indicators. So, while the model stressed patient volume and patient production, it also promoted patient quality. I think the dramatic thing with that is that when the doctors are paid according to how hard they work, I don't need to worry if they are showing up for work, working hard enough, or taking some extra time off. I don't need to worry about our doctors working hard enough or taking extra time off because I'm not guaranteeing their compensation. And their percentage that they receive is really comparable to what they would be receiving in private practice.
To come up with this model, we created a software package that allows us to put in important pieces of data in a marketplace, such as the payer mix. ... We do surveys of the existing doctors in a community of what the specialists are polling out of their practice and compensation versus a primary care and a number of other factors. And what this software provides is a tiered structure of compensation.
What blows people's minds usually is that I can have a neurosurgeon and family doctor on the same tier structure, but what they make from it is dramatically different. The neurosurgeon may make $1.5 to $2 million a year, and the family doc may make $250,000. And so that tier structure … has been very successful and allowed us to track hundreds of doctors.
But most importantly … is the culture that we created. And that is the culture of having our 8,000 employees realize that the more successful we help our doctors be in their practice, that that success is going to flow to the rest of the system. This created a culture of serving doctors to help them to be more efficient so that it would help the whole practice.
Gans: You’re focusing not just on production — you’re focusing on the quality of care. What is PIP and what are some of these metrics of quality you’re looking at?
Bea: We set goals ahead of time at the start of the year, and it can vary by location. It usually varies by specialty, and they have to really meet certain practice standards or quality standards.
We have our own medical insurance product; it offers 14 different insurance products to the marketplace. And managing populations of patients through the insurance company has given us a big leg up in knowing how to set quality standards and goals that we set in the PIP program.
One of the things that the model is premised on is that we cannot protect the doctor from the marketplace that he chooses to practice in. If he wants to practice in Rockford, Illinois, where Illinois Medicaid pays 18 cents on the dollar, that would be happening if he's in his private practice versus with Mercy. So we don't protect the doctors from the payer mix they would be working in, but we can protect them from bad debt and charity [care]. Basically, the tier structure is not based on actual income that's collected, it's based on what's supposed to be collected. If the health system fails to do its job in collecting from Medicare, collecting from Medicaid, collecting from commercial insurance, then the doctors aren't penalized. They’re paid at the prevailing Medicare rate, by their prevailing managed care rate. So the doctors don't have to worry about how efficient or inefficient the system is at collecting what is supposed to be collected.
Gans: I think one of the advantages that you described with Mercyhealth is that you're fully integrated. In other words, the doctors are really part of the system with the inpatient and ambulatory care facilities, and you have your insurance arm as well.
Bea: That's right, one medical record. And even for our ACO at Mercyhealth, we didn't have to develop new structures to take out new costs. We were already functioning as an ACO when the Affordable Care Act was enacted, because our doctors and our hospitals were completely integrated. On the steering committee of our ACO, we actually have members from our insurance company who have tremendous experience in managing patient populations, working with members of our health system and helping case management of our patients. When we look at our successes in ACO, besides the fact that Mercy was already functioning as an ACO, our goals are really developed for the ACO by our doctors and other care providers together. We have a single medical record that supports evidence-based practice standards, to coordinate care.
We also employ strong case managers to help to coordinate care. We have strong outreach programs for wellness and to manage chronic diseases. The point here is that the doctors are integral and integrated in all of this. ... I think ACOs that are trying to be an ACO via contract are going to be unsuccessful, because as more and more bundled payments come from CMS, which are already happening, that bundled payment is not going to be sufficient to cover the cost structures of independent physician offices and independent physician groups and the hospital and the other components. ACOs that are ACOs only via contract are going to be fighting with each other over getting their share of that bundled payment.
Gans: How does the physician partnership model fit in with the ACO? Because they’re the delivery arm.
Bea: The physician partnership model is really the foundation of the entire vertically integrated health system. ... If your doctors are with you part of the time and not all the time, and if they're admitting but competing, you really have a house divided. When the physicians are in a fully integrated health system, you have common incentives, common goals, and as long as they know how they're being compensated, which is very similar to private practice, and … there’s control over what's important to them in their practice, the system is really making their life easier. They have more time for production …
Gans: And maybe more time for their own lives.
Bea: Right, the time to see more patients and for their own lives. But you’ve got to have a culture that doesn't treat them like timeclock-punching employees. I don't have to wake up in the morning and wonder if my 800 salaried doctors are going to put in an honest day’s work for their compensation. Because if they don't, they're not getting compensated.
I would just say that healthcare is changing dramatically; it certainly has in my lifetime. I think it's going to change even faster with the advent of technology. I'm asked to sit on several boards of new technology companies that are coming forward with emerging technologies. But I still go back to the foundation of adapting to all these new technologies and new delivery models, having the doctors and the hospitals as part of the same organization. That is the foundation, and you can adapt to any change that comes from the government or the marketplace or technology if you're working together, day in and day out, with common incentives.
Explore Related Content
Member Tool
Sample Physician Compensation Model Tables
Member Tool
Physician Employment Contracting Best Practices
Member Tool
Physician Employment Agreement Sample Contract
Member Tool
Common Contract Methodologies to Hire Physicians
