Does Your Practice Suffer if Your Affiliated Hospital Struggle?

Hospital Cash Problems, Financial StrugglesAs the economy continues to flounder and with the unemployment rate hovering close to 9%, some hospitals are seeing less patients come through their doors. As a result, they may be struggling to stay afloat financially. If your medical practice is affiliated with one of these struggling hospitals, there could be a trickle-down effect that negatively impacts your operations as well.

Whether your practice is aligned through a referral network or are employer-owned, Steve Jenkins, senior vice president at Sg2, a health care intelligence, analytics, and consulting company in Skokie, Ill., says the chief impact of a struggling hospital is a diversion of management attention as well as budgetary dollars.

“When a hospital is in a financial crisis, that could be drawing management attention away from the needs of their affiliated physicians,” Jenkins says. “Instead, they are drawing their attention to short-term issues of how they can right the boat.”

It also places constrains on operating funds that they may use to hire nurses and support staff for your practice and capital funds you could use to reinvest into the practice.

Ted Schwab agrees, and adds that a struggling hospital could have a disastrous effect on your practice in terms of quality and your brand as well.

“Let’s not kid ourselves that if you begin to cut back on staff, vendors, maintenance or technology, that it doesn’t have an impact on quality of care. It absolutely does,” says Schwab, a partner of Health and Life Sciences with the San Francisco, Calif. office of the global consulting firm, Oliver Wyman.

It also affects your brand, notes Schwab. Every medical office wants to be associated with a hospital that has a great reputation.

“If a hospital begins to struggle, the public knows it, patients know it, families know it, and if they connect you with a struggling hospital, it will hurt your brand,” he says.

So what can your practice do to help itself during these times? There are four critical steps you can take to shield your practice from the fallout.

Speak with the hospital’s leadership team

If you really want to stay up on how your hospital is doing, attorney Amy Galloway, a director with Ft. Lauderdale, Fla.-based Tripp Scott’s healthcare practice, says to attend the meetings, particularly if you are a medical staff member.

“If you see a significant change happening or likely to happen, try to head it off the path by having ongoing communications with the director of physician services,” she says. “Let them know that you are willing to do your part to help right the ship, but they need to be supportive of you as well, and telling you what their plans are to correct the problems.”

Schwab also recommends speaking with the hospital’s chief quality officer, medical executive committee, as well as the chief executive officer.

“First, let the chief quality officer know that while you understand these are tough economic times and there may be budgetary concerns, that they can’t cut back on quality,” he says.

Secondly, express your concerns to the medical executive committee and the elected president of the medical staff. It’s their responsibility to make sure that the hospital runs effectively, efficiently, and provides great quality of care.

In addition, Schwab says to head straight to the top and speak to the chief executive officer of the heath care system.

“Many times, physicians assume that the chief executive officer or the hospital administrator always knows how the struggles are impacting patient care and that simply is not true,” he says. “They just have so many other things on their plate and may not realize it.”

Communicate with your patients

As soon as crisis hits, you’re expected to communicate with your stakeholders. In this case, your most important stakeholders, besides your staff, are your patients.

Galloway advises establishing an outreach and marketing plan to let your patients know that you are concerned and that (if this is the case) that you have direct ability to affect change at that facility and you also want to make sure your patients are cared for. Even if that means you may have to try to find another arrangement for your patients.

However, Schwab warns that one of the most dangerous things you can do is communicate on your own to your patients about the struggles of the hospital.

“One, you don’t have 100 percent of the information, and two, you will create some misinformation out there,” he says. 

Rather, Schwab says to communicate to your patients in a joint effort with the hospital. This might be through press releases, interviews with the local newspaper and editorial board, bad even through electronic information. 

“However you choose to communicate, if you are aligned with the hospital, the information needs to come from your office and the hospital together,” he says.

Show support

It’s understandable that some practices may want to distance itself with the struggling hospital. However, Jenkins says your practice may want to consider the long term effects and by showing some support now, it can pay dividends in the future.

“A hospital affiliation is a partnership for the long haul, and there are real benefits if a physician can show loyalty and support to hospital leadership during tough times,” he says.

Of course, Jenkins says you need to be focused on the short term and ensure that your payroll is met and your patients care taken care of. But you also have to believe that things will get better.

“Hospital leaders really respect those physicians that they can count on in difficult times,” he says. “As long as you think there is a corner to be turned, be a good partner to your hospital leadership team.”

Keep your options open

Your hospital could be financially sounds yet still have other types of problems. For instance, the the staff infection rates could be out of control at your affiliated hospital. In this case, Galloway says one option is to become affiliated with a different hospital.

“If you are at a hospital where you send all your patient cases to, and that hospital starts having issues where your patients don’t want to go there, you need to start looking at other options,” she says. “Ask yourself if there any other facilities you can start to develop relationships with?”

Of course, this is easier if you are an independent practice that is only aligned with a hospital through a referral network. In a hospital owned group, you are tied more closely to the hip and could be stuck. At this point, it’s wise to begin reviewing your contractual agreement to see if there are any material breaches. If there is, Galloway says to consult an attorney or a practice management consultant to review the contract and to audit your practice.

Jenkins says that as an independent practice physician ask yourself two questions. Is this hospital going to make it? Is the financial difficulty so great that they may not make it or are they going to need to seek a merger partner?

If your answer to either question is yes, then the next question is one of timing—how long do you think it will take for them to right the ship. Is it one year or two years, and are you willing to hang tough with them, or do you want to diversify my practice.

“You won’t necessarily have to break your affiliation in most cases, but you will have to start to diversify where you send cases,” he says. “Shift some of your case volume to another hospital to cultivate a new relationship.”

In this time of transformation and change, there are going to be hospital systems that are winners and losers, adds Schwab.

“Tying your horse to only one carriage is going to be  a pretty risky proposition for the next three to five years,” he says. “Also, don’t let hospitals lead the entire clinical transformation in your market. You have to be part of it and lead the effort because you can’t always rely on that hospital to be there.”

Be sure to also have a long-term five-year financial plan that looks at the best and worst case scenarios and associate that with the success of your hospital.

“Think about what will happen if the hospital is successful and if they are not successful,” he says.

How do you know if your hospital is on the right path? Schwab says that there are three clear indicators that they are addressing the right issues. Number one, and the most important, determine if they have a physician alignment strategy in place that makes you feel comfortable.

“There are many ways to align physicians, such as acquisitions and billing networks, but do they have a strategy in place that makes sense?” he asks. “Secondly, hospital administrators don’t write orders, doctors do. Have they looked at and are they in alignment with current insurance contracting practices in the market. If the hospital is not in alignment with new contracting mechanism in some sort of joint capacity with the physician, then they will continue to have trouble.”

Finally, Schwab says to find out whether there is an ongoing effort around the supply chain. Hospitals have a tremendous percentage of fixed costs that will not change overnight. Hospitals are going to have to look at their variable costs which are in their supply chain.

“Are they looking at everything as to how they are purchasing antibiotics to food in the cafeteria to everything in between,” he says.

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