For successful clinical integration to occur, hospital and physician alignment is a must, especially as the health care industry shifts to an environment where provider payment will be tied to results for quality, access and efficiency. When baseline performance levels are met, hospitals and physicians will benefit from shared savings—and to achieve those levels, aligning the actions of the provider group is essential. When performance levels are not met, hospitals and physicians will be at risk for reduced payment, no payment or exclusion from a network.

Physician alignment—the effective coordination between hospitals and physicians—is necessary to adapt to new payment and care delivery models, provide quality patient care and enhance physician satisfaction.

There are typically three organizational options for health care entities pursuing effective physician alignment: 1) independent physician programs, 2) employed physician programs, and 3) clinically integrated networks.

Each option has potential benefits and drawbacks:

1. Independent physician programs: In this physician alignment option, hospitals develop and refine programs to support and align with physicians who wish to remain independent. This usually involves developing contracts with physician groups, either to purchase services from them or provide services to them. Both the hospital and the physician group define clear deliverables and performance levels.
   
   This option is flexible, can be set up relatively quickly, and be managed short- or long-term. However, with this type of physician alignment arrangement, hospitals may have limited ability to influence physician behavior, clinical quality, and costs. And despite requiring less capital than a physician acquisition model (see #2 below), this option still demands that the health care organization dedicate enough resources to ongoing monitoring and performance improvement  across the network.
    
2. Employed physician programs: Hospitals and health systems will sometimes pursue physician alignment by acquiring private practices and employing physicians, a strategy that has grown in popularity in recent years. This approach can ensure a good deal of influence over clinical outcomes and cost of care, however, it requires significant amounts of capital for recruitment, salaries and practice acquisitions.
   
   The hospital or health system also needs solid technology capabilities to effectively manage their practices, and to monitor ongoing performance across many domains. Regardless, physician acquisitions and employment do not guarantee meaningful clinical integration and physician alignment: Clinical and financial  incentives must be aligned across the network and shared goals must be established and achieved. Before deciding on acquisitions as a means to clinical integration, hospitals should evaluate how local physicians feel about hospital employment, and recognize that compensation agreements need to be structured competitively, in a manner that is sustainable over the long term.
    
3. Clinically integrated networks or accountable care organizations (ACO): This physician alignment option includes both employed and independent physicians who are aligned through formal clinical integration programs and other value-based integration options, such as the Medicare Shared Savings Program¹. Clinically integrated programs enable hospitals, physician networks and other providers to collectively negotiate with managed care companies and health plans to improve the quality and efficiency of care. This type of arrangement, however, has issues that need to be carefully considered when deciding how incentives are structured, and how rewards and penalties are distributed. To date, relatively few organizations have pursued formal clinical integration or ACO status as a physician alignment strategy, due to the significant infrastructure and care delivery requirements of formal programs. Many health care entities are simply not equipped to pursue such FTC-compliant programs at this time.

To date, relatively few organizations have pursued formal clinical integration or ACO status as a physician alignment strategy, due to the significant infrastructure and care delivery requirements of formal programs. Many health care entities are simply not equipped to pursue such FTC-compliant programs at this time.

Regardless of the type of physician alignment arrangement, clinical and administrative physician leaders should be included in the planning and development of new networks, operating models and other integration initiatives. Without physician leadership, value-based health care and successful physician alignment are not possible.

^{1 A Guide to Physician Integration Models for Sustainable Success. Health Research & Educational Trust and Kaufman, Hall & Associates, Inc., Chicago: September 2012. Accessed at www.hpoe.org.}