Physician Network Growth and Stabilization

1. Physician Network Growth and Stabilization: How transparency is foundational to sustainability. Health systems that stay static in their strategies for finding, acquiring, and working with providers are going to face retention difficulties in the near future, and they may soon find it simply impossible to sustain their existing provider network. The smartest health systems today are focusing heavily on stabilizing their physician enterprises. That’s because the market is staring down a future without enough physicians to go around. Hospital groups are growing their networks at incredible rates: between 2012 and 2018, the number of hospital- owned physician practices increased by 124.1% – with that growth poised to continue into the future. Over 75% of health systems say they plan to employ more physicians in 2020.i Just one problem: according to the Association of American Medical Colleges, the U.S. “will see a shortage of up to nearly 122,000 physicians by 2032.”ii Worse, not only are medical groups competing for a shrinking number of physicians, they’re facing increased competition from new quarters. Retailers like CVS and Walmart are planning to build their own healthcare workforces, for example.iii Payers are also developing their own networks. “Blue Cross Blue Shield Association, for instance, will launch a national provider network in 2021,” reports Beckers ASC Review.iv In this new reality – not enough providers and too many competitors – churn can be an existential problem. If you lose providers to turnover in coming years, it may be literally impossible to replace them. That puts everything the health system wants to achieve at risk: patient outcomes, revenue generation, organizational reputation. So, what can medical groups do now to grow, protect, and sustain their provider networks? More to the point, how can they manage scalability with a sustainable, systematized business process that offers resiliency against tomorrow’s dangers? It starts with transparency. Read on to find out how. © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 1

2. Generate transparency into physician compensation to foster better decision- making and relationships. ❶ One of the greatest obstacles in sustaining a provider network is transparency of information. The “not knowing” about problems puts health systems at risk of losing providers unexpectedly without knowing why – and without any way to find or generate information about those problems. The flip situation is just as much of a problem: if medical groups can’t identify what works when it comes to attracting, developing, and retaining providers, they may end up missing good opportunities and making bad decisions. This is particularly true when it comes to the financial relationships between medical groups and their providers, because compensation management is more complex than ever, and it can be a significant administrative challenge for both physicians and employers. Visibility and transparency is critical because if turnover is a problem, can the health system figure out why? If the answer is not an immediate yes, it means both the health system and the provider have too little insight into their relationship. In other words, if the health system dealing with turnover (or even just frustrated providers) wants to correct the issue – or, better yet, spot the red flags before problems arise at all – they need to know why physicians are unhappy. Measures like interviews and “check-ins” are great but insufficient; they’re too reactive to provide the level of transparency needed. This lack of transparency also erodes trust. If providers can’t get the information they want in a timely way, or feel they have no input into the model, it can foster distrust between provider and administrator. Providers are left confused, skeptical, and frustrated as to whether their compensation is commensurate with their performance Communication breakdowns lead to dissatisfaction, turnover, and separation. Instead, technology must be in place to produce empirical data. And in this situation, Microsoft Excel isn’t enough. The compensation technology should enable physicians to connect the dots between any value-based metrics to which they are subject, their performance in meeting those metrics, and their income. Similarly, the tool must allow administrators to understand where succeeding or falling short and, further, compensation plans for the future to know from a high level what’s the total financial impact to the organization. Thankfully, with such a tool in place, medical groups begin to realize a series of advantages. For one, it facilitates clearer communication and fosters positive relationships with physicians. Providing immediate feedback on performance, what they’re doing, and how it correlates with being compensated is critical to establishing trust between the provider and medical group. Even better, a real- time system can disseminate information to physicians with little-to-no lag time. For another, it enables better decision-making. Physicians can determine what changes they may need to make in their own behaviors to get their compensation where they want it to be. In turn, administrators can know – through a single source – how providers are performing, where issues are arising, and how any changes will affect underlying financial performance. and agreements. It will prove increasingly difficult for medical groups to retain providers over the long-term if those providers don’t trust how the financial relationship is administered. their providers are to model their © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 2

3. Manage physician relationships with an eye to “systemness” to keep provider and organizational goals aligned. ❷ But frequently, that is not how the two sides – the provider group and their health system employer – experience their relationships with each other. From the perspective of a medical group, the standard baseline business model is something like: hire more providers to refer more patients into their system to generate more billing to grow revenues. There’s certainly evidence that this model works, and it’s the reason why so many hospital groups have spent the past several years snapping up private practices. “Primary care providers were the [principal source of] market share because they would drive business to specialty physicians in hospitals,” says Marc Halley, MBA, author of The Primary Care – Market Share Connection: How Hospitals Achieve Competitive Advantage, to HCPLive (formerly MD Magazine). A misalignment between the providers and the health system can undermine and compromise any effort at growing a sustainable provider network by introducing unnecessary friction. Again, transparency helps. For example, if you have transparency around metrics tied to physician compensation regarding new value models and reimbursements, it’s possible to get both providers and leadership driving toward the same goal. That requires what we call “systemness,” or the blending of all the moving parts of a well-functioning health group – great people, strong process, genuinely helpful technology, and well-defined organizational goals – into symbiosis with each other Remember, everything is contingent on the patient experience, and here all of the interlocking pieces of a health system matter. It’s the provider network that drives patient experience; the network, in turn, depends on physician experience. Provider experience, then, is a function of physicians being happy and satisfied in their relationship with the health system – and also in alignment with the health system’s overall goals. In other words, everything has to line up; the whole ecosystem has to work if the health system is to generate positive patient outcomes, succeed as an organization, and sustain its provider network. An organization’s provider network is not separate from its business operation; they are seamlessly, organically intertwined. From the perspective of the providers, however, the demands of the medical group can feel removed from their personal needs, with interests misaligned. © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 3

4. Moving forward, hospitals will be challenged to push past surface-level relationships with their physician and medical group partners and instead create deeper partnerships with greater clinical, financial, and organizational integration. Meaningful alignment may require a shift from traditional to more innovative arrangements with physicians. In many cases, that will mean moving away from traditional wRVU compensation and toward provider compensation and employment models that support long-term partnerships and an integrated system culture. In other words, what are medical groups going to do from a compensation modeling perspective (1) to attract and retain these people without (2) creating an administrative nightmare on the backend, while still (3) driving the whole enterprise toward its larger organizational goals? The fulcrum of success here is straightforward. The intense reliance on manual labor and data manipulation makes traditional compensation management difficult, error-prone, opaque, and potentially unreliable. Thankfully, an automated solution simplifies and streamlines the whole process. In fact, with such a solution at hand, hospitals and medical groups will be much better positioned to bring their provider network into alignment with the health system A lack of systemness, weak coordination, and inconsistent patient experience will erode both provider relationships and patient outcomes. The disparate elements that govern provider relationships (especially compensation) must be aggregated and integrated, so that they can be managed from within a single system, a single source of truth. The tools you choose make all the difference. The right tools can do more than shine a light on otherwise hidden or obscure measures of the health of a medical group’s relationship with its provider network. They can also consolidate disparate data sets into a single source of truth. In their absence, operational and administrative leaders have no choice but to go to multiple places for multiple sets of information – increasing delays and the risk of errors. With a single source of truth, medical directors can sit down with physicians and talk through their areas of performance, rather than have them show up with a bunch of reports from a bunch of different places. © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 4

5. Strengthen the resiliency of your provider network against erosion from burnout, overwhelm, and dissatisfaction. ❸ Burnout –defined as “long-term stress reaction marked by emotional exhaustion, depersonalization, and a lack of sense of personal accomplishment” – plagues provider networks, and it’s lethal to long-term network sustainability.v Physicians face one of the highest burnout rates in the U.S. A recent survey by the American Medical Association (AMA) found that 43.9% of U.S. physicians exhibit at least one indicator of burnout.vi Causes include excessive workloads and stress from what AMA President Barbara L. McAneny, MD calls “the bureaucracy of modern medicine.”vii In turn, burnout can compromise physician-patient interactions, potentially leading to worse health outcomes, and can lead physicians to seek other employment or retire from medicine altogether. In short, burnout will not only erode the effectiveness of a hospital system, it will also undermine any attempt to sustain a provider network over time. In this situation, a formalized resiliency program can pay dividends. 1: Help physicians better manage their workloads. Battling burnout – particularly for physicians who are busy producers or facing expectations to produce at higher levels – includes helping those providers to more effectively manage themselves and manage their life. On paper, they may be successful, with a strong panel size, but internally they may be unhappy, disaffected, and/or exhausted. How do we keep them engaged from an emotional well-being standpoint? Answering that question is critical to the long-term stability of a provider network. That’s where a resiliency program comes into play. 2: Make use of resources like Advanced Practice Providers (APPs) to support physician needs. Many physicians feel apprehensive about the increasing use of APPs, but at the end of the day, APPs present an excellent support resource for overworked doctors. And APPs aren’t going anywhere; the shortage of providers ensures that medical groups will have to make maximum use of all options. But health systems can make smarter use of APPs to support physician needs and find ways to align both provider and APP incentives toward shared goals. For example, medical groups can consider compensation formulas that incentivize doctors to better utilize their APPs, or to simply produce more transparency around how APPs are being used in practice. 3: Assess and improve physicians’ overall experience. Whether a hospital group hires an official Chief Experience Officer, or simply assigns such duties to someone in a medical directorship role, oversight of provider experience should be a formalized part of today’s working environment. This person should be able to serve as a frank conduit with physicians regarding what they can or cannot change. Some complaints may not be immediately fixable – issues with the Electronic Medical Records (EMR) system, for example – but other areas can be controlled. The key: the person in this role needs to bridge communication gaps between administrators by looking at physician satisfaction in a number of different areas, so the providers can continue to be successful and engaged in their roles. 4: Ensure compensation is aligned with resiliency goals. Compensation plays a role here too. As managed care payers push for more value, it’s critical to align incentives and physician managing that panel size, and seeing how compensation models need to be tailored to enhance physician resiliency. providers and compensation, e.g., © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 5

6. The importance of good change management. In the absence of a project manager or change manager helping with any initiative to successfully grow and retain a provider network, almost any effort will face a steep uphill climb. Health care is continually evolving and changing, and change management must be carefully handled and coordinated, down to the physician level, to help everyone stay engaged with the whole process. This is particularly critical at hospital groups, because the scale of these efforts can be enormous – and thus potentially unmanageable. Ultimately, good change management spells the difference between success and failure. Industry consultancy group McKinsey and Company, in collaboration with the University of Oxford, found that, with excellent change management practices in place, project ROI hits an average of 143%. When organizations attempt change with poor or no change management program in place, ROI is only 35%.viii In short, change management matters. Several years of rapid expansion have created an execution risk for health systems, with a rising urgency among healthcare leaders to address unsustainable practices in growing and maintaining their provider networks. With over 100,000 doctors leaving the market, health systems must figure out how they will grow and sustain their provider networks as supply diminishes. What will hospitals do to manage that dwindling supply and stabilize their provider network? Only health systems that can create meaningful alignment based on trust, culture, and consistency between themselves and their provider networks will be positioned for success in this environment. To grow, to keep the network stable, and for all efforts to be sustainable over time, organizations must be transparent with their providers. They must be communicating (and, underlying that, be able to communicate) with their providers to ensure they’re happy, successful, and get what they need. Only that will ensure that their existing provider network is resilient against turnover and churn. From there, that transparency can help build the systemness that’s critical to medical groups that want to perform seamlessly in delivering outstanding patient outcomes through a provider network that’s at the top of its game, all while driving towards the same organizational goals. Only with those elements in place will it be possible to build a genuinely sustainable business model that allows for growth and stabilization. © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 6

7. About the Authors Dave Butcher, SVP, Strategic Solutions Hallmark Health Care Solutions With 19 years of client acquisition and consulting experience in healthcare and finance, Dave is strategically well-versed in bench- marking processes, sales system development, and software project rollouts while upholding a "seek first to understand" methodology for prospect/client interaction and provide appropriate solutions and services to meet need. Hallmark Healthcare Solutions is a global healthcare solution and IT firm with offices located in New Jersey, New York, Michigan, and India. Hallmark offers a unique approach inclusive of both strategy and technology to achieve the desired outcome. The technology component positions organizations to use real-time data for improved decision making with regard to utilizing human capital. Deirdre Franzese, CPA, Director of Finance BayCare Medical Group BayCare Medical Group is Tampa Bay's leading multi-specialty group with more than 600 providers practicing 45 specialties in over 190 outpatient locations throughout the Tampa Bay and west central Florida regions. Locally and nationally recognized as a 2018-2019 Great Place to Work® and Fortune 100 Best Companies to Work For®, BayCare Health System is a not-for-profit 501(c)(3) organization, with a network comprised of 15 hospitals with services including imaging, lab, behavioral health, home health care and urgent care. Our priority is connecting patients to a complete range of preventive, diagnostic and treatment services for any health care need, throughout their lifetime. www.hallmarkhcs.com info@hallmarkhealthcareit.com 200 Motor Parkway, Suite D-26 Hauppauge, NY 11788 (856) 231 5340 https://baycare.org 2985 Drew St. Clearwater, FL 33759 1-800-BayCare (229-2273) The information contained in this paper is for generalized informational and educational purposes only. It is not designed to substitute for, or replace, professional business advice. You must not rely on the information in the report as an alternative to professional business advice from an appropriately qualified professional. If you have any specific questions about any relevant subject matter, you should consult an appropriately qualified professional. Hallmark Healthcare Solutions, LLC. does not represent, warrant, undertake or guarantee that the use of guidance in the report will lead to any particular outcome or result. Copyright © 2020 Hallmark Healthcare Solutions, LLC. All rights reserved. References i https://www.modernhealthcare.com/physicians/hospital-employed-doctors-opting-independence ii https://www.aamc.org/news-insights/press-releases/new-findings-confirm-predictions-physician-shortage iii https://www.beckershospitalreview.com/strategy/hospitals-and-health-systems-6-trends-and-issues.html iv https://www.beckersasc.com/leadership/what-is-the-value-and-return-of-the-medical-group-enterprise.html v https://www.ahrq.gov/prevention/clinician/ahrq-works/burnout/index.html vi https://www.ama-assn.org/practice-management/physician-health/new-survey-shows-decline-physician-burnout vii https://www.ama-assn.org/practice-management/physician-health/new-survey-shows-decline-physician-burnout viii http://www.pedowitzgroup.com/change-management-in-technology-implementations/ © 2020 Hallmark Healthcare Solutions Sustainable Physician Networks | 7