Contributor: Institutional Engagement With Physicians Is Key to Managing Cost and Quality

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Although physicians’ clinical decisions serve as the biggest drivers behind the cost of care, hospitals have long been reluctant to take financial accountability. If such accountability is to be transformed from a diffuse fear to a manageable managerial task, institutional engagement with physicians will be a critical next step.

Hospitals have long been reluctant to take financial accountability for the cost of care. Their primary reason, as evidenced by Numerof & Associates’ Sixth Annual State of Population Health Survey Report, is the fear of financial loss.

At the same time, most of those same health care executives also acknowledge that their ability to manage cost at the physician level is not what it should be. Sixty-three percent rated their organization’s ability to manage variation in cost at the physician level as “average” or “worse than average.”

The reason many provider organizations do not have the ability to manage costs generated by physicians is that they have not taken the steps needed to build efficiency and predictability into the clinical decisions their physicians make.

With physicians’ clinical decisions being the biggest drivers behind the cost of care, provider organizations need to engage with physicians to make clinical decision-making more predictable and efficient. Until that happens, their fear of financial loss will be justified.


Fortunately, there are clear ways for health care executives to get a better handle on this key driver of health care costs.

Developing evidence-based care paths is one example. An evidence-based care path that lays out the best next steps for a patient that presents with a certain condition is an excellent way for physicians and executives to collaboratively decide on the lowest-cost course of treatment.

Such care paths are developed by the physician group with the expectation that all clinical staff will use them as guidelines. Care paths are then incorporated into the order entry system, prompting users to provide a rationale when their orders depart from the care path. Physicians are still exercising their clinical judgement in each case, but to the extent that decisions are shaped by the care path, costs can be reduced and quality improved. Data on variation from the care path provide input on its utility and on cost outliers among the physician group.

Data from the Numerof survey indicate that just 51% of respondents said their organization had established standardized care paths for 1 or more high-cost procedures, and just 68% said that order entry systems (eg, computerized provider order entry systems) incorporate care paths and capture exceptions.

Importantly, these underutilized mechanisms also set the stage for the next step in providers’ overarching goal of improving costs and quality. With care paths in place and a system to assess adherence in place, physicians and executives can build a data-based picture of the cost and quality consequences of a care path and on the decisions and outcomes of individual physicians. Only 58% of respondents said their organization already provides at least some physicians with comparative cost and/or quality data, even though insights like these are essential if providers are going to tie payment to outcomes.

Few health care executives would argue with the idea that the institution should bear responsibility for the cost and quality of the care delivered. So, the question is, what gets in the way of implementing these commonsense steps?

The main barrier is cultural—it involves the way executives often think about the physician-hospital relationship. Historically, there has been an unwritten understanding between clinicians and administrators that amounted to, “stay out of my clinical affairs and I’ll continue to bring my patients here and make referrals.” Securing the flow of patient care and referrals has been a key driver of practice acquisition over the past decade.

Yet now that over half of physicians are employees, that unwritten understanding remains in force. Hospital administrators are reluctant to engage with physicians to address issues that touch on clinical decision making. Therein lies the problem: Hospitals can’t possibly expect to be able to control clinical costs, quality, and outcomes without collaboration, standardization, and a redefinition of the physician’s role in the enterprise.

Accountability for cost and quality is, indeed, a critical ingredient for population health management. If such accountability is to be transformed from a diffuse fear that results in paralysis to a manageable managerial task, institutional engagement with physicians will be a critical next step.