What is a Co-Management Agreement?

Everywhere you go, you hear about hospitals integrating with physicians. “Physician alignment” and “physician engagement” seem to be the buzzwords of the day and these terms are often associated with co-management. Co-management, simply speaking, is a form of hospital-physician integration that does not require hospital employed physicians. However, co-management can be leveraged to further integrate employed physicians.

Co-management is when a hospital engages physicians to assist in managing some of its service lines. A common co-management arrangement involves the engagement of “specialists” to collaborate or co-manage; for example, a hospital might engage cardiologists to assist in the management of its cardiovascular service line.

Physician management services typically do not duplicate services provided by hospital staff. Rather, physician management services often concern high-priority matters that are within the physicians’ expertise. For example, a co-management agreement will often include medical directorship duties or positions that individual physicians would otherwise provide. Other responsibilities include managing and optimizing an operating room or scheduling in a cath lab, developing specialty-specific protocols for patients and establishing specific inpatient and outpatient quality and efficiency objectives and implementing plans to achieve specific goals.

The “co“ in co-management is a reflection of the collaboration between the hospital and the physicians. Within this collaborative effort, there are numerous points that intersect. The bottom line is that both hospital and physicians work together in the decision-making process.

Co-management agreements can benefit physicians by permitting them to integrate with their preferred hospital to improve that hospital’s quality and efficiency in areas where they provide care. Another potential benefit is that it is not required that physicians be employed by the hospital to participate. Thus, physicians can retain their independence.

For the hospital, having a select group of dedicated physicians manage a service line can be equally, if not more effective as management by hospital-employed physicians. The difficulty arises as to how to discern which physicians are “fully dedicated” to participate in the co-management agreement. Physicians employed by the hospital are often considered sufficiently “dedicated” to participate in co-management agreements.

How does a hospital create a co-management agreement?

Some hospitals and physicians form a co-management joint venture. These joint ventures are owned by the hospital and typically independent physicians. These joint ventures can take a considerable amount of time, energy and financial resources to create as it is a legal entity  that exists solely to perform the co-management agreement. Once executed, some of the physician owners may provide medical director services for the hospital. However, all physician owners and the hospital assist the joint venture to perform the broader co-management services. At the conclusion of the agreement, the joint venture distributes earnings to the physicians and the hospital.

A direct agreement is the quickest and most simple arrangement between the hospital and the physicians. This allows the hospital to associate with and benefit from the management skills of the physicians without incurring the costs or risks of employing the physicians directly. It also avoids the costs and time consumed in creating a separate legal entity as the joint venture requires.

Crafting a co-management agreement may appear straight-forward as these agreements seek to elevate service line quality and efficiency by leveraging a physicians’ unique skills in the hospital. Physician buy-in and direct leadership drive behavioral changes that the hospital is unable to influence. Agreements often include specific measurable quality and efficiency goals and payouts are based on achieving these goals. Properly structured, this type of arrangement can align hospital-physician incentives to  achieve enhanced patient outcomes while significantly improving financial performance.

Hospitals often delegate the creation and coordination of the co-management agreement to third-party healthcare consulting firms. In this way, an objective entity can help craft the agreement and then provide oversight, and measure, track and record progress of initiatives. Healthcare consulting firms work to leverage the strengths of both parties while identifying and collaborating to overcome weaknesses. Simply, healthcare consulting firms are better equipped to design a co-management agreement that accelerates, optimizes and achieves hospital-physician alignment.

Dynafios provides end-to-end co-management services from crafting the agreement, collaboration and oversight to periodic audits and adjudications. So far, we’ve successfully managed more than 500 healthcare agreements. But, we haven’t stopped at co-management agreements.

We’ve also have developed a hybrid co-management program we call C2i. C2i is a holistic approach to physician alignment delivering enhanced clinical care and improved financial performance. C2i integrates all disciplines within a service line and identifies variation and opportunities for improvement. The C2i co-management program offers hospitals and physicians a road map to successful clinical transformation.

Curious about co-management or C2i for your hospital or healthcare system? Give us a call at 877.858.3282 or email us at info@dynafios.com.

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