Clinically integrated networks: Can they create value?
Although structurally simple to create, clinically integrated networks (CINs) are difficult to get right. Health systems considering establishing CINs must think through what it truly takes to create value through these entities and then make sure they have designed the CINs appropriately.
The transition to value-based reimbursement in healthcare is creating opportunity and tumult for health systems, physicians, and payors alike. Among all the interactions these stakeholders have, the relationship between physicians and health systems remains the most critical to clinical quality and efficiency, as well as the competitive success of each player.
The relationship between physicians and health systems varies depending on the economic incentives involved. However, providing meaningful incentives has often been difficult because of legal complexities and the scrutiny that tends to scale with the magnitude of the incentive. Historically, there have been two constant—but less-than-satisfying—bookends. Independent physicians, who often perceive themselves as small-business entrepreneurs, have usually not been offered alignment incentives sufficient to convince them to contribute meaningfully to at-scale care coordination. Employed physicians, who often act like salaried employees, have often not been given incentives strong enough to encourage productivity and thus have typically been more expensive than most other options. The innovations that have occurred have largely fallen in between these two ends of the spectrum.
Today, clinically integrated networks (CINs) are in vogue. CINs can, in theory, create “just the right” relationship between physicians and health systems because they allow for some shared financial accountability for clinical improvement, provide a legal structure for combining multiple disparate entities, and have the potential to establish a more aligned delivery system. At present, this theory is pervasive among providers, and thus the industry has witnessed an explosion of CINs across the country.
We are skeptical about the value CINs have created to date. In many cases, it appears that health systems rushed to set up the legal structures of CINs without considering—and designing to—what truly creates value through these entities. Much of the rush may reflect a fear of being left “on the outside looking in” as physicians aggregate and/or partner with payors to better manage risk. For some health systems, however, CINs have purportedly begun delivering desired benefits. In this paper, we will articulate reasons why health systems should (or should not) choose to pursue CINs and what conditions must be met to pursue such arrangements. We will also put some facts behind the economics of these arrangements.
Why should systems pursue a CIN?
Simply stated, CINs are legal structures that facilitate healthcare provider collaboration. Thus, they should not be confused with the loosely defined term “clinical integration,” which communicates the overall need to be effective, efficient, equitable, and patient-focused, without specifically suggesting a legal or formal structure. (For more information about the structure of a CIN, see sidebar in the PDF).
Before establishing a CIN, health systems need to clearly define why they are pursuing this option as well as why local physicians would want to join it. In markets where clinical integration and the shift to value-based reimbursement are nascent, health systems may choose to form a CIN as an “offensive” strategy to gain market share and provide integrated services in a region where others may have difficulty creating a competing offering or may delay doing so for other reasons. The decision to pursue this strategy should be made only if there is a belief that the shift to value-based reimbursement is inevitable and a first-mover advantage exists. In markets where this shift is already occurring, CIN formation can be a “defensive” move to maintain access to a fair share of lives and manage their care. In either case, we see two primary reasons for health systems to form CINs:
- To align independent physicians with the health systems and create a vehicle for both independent and system-employed physicians to collaborate toward care improvement
- To maintain the option of participating in value-based/risk contracts and eventually take on a larger share of the premium
Align independent physicians When done effectively, aligning physicians in a CIN offers health systems many of the benefits of employment without the investment required to actually employ physicians. CIN membership is also more palatable to physi-cians seeking selective benefits but unwilling to cede their independence or tax ID number.
Physician alignment leads to increased net-work sufficiency for the health system and CIN. A carefully developed workforce plan covering both physician specialty and location is critical for making attractive products and effectively managing risk. The system must align the right mix of specialists and primary care physicians given the anticipated needs of the patients to be covered by the CIN and the system’s current staff of employed physicians. For a system with a limited hospital footprint, aligning physicians outside the system’s geographic reach (using hub-and-spoke architecture) can help build products that are relevant for the entire market.
Health systems are also likely to derive benefits from physician alignment outside of the CIN contracts. Clinical integration between physicians and hospitals leads to familiarity and the ability to better coordinate care for all patients, not just those on CIN contracts. Thus, the systems are likely to increase their share of lives from an aligned physician’s entire patient panel. This concept, which we term the “halo effect” of CIN alignment, will be explored in more detail later.
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