Part 1: a report from the trenches of a start-up PO.

THERE ARE CONVINCING SIGNS THAT COMMUNITY Health Partners, a physician organization based in Kansas City, has turned the corner as it rolls into the second year of operation. The biggest indicator is that we hammered out the city's first professional risk contracts and the PO has grown from 23 to more than 50 physician member/owners--both PCPs and SCPs--and an additional 25 PCPs who affiliate with the PO for contracting purposes.

Other indicators are transparent to the outside world, but mean a great deal to physician leaders who, like the Velveteen Rabbit, wonder when they are real. My moment of realizing Community Health Partners was a "real organization" occurred when the office moved from my car and cellular phone to a three room office with a lobby. The rooms are now hopping with activity, as we hired a full time administrative assistant and part time nurse, and the phones are ringing off the hooks. Further evidence of our existence came with the need for more file drawers to hold drafts of contracts, correspondence with would-be capital partners, and proposals from management services organizations.

It would be premature and likely bad luck to announce CHP a model for success, as the organization still rumbles with the volcanic activity in the marketplace--from hospital mergers and physician buyouts to payer power plays that call for excluding CHP physicians when we do not accept low cap rates. During the first year there were many turning points that felt like a hairpin ride around Dead Man's Curve: Payers hesitated to negotiate capitated contracts; hospitals withdrew financial support once promised; and hospital employed physicians transitioned from the PO to a PHO.

Perhaps the greatest fear among physicians was losing the support of a hospital with which many members were associated for decades. As change management consultant and author Joe Flower says in his column for The Physician Executive, physicians need to address what they fear most and work through that fear. He illustrates this point by describing the need for the antelope to run straight toward the lion's roar--even though it represents the scariest path imaginable--to circumvent the waiting lions nearby ready for the pursuit and kill, thus ensuring its survival. "No antelope has been known to do that," 1 writes Flower. "Very few humans can, either--but they are the ones who can learn to deal with the change they fear."

CHP member physicians did run straight toward the lion, announcing they would continue to hope for a partnership with the hospital with which they had associated, but would also explore options with competitors. As much as anything, this position required our physicians to live with ambiguity and uncertainty. It was unclear as to what results would come of our strategy, but over a period of six months other hospitals did ante up with financial or other assistance, and the one hospital that had refused to partner with us is now in discussions to explore ways to develop a partnership.

One year ago, no one in Kansas City would have bet a plug nickel that the independent physicians of CHP would have hung in there. But here we are, standing up straight and full of resolve and purpose, with four contracts in hand. Metaphorically speaking, The Little Engine that Could is on track. We are winning the attention of payers, the respect of our peers, and the interest, if not support, of hospitals. We are evolving from a primary care PO to a multispecialty clinic with a wraparound IPA.

How did CHP do it?

How did CHP survive the thinly disguised threats and the dissension among our own members about which course to follow? Over the last two years there seems to have been a spontaneous generation of POs across the country, and the result is a growing body of knowledge about what it takes under a variety of circumstances to build POs. Looking back, there are at least 10 reasons we made it this far. These are not reasons you learn about in medical school or an MBA program. There is no one-size-fits-all template for building POs. No fixed organizational chart. No neon signs pointing to the best capital partner.

Here is the first five of l0 reasons CHP can offer as the rationale for our progress. Perhaps these reasons mesh with what is happening in other parts of the U.S., where POs are sprouting up and taking hold.

Reasons for Success

1. A working, knowledgeable board of respected physician leaders

First and foremost, CHP owes the success it has enjoyed thus far to the determination and resilience of its board of directors. Nothing remarkable comes of a PO without dogged and skillful physician leadership that stands out front and champions the PO agenda, when other market players try to "cherry pick" physicians from your organization. CHP has benefited enormously from the guidance of respected board presidents James Webb, MD, and John Oxler, Jr., MD, as well as the board officers and members.

What the board tackled required (1) a pioneering spirit that allowed the physicians to take risks and go forward in spite of the unknowns, (2) a recognition that everyone has to go through a phase in which they resist and balk at change and there is no way to avoid this backlash, (3) a continuous education process about capitation contracting and risk management process, and (4) hard work. In the first year of CHP's existence, board and committee members collectively logged in over 1,000 hours.

2. The board moves ahead on simultaneous tracks

Forget the decisionmaking tree you learned in medical school that called for eliminating option A before you move to Option B. CHP would have died an early death if we had waited until one issue was resolved before we took up another. For example, if we had waited for one hospital to decide whether it would help fund us before we moved on to the next one or another potential funding source, we probably still would be waiting and floundering. CHP did receive a number of informal offers for funding from administrators, but either the money was not forthcoming or it came with too big a trade off, such as requiring contracting only through a PHO or with the right of first refusal. So, CHP entertained or solicited funding from numerous sources, and that approach has paid off.

You need to move ahead with gusto on all fronts for a number of reasons, including the need to demonstrate to physicians waiting in the wings that you offer a viable alternative to hospital employment or contracting through a struggling PHO. You also need to move ahead because a stalling position provides competitors with precious time to charge ahead of you in wooing physicians to a less rewarding, although more tangible, position in the marketplace.

3. Affiliate with any hospital or payer that really knows how to partner with physicians

CHP has made it clear to all hospitals and payers that we are neutral in our affiliations. That is, we are open to discuss contracts with any hospital or payer that is willing to truly partner with CHP physicians. The partnership we call for is not a thin representation of a business partnership; it requires an appropriate access to the savings in global risk contracts, for example:

Most of our member physicians are already credentialed or in the process of being credentialed in all the major hospitals in the counties where we practice. By establishing this flexibility we do not disqualify ourselves from working with payers who have defined hospital affiliations.

4. Develop quick wins and communicate progress

To develop CHP's momentum and viability for physicians, we found a number of ways to demonstrate our effectiveness early on. For example, we compared individual rates for malpractice insurance with group rates for the coverage. The difference was significant and the group decided to select one insurer so every member could benefit from the lower rates, even though some physicians had been loyal to their individual insurer for many years.

It is difficult to demonstrate quick wins with contracting efforts. Negotiating your first contracts can take far longer than imaginable, often rolling into more than six months to one year. So it is critical to set appropriate expectations with your members about just how long the process takes. Meanwhile, make use of the time by educating your physicians about what it takes to negotiate a contract and what a good contract looks like.

Before CHP board members saw their first contract negotiated by the contracting committee, they discussed the potential deal breakers. As it turned out, some of those red flags were less important than others and were dismissed. Other flags, such as the number and kind of services covered under a professional cap, were addressed and negotiated before members would sign on the dotted line.

It is key to remember that start up POs do not get everything the physicians want in the first contract. Unless your PO has more than 20,000 covered lives, (which CHP does not yet manage), you may need to wait until you meet the payer again in your next negotiations to gain more risk or higher rates. Suffice it to say, taking a hard line on every issue in your first contract can spell doom.

Explain the progress you are making on all fronts--from contracting and rate discounts to entertaining options with capital partners--in communications with your board, your member physicians, and opinion leaders throughout the city. CHP publishes a biweekly newsletter, for example, that lands in the mailboxes or fax machines of more than 300 physicians and health care leaders in Kansas City. CHP's distribution list includes the spectrum of contacts we want to maintain as we grow: executive directors of payer organizations, managers of provider relations, presidents of hospitals, reporters on the health care beat, physicians who have expressed an interest in joining CHP, as well as the members.

5. Educate, educate, educate physicians about the new ground rules of capitation

Much of the resistance that comes from physicians about the new world of capitation arises from a dark, fearful place in which there is little or no hope that they can adapt and prosper with capitated contracts. This fear is predictable and understandable, but many of the fears can be alleviated over time with fact-based communications about how to take advantage of capitation.

One of the fears expressed after a presentation to specialists we had invited to join CHP was that the primary care physicians wanted more than 50 percent savings in the risk pools. In retrospect, I can see how the misunderstanding occurred. We had placed an overhead in front of specialists that showed how primary care physicians received 100 percent of the savings in their own risk pool. The specialists, who were unfamiliar with the three risk pools for PCP, SCP, and hospitals, did not get past the PCP pool in the graphic to see that once contracts expanded beyond primary care cap into professional risk contracting, primary care physicians and specialists would share equally in the savings.

The point being, physicians must be given the opportunity to ask questions and physician leaders must take on the responsibility of providing the education. The information must be explained face to face in groups, individually, and supported in print materials. This education process is ongoing and must be thorough and repeated, lest we forget what the mission is about and why it is worth pursuing.

CHP has turned one big corner, having passed its one year anniversary, but there are many more to navigate. We are immersed in developing a management information service and implementing an outcomes based research system to assure patients and payers that we are finding the balance between under- and over- utilizing services. No doubt, more lessons are to be learned.

Reference

(1.) Flower, J. The Physician Executive, March, 1997, Volume 23, issue 3.

Elizabeth Gallup, MD, JD, MBA, is the Executive Director of a start up physician organization, Community Health Partners, in Overland Park, Kansas. Gallup co-authored the newly released ACPE book, How Physicians Can Avoid Surrender and Lead Change with Cyd Slayton, CHP's Planning and Marketing Director. They are also consultants with Stratics Healthcare. They can be reached at 913/894-8882.