February 24, 2017
What is a PHO?

A PHO is a physician-hospital organization. A technical definition would be “a separate legal entity formed by one or more physicians and one or more hospitals whose objective it is to negotiate contracts with payer organizations.” In other words, it is a relationship between a hospital and local physicians or physicians who practice there.

What is the purpose of a PHO?

The original purpose of a PHO is to negotiate better contracts with payors for the hospital and physicians. There are other uses of this platform, such as:

  • A legal mode of communication between the two entities, the hospital and the physicians.
  • Improving value, healthcare indicators such as 30-day readmits, reduced ER visits, primary care visits within seven days of discharge, reduced LOS, reduced vent days, compliance, and utilization.
  • Improved savings by the use of hospitalists, intensivists, shared reports of utilization, and improved communication.
  • Improved customer service.
  • Marketing
  • Better documentation and use of EMR, reduced RAC audits, and improving self-policing in the hospital environment.
  • Creating shared portals for EMR, discharge reports, labs,etc.
  • Risk-sharing
  • An important tool for ACO and Patient-Centered Medical Home (PCMH).
  • Preparing for pay-for-performance and bundled payments.
  • Improving profits through inventive leveraging in achanging market-place.
  • Mutual referral service.
Why have PHOs not been uniformly successful in the past?

The history of PHOs has been a roller coaster. There have been multiple attempts to integrate the two entities in the past, with many failures, partial successes, advances, and retreats. The reasons for failure in the past have been:

  • Poor integration of physicians and hospitals.
  • Poor leadership from physicians and hospital administrators.
  • Poor communication between physicians and hospital administrators.
  • Lack of technological ability to share data and reports.
  • Poor emphasis on quality, care management, case management and compliance.
  • Poor modeling and planning.
  • Reduced demands from the government - now the pendulum has swung and it becomes more advantageous to do a PHO the right way.
  • Weak or incomplete primary and specialist networks.
  • Unshared goals
  • Poor contracting with payers.
  • Poor leveraging
  • Physicians in the past were mostly solo entities and not integrated among themselves, and moving them in sync was well-nigh impossible.
Is the regulatory environment or change in healthcare industry favorable for PHOs?

In the author's opinion, yes. This is so because:

  • The requirements and emphasis on RAC audits, reduced 30- day admits, and better customer service create a need for greater cooperation between physicians and hospitals.
  • The fee-for-service model is quickly being replaced by new models such as fee-for-value, shared risk, shared savings, pay-for-performance, bundled payments, etc.
  • The need for sharing data, reducing utilization, patient satisfaction, and improving HEDIS under the Star Ratings initiative.
  • Reduced premiums for Medicare Advantage programs means greater need to reduce waste and improved savings.
  • Most importantly, the PHO model can be an extremely effective platform for improving the overall customer experience, profitability, quality, reduced adverse events, savings, and creating a long-term mutually beneficial relationship among physicians and hospitals in an adverse environment. It is an idea whose time has come again and again. This time it might be here to stay.
How to create a successful PHO?

These are some of the suggestions:

  • Shared goals
  • Strong leadership
  • Better communication and better understanding.
  • Better contracting.
  • Integration at every point of the healthcare delivery system of data and services. For example, at emergency rooms, for hospitalists, intensivists, discharge planning, follow up with primaries, etc. Thus the entire loop needs to be monitored and closely managed and needs to be tightly knit.
  • Better use of technological advances to improve services, reporting, care, and feedback from patients and providers.
  • Creating strong provider-networks, which might even be closed in some specialties.
  • An attitude of supporting each other.
  • Creating local solutions for local issues.
  • Challenging the system constantly and having an attitude of constant improvement.
  • Better liaison among providers and between providers and hospitals.

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