by Jane Jerzak

Wipfli’s health care business consultants often work with organizations that want to expand their marketplace footprints and service offerings.  These new initiatives often take the form of “joint ventures” between hospitals and physicians.

Joint expansion efforts take a significant amount of thought and leadership to be successful.  Two significant challenges in getting the entire team “on board” include physician buy-in and board of director buy-in.  Obtaining both of these critical elements demands significant organizational and leadership skills, resources, and hard work on the part of the project steering committee.

Physician Buy-in

We believe a data-driven process and one that addresses physicians’ personal prejudice and emotional resistance to change provides the best road map for success.  Physicians need to understand that the joint venture is worthwhile.

Sound best-partner methods must be in place to address the three main sources of initial physician resistance, which include:

• Lack of knowledge - Physicians are typically independent thinkers, which means they need logical data to make the case that this will be a “win-win.”
  
• Personal prejudice - Physicians need to “trust” the strategic growth leadership team and their efforts.
  
• Emotional resistance - Do I like hospital leadership?  Do I like the plan?  Physicians need to be able to answer these questions with an honest “yes.”

The initial readiness assessment for a joint venture concept should include:

• Trust and alignment between the hospital and the physicians.
• Starting points of agreement (the “win-win”).
• High value and easy initial joint “wins.”
• Definition of the common enemy.
• Definition of “success” and its related metrics.

This final bullet point is critical; success must be defined clearly and sufficiently to help physicians understand that the proposition is possible.

Three Phases of Joint Venture Development

Once the steering committee framework is in place and everyone is on board, we can begin to discuss a process and methodology for successful joint venture development.  A joint venture project can typically be framed into three distinct but interrelated phases:  market analysis, strategic options development (including facility/capacity planning), and financial modeling.

Phase I - Market Analysis

The strategic growth steering committee must initially understand its service area and identify market trends and dynamics that will impact the organization into the future.  Specifically, the team should

• Update service area definitions and create a current and future state area map to serve as a graphic guide for market discussion and decision making.
• Understand existing and future population/demographic data and trends for the defined service area.
• Evaluate current demand and estimate future potential demand for contemplated services.
• Develop high-level assumptions and an understanding of factors that drive consumer decision making.
• Identify clinical service/physician “groups” and opportunities for joint-venture development.

Phase II - Strategic Options Development and Facility/Capacity Planning

Based on the outcome of the market assessment, the strategic growth steering committee can focus on new services, expanded service line opportunities, or both.  In this phase, the team will need to understand the legal, structural, and reimbursement-related factors of each strategic option considered.  The committee should also address the associated physical space/facility requirements to support the strategic service-line strategies.  At the end of this phase, consensus should be reached regarding the preferred strategy for the project.

Phase III - Financial Modeling

The key findings from the market analysis and strategic options development phases of the project should be put to the test with well thought out financial modeling.  Key assumptions, analyses, and conclusions should be confirmed before moving forward.

Once this information is validated, an integrated financial model, including range of potential financial outcomes of the joint venture for all key stakeholders, should be developed.  The information should include cost/benefit and ROI discussion and analysis in a form that is clear to all constituents, including hospital and physician leadership as well as the hospital’s board of directors.  Once the project’s approval moves forward, an operational team should be in place to provide leadership for the implementation phase of the project.

Summary

Moving from an attitude of competition to cooperation and collaboration takes sound leadership, a well thought out communication plan, and a process-driven approach supported with sound data.  With a “common enemy” perspective and a culture of trust and confidence, we believe physicians will be more willing to work with hospital leadership on exciting “win-win” strategies.

Are you ready for the challenge?

Jane Jerzak, RN, CPA, is a partner in Wipfli’s health care practice.  She has 25 years of experience in the health care industry where she has helped a variety of organizations from rural providers to integrated delivery networks develop data-driven strategies and joint ventures between hospitals and physicians.  If you would like more information on our proven approach to hospital/physician ventures, please contact Jane at jjerzak@wipfli.com or 920.662.2821.