Essay Example on Hill Physicians Medical Group: A Market-Driven Approach

Hill Physicians Medical Group (HPMG) was established in 1984 (HPMG, 2013). It is the largest autonomous practice association in Northern California. Further, it operates on a health plan framework that seeks to offer healthcare to over 300,000 patients who are registered under the commercial health maintenance organization (HMO), Medicare Advantage Plans, as well as California’s Medicaid Program (HPMG, 2013). HPMG has an agreement with over 3,900 independent healthcare providers, 800 primary care physicians, and 48 hospitals (HPMG, 2013).

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This agreement sees HPMG receive a fixed payment rate from the different health plans, and in turn, it pays the physicians, including bonuses accrued (McCarthy et al., 2009). All the physicians have to do is attain the Group’s goals of efficient service provision, quality clinics, and effective use of electronic health records (EHRs). In setting up its goals, HPMG seeks the opinion and input of a majority of the physicians.

The aim of HPMG while joining with several local hospitals and commercial health plans was to improve the quality of services offered, decrease fragmentation, and retention of business or clients through the reduction of the cost of health care. January 2010 saw the establishment of an Accountable Care Organization (ACO) intending to improve the premium healthcare coverage for both civil servants and retirees. All such persons were covered under the California Public Employees’ Retirement System (CalPERS).

In counting its success thus far, the ACO has seen a reduction in physical use of hospitals and monthly spending from members has equally decreased. Consequently, the organization has been able to save as much as $59 million. The agreement to enjoin other organizations in its operations has thus proved successful for HPMG.

Problems

The environment within which HPMG operates is highly consolidated and sees intense competition from other groups such as Kaiser. The competition for the vast customer base is so intense, such that any slight advantage a competitor has over the other could result in their downfall or losses. Further, a lot of money was being wasted on the premium health care package covered by CalPERS. The package was so demanding, costly, and less productive. The fee-for-service charges that were being asked for by various independent physicians jeopardized the market, as different physicians charged differently (Markovich, 2012). The effect of this would be that unhealthy competition or undercutting would occur. This ultimately lowers the quality of healthcare provision.

Further, the overuse of hospital facilities resulted in more costs incurred by different healthcare organizations as they went about their duties. This overuse of hospital services was as a result of over-reliance on inpatient services at the expense of outpatient services. Also, the constant readmissions have played an enormous role in the increased costs from overuse of hospital facilities.

The transition from inpatient care to outpatient care was flawed. Little to no attention was paid to the patients after their discharge from the hospital. This hampered the productivity of the healthcare services, as it was challenging to retain the customers who were not pleased with the treatment and care. Further, rather than the physicians working together in harmony to achieve a common good, they focused on competing amongst themselves to score higher profits and capture more customers. The leading competitor, Kaiser, was well organized and functioning. They had their own hospitals and were served with their own set of physicians.

Solutions

Seeing that their competitor, Kaiser poised their biggest problem, it was prudent to model themselves similarly. As such HPMG resolved this problem by merging up with Dignity Health and Blue Shield of California. The former was an extensive Catholic hospital system, while the former was a government-based nonprofit health insurer. This merge up gave them a better pull and attractive power in the Sacramento market. Consequently, they were able to retain most of their customers.

To solve the problem of inpatient and outpatient care transitions, it was prudent to establish a team that would aid in the transition. This team consists of physicians, inpatient and outpatient nurses and social workers. Working in collaboration, all three would come up with the best care practices for the patients upon discharge (Markovich, 2012). After that, they would equally make follow-ups and checkups through home visits and primary care appointments. The patients would also be taken through some form of education on self-care before being discharged.

It was also established that patients suffering from chronic illness contributed to the most significant percentage of overall costs incurred by the organization. One main contribution of this was the duplication of healthcare services offered to such patients. To rectify this problem, before the admission of any patient suffering from chronic illness, it would be prudent first to establish which of the three organizations was better suited to handle the patient (Markovich, 2012). The most suited organization would then handle the patient exclusively. This specialization helped avoid duplication of services, thus resulting in the overall reduction of costs.

In further competition with Kaiser, there was a need to reduce costs of the premium healthcare package, which was offered through CalPERS, lower than that which was being charged by Kaiser. The number of civil servants and retirees enrolled for these services was quite significant, and it was prudent to be able to cover all of them without necessarily incurring more costs. The most favourable premium charges and guaranteed quality healthcare would not only retain its customers but also attract new enrollments (McCarthy et al., 2009). To sustain the reduction in the premium charges, without incurring any loses on their end, all the three partners set out to minimize costs as much as possible. These costs reduced or saved up would then be invested in the premium healthcare packages.

The unfair competitions that were previously witnessed, which posed a considerable problem to the overall healthcare provision is resolved through the merging up or partnership agreement of the three. Like their competitor Kaiser, the merge up saw the three collaborate in offering quality healthcare harmoniously. A fixed-rate of payment for everyone was agreed upon, as well as how to share and split bonuses. For instance, in the first year, they were able to save up close to $20 million, $15.5 million of which was reinvested in the premiums, and the remaining balance shared equally amongst them. As such, they were able to emphasize affordable healthcare, while at the same time guarantee improved quality in its delivery.

To further have a grip of the customer base, the partners ought to look into more partnership agreements with different local organizations. The advantage of this is that it increases the geographical landscape within which they have an impact on, and as such, they can capture more customers (McCarthy et al., 2009). It is not enough that the partnership only involves three partners. To realize further success and growth in overall profits, there is a need to reach out and offer the same partnership agreements to other domestic healthcare organizations.

Most Effective Solution

From the data or information presented, it is clear that the main problem faced by Hill Physicians Medical Group was the nature of the high costs they were incurring in their regular operations. Further, the competition that they were receiving from both Kaiser and other independent physicians was doing them more harm than good. It was not enough that they were offering affordable and quality healthcare since other organizations were offering the same as well. It was prudent for them to come up with measures that ranked higher in terms of efficiency and productivity when compared to its competitors.

To vitiate these concerns, it was prudent to come up with a solution that is mainly aimed at beating the competition and capturing the Sacramento customer base. The most effective solution with regard to this is having a reduction in the costs charged and improving the quality of healthcare services offered. For instance, a reduction in the costs of premiums offered was particularly more attractive to the customers and equally resulted in the enrollment of more customers (McCarthy et al., 2009). Healthcare plans that targeted minimal usage of hospital services resulted in a decrease in the costs incurred by the patients through home-based care, and virtual healthcare services offered.

However, it would be self-defeating to the organization to offer quality healthcare with reduced costs, without seeking to reduce its overall spending. As such, setting target-reduction costs, and coming up with several goals or strategies aimed at reducing costs is essential. Such strategies include better analysis of data; providing educative sessions before the discharge of patients to reduce the over-reliance of hospital health care services; setting up transition teams to facilitate inpatient-outpatient transitions; minimizing the chances of readmissions; better management of patients suffering from chronic ailments; better coordination and communication between the partners to improve productivity and quality of health care. The achievement of these targets would directly result in the reduction of customer charges, and improvement in the overall quality of healthcare. The organization would then have an advantage over many of its competitors.

In support of the above proposed effective solution, over the first three years of their implementation, the accountable care organizations witnessed a surge in profits owing to the amount of money that was saved up. From a target of $15 million per year, they were able to save up $59 million over three years. Further, the organization was able to save up an annual average of $480 per customer (HPMG, 2013). The money that was accumulated in savings was used as reinvestment to cushion the losses that would have otherwise been incurred owing to the reduced charges on customers. As such, the organizations still realized positive progression.

Besides, the reduction in premium services saw their enrollment surpass the initial 41,000 membership subscriptions. This increase was as a result of the decrease in costs and improvement in the quality of healthcare. They proved to offer a more lucrative deal as compared to their biggest competitor, Kaiser, and as such, succeeded in appealing to and capturing a more extensive customer base.

In conclusion, owing to the above example, the most effective solution proposed is effective in curbing the problems suggested earlier. While it may have its faults, the advantages it comes with outweigh the cons.

References

D. McCarthy, K. Mueller, and J. Wrenn, Kaiser Permanente: Bridging the Quality Divide with Integrated Practice, Group Accountability, and Health Information Technology (New York: The Commonwealth Fund, June 2009).

Hill Physicians Medical Group (HPMG), 2013 Annual Report, http://www.hillphysicians.com/AboutUs/Pages/Annual-Report.aspx

Markovich, “A Global Budget,” 2012; Blue Shield of California, “An Accountable Care Organization Pilot: Lessons Learned,” https://www.blueshieldca.com/employer/documents/knowledge-center/features/EKH_ACO%20Lessons%20Learned%20Case%20Study.pdf.