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Hospital survival in the current environment is dependent upon creating an integrated system that maintains tax exempt status (for nonprofit hospitals) and provides incentives to medical staff members to work with the hospital to improve the quality, accessibility and affordability of services to the hospital community. A hospital's greatest strength - diverse physician practices - sometimes presents a challenge in that the hospital does not speak with one voice and does not have hospital and physician financial incentives aligned across the entire system. Hospitals that do not employ all their physicians need an integrating mechanism to compete with those that do. Increasingly, payors are looking to one stop shopping through a bargaining unit that can deliver both hospitals and their physicians. As competition emerges, there is increased pressure for improved performance, lower costs, and a clear manifestation of ability to take on financial risk collectively.

Some hospitals are unhappy with their PHO structures, deeming them cumbersome, perhaps biased toward specialists, or creating leverage because the hospital does not hold the managed care contracts, and it cannot take the full burden of the risk requirements and fund the required infrastructure without putting its tax exempt status at risk.

Beautyman Alvstad, LLP's Hospital Economic Profile Plan (HEPP) solves these problems. HEPP is designed to set aside funds from payor contracts for participating physicians on a tax-deferred basis to reward performance based on the overall goals and objectives of clinical process improvement.

Physicians who are accepted into HEPP upon submission and approval of an application, are eligible for allocation of funds to individual tax-deferred accounts. Annual distributions from these accounts to physicians are based on criteria tied to clinical and system performance. The funding mechanism is structured so as to protect the hospital's tax exempt status. A physician advisory board reports to the Hospital Board of Trustees.

More detailed information on the HEPP program is available upon request.



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