In the business of healthcare, the physician-hospital relationship is critically important, affecting the success of a medical center as well as the overall health of a community. Last month, in part one, we discussed the first five dynamics important to a positive physician-hospital relationship. Today we'll focus on the remaining issues. 1. The Dynamic of Loyalty Many hospitals have gone down the same path. They've recruited a physician, purchased the equipment he or she requested and established a new service line that he or she considered necessary, only to have that physician refer some patients to other medical centers, invest in a competing business enterprise or even leave the community. Needless to say, loyalty to that physician decreases significantly. Conversely, many physicians have consistently supported a medical center for years and admitted patients to that facility alone, only to wake up one day to find that the hospital has recruited a competing physician who will dilute their market share and reduce patient revenue. Again, the result is a significant decrease in loyalty to that hospital. Hospitals and physicians must thoughtfully evaluate each decision and its potential impact on their relationship. One poor decision may remove any semblance of loyalty that existed. 2. The Dynamic of Community Connectivity The typical hospital is strongly connected to its community through hospital and foundation board members, volunteers and hospital representatives who serve in civic clubs and on nonprofit agency boards. This connectivity gives hospitals a steady stream of input and feedback, including valuable insight regarding specific physicians. Hospitals may hear about physicians' clinical care, professional behavior, and even their private office operation. At the same time, physicians hear from their patients about a hospital's overcrowded waiting rooms, the volumes of forms they must complete and understaffed nursing units. Physicians' direct, personal connection with individual patients is powerful. It provides unique insight into the hospitals' opportunities for improvement. Failure to appreciate this mutual connectivity on the part of either physicians or hospitals can lead to missed opportunities. Openness to constructive feedback on the part of both groups paves the way for excellence. 3. The Dynamic of Referral Patterns Physicians increasingly refer to other physicians primarily and to hospitals secondarily. Physicians will take into consideration the reputation of a hospital and may be impacted by some degree of loyalty when making a referral, but the basis of their decision is typically the doctor to whom they are referring. This dynamic is observed most vividly within health systems. Large metropolitan hospitals often enter into relationships with outlying rural hospitals to increase referrals to their specialty physicians. This strategy proves effective when metro hospitals and their specialists understand the benefits and limitations of the affiliation. The affiliation itself will not produce a single additional patient referral. It will, however, produce an opportunity to understand and meet the needs of the outlying referring physicians. 4. The Dynamic of Outpatient Clinical Services Revenue The shift of healthcare from inpatient to outpatient settings, continued technological advancement and stagnating physician incomes create significant physician interest in developing their own outpatient clinical services. Hospitals that do not come to grips with this dynamic will inevitably discover that some of their physicians are planning a major competitive enterprise. Physicians who take advantage of proprietary clinical service opportunities without regard for its impact on their preferred hospital will more than likely be disappointed by the long term ramifications of their business decision. When physicians and hospitals seek opportunities to form strategic business alliances, they may be better equipped to capitalize on the changes taking place in the healthcare industry. Capital may be preserved, diverse talents and expertise can be focused on a new clinical service and the key healthcare stakeholders can gather at the same table. 5. The Dynamic of Communication Creating effective communication channels between physicians and hospitals is a formidable undertaking. Formal channels such as regular medical meetings of the medical staff are not the best forum for effective communication. Physicians are often rushed, and the group is typically too large. Informal channels like hallway conversations, dialogue in the physicians' lounge or lunch in the physicians' dining room have their place, but they can be time consuming and unpredictable. Consequently, lacking an effective channel, interaction wanes and paths diverge. While communication is a two way street, the brunt of the responsibility lies with hospital leadership to develop innovative and proactive means of listening to and communicating with their medical staff. Recognizing the dynamics that rage between physicians and hospitals and the impact they can have will lead to greater understanding. Greater understanding will lead to healthier professional relationships. Communities will be better served and patients will receive better care as the outcome. Jay Weatherly, III, former CEO of Cullman Regional Medical Center, and Steve Nyquist are cofounders of Salient Health Ventures, based in Cullman. December 2006