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Health System Expands Services Through Combined Co-Management and Professional Services Agreements


A large Midwestern regional health system was entering into a contractual agreement with a prestigious quaternary medical provider that required selected services – including surgeries – be performed in facilities under their control. The health system had employed or contracted all specialties except for one. They reached out to Katz, Sapper & Miller’s healthcare consulting team for help aligning this physician group to comply with their contractual commitment.

The Challenge

Care for this specialty was delivered in several locations, including the group’s offices and surgery centers. To satisfy the quaternary provider’s requirements, all cases referred to the group from the health system, including clinic visits, would need to be seen at controlled health system sites. This required the group to segment these patients and establish new on-campus clinics. It also required the group to ensure surgeries on these shared patients were performed at system hospitals or controlled surgery centers.

The Solution

After careful analysis, KSM’s healthcare consultants proposed aligning the group and hospital both clinically and administratively. The KSM team helped implement a professional services agreement for clinical alignment, with the health system creating a specialty clinic that provided space and all the non-physician staff needed for the surgeons to see health system patients. The health system performs all billing and collections and compensates the group for their medical services on a per-work-relative-value-unit basis.

The KSM team then helped implement a co-management agreement to align the administrative aspects, including the management of the specialty’s surgical services. A shared governance committee consisting of group members (including non-physicians) and health system leaders was established. The shared governance committee assists in managing the performance of the service line throughout the health system, encompassing inpatient, outpatient, and office-based care. Several subcommittees with specific geographic and clinical focus areas were created as well. As part of the co-management agreement, the surgical group performs specific duties and is compensated for these hours and for the achievement of performance metrics.

The legal structure of both agreements was authored by legal counsel for both parties, and the financial details of both arrangements were reviewed for fair market value and commercial reasonableness.

The Result

The KSM team and the health system worked collaboratively toward a solution that enabled the system to engage with the quaternary provider because all care for this specialty was now delivered in system facilities. The KSM team facilitated a mutually beneficial partnership between the two entities. Most importantly, the model sets a framework for the group and health system to collaborate and expand in size and alignment as they continue to advance clinical care, cost performance, and the patients’ experience.

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The Shared Benefits
of Co-Management

Learn more about the clinical and financial benefits of co-management and how it can work in your healthcare system.

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