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“Without That Physician Enterprise, Those Are Four Very Pretty Walls That Do Absolutely Nothing.”
“Without That Physician Enterprise, Those Are Four Very Pretty Walls That Do Absolutely Nothing.”
By Jerry Penso, MD, MBA
April 1, 2026
That quote from a recent conversation has stayed with me.
I recently sat down with Todd Smith, MD, chief physician executive (CPE) at Sutter Health, one of the largest not-for-profit health systems in the country. We discussed a challenge I hear about constantly from health system leaders: How do you convince your board that the physician enterprise is a strategic asset, not a cost center?
Todd’s answer was direct and vivid. He was describing a board that had just invested $2 billion in a new hospital in California. His point: Without the physicians, it’s an expensive, empty building. It’s a simple idea. But it’s one that gets lost in financial reporting when you only look at the physician enterprise’s P&L in isolation.
At AMGA, we’ve made health system integration a strategic priority because the evidence is clear that it’s one of the defining challenges facing American healthcare right now. Across the country, health systems have spent the last decade acquiring physician practices, building ambulatory networks, and expanding their footprints. But acquisition is not integration. And the gap between the two is where access suffers, costs climb, and quality stalls.
Dr. Todd Smith is one of the leaders doing the hard work of closing that gap. Here’s what I took away from our conversation.
Start with Why—and Start with Honesty
When I asked Todd how Sutter gets hospitals and medical groups to work together as a system, he didn’t start with process or technology. He started with purpose and trust.
“It’s not just about getting bigger,” he said. “It’s about getting better, utilizing the resources we have to better support our workforce and treat our patients.” When hospitals and medical groups optimize independently, the whole system underperforms—on access, on quality, and on long-term sustainability. That’s the why. And in today’s regulatory and reimbursement environment, it’s becoming impossible to ignore.
But knowing why isn’t enough. Before strategy discussions can even begin, Todd said system and physician enterprise leaders need to have a “gloves-off” conversation with each other. What does success look like to you? What have I done that made you not trust me? What do we need to do differently? “If you don't have those hard conversations,” he said, “you layer a pseudo-strategy discussion on a foundation that doesn’t actually support it.”
Planning together—not coordinating after the fact
Once trust is established, the next challenge is joint planning. Todd described a pattern that will sound familiar: Hospitals develop their strategy, medical groups develop theirs, ASCs develop theirs, and then everyone tries to mush them together at the end. By that point, things are semi-baked and hard to unwind.
Sutter is moving toward what Todd calls Integrated Strategic Operational Financial Planning, bringing strategy, divisions, medical groups, and service lines together from the start, culminating in a unified capital plan. On capital prioritization—getting the team to agree on what’s most important and say “not now” to everything else—he’s candid that it’s still a work in progress: “For every dollar of capital you have, you’ve got four or five requests for that same dollar.” Getting that right, he said, is “like making sausage. It’s going to be messy.”
Patients move horizontally. Your strategy should too.
Value of the Physician Enterprise
One of the most powerful moments in our conversation came when we talked about how to show a board the true value of the physician enterprise.
“Patients work horizontally,” Todd said. “They touch primary care, they touch the specialist, they touch the ASC, they touch the hospital. You can’t just look at it in isolation.”
To illustrate the interconnectedness of the hospital and the physician enterprise, he used the example of a cardiac program. The hospital may see strong financials from cardiac surgery. But that mitral valve doesn’t get placed without the cardiothoracic surgeon. If the surgeon’s cost sits in a different budget line, the hospital looks like it’s winning, while the physician enterprise looks like it’s losing. The system, viewed as a whole, is actually performing well, but the reporting structure obscures it.
The solution is what Todd calls the “totality of the conversation”: showing the board how care actually flows across the system, from first patient contact through acute care and beyond. And critically, measuring it that way too. Rather than reporting hospital metrics separately from physician enterprise metrics, Sutter focuses the board on system-level measures: access to care across the continuum, quality outcomes, and financial sustainability as an integrated whole. The goal is a dashboard that reflects how the system actually performs for patients, not how each entity performs in isolation.
Culture, dyads, and the human infrastructure of integration
We also talked about acquisition integration—how Sutter moves practices from acquired to actually integrated. For large acquisitions like Sansum Clinic (200+ clinicians), Todd described it simply as “a full-time job” that is still ongoing. The technology and structural work is necessary, but it’s not sufficient.
For newly acquired organizations especially, that culture work can’t wait. It has to start immediately and be sustained intentionally. Sutter’s approach is structured and consistent. Sutter does quarterly in-person leadership meetings down to the senior director level, twice-yearly gatherings that include supervisors systemwide, and large-scale “Power of One” events bringing together thousands of staff at a time. “Culture is not a point in time,” Todd said. “It’s a journey. It has to continue to be nurtured, watered, fed, and grow.”
“Bilingual” Leadership
At the individual leadership level, that culture gets built through the dyad relationship between physician and administrative leaders. Todd’s advice for any CPE working toward true integration: become bilingual. “You have to speak clinician and you have to speak administrative.” The best dyad partners learn each other’s definition of success and build a shared language from there. “You learn how they think about success, and they learn what you think success looks like. Then you bridge to each other’s success language,” he said. That mutual fluency, built deliberately over time, is what separates systems that coordinate on paper from ones that actually function as one.
The integration challenge is real, it’s hard, and there are no shortcuts. But AMGA board members like Dr. Todd Smith are on the front lines of this work every day, and their willingness to share what’s actually working, and what isn’t, is exactly the kind of real-world perspective our field needs more of. I plan to continue these conversations with health system leaders in the coming months. Stay tuned.
Jerry Penso, MD, MBA, is president and CEO of AMGA.
Originally published on LinkedIn.
