Current Topics in Physician Employment

John C. ForesterWV United Health System

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More physicians are being employed – 50% of residents that graduated in 2011 were hospital/health system employed

2012 Review shows that 63 percent of Merritt Hawkins’ recent search assignments featured hospital employment of the physician

American Hospital Association has indicated that the number of physicians employed by hospitals has increased 34% from 2000 to 2010

Some research suggests that truly independent physicians now only comprise about 33% of the total physicians practicing

Current Industry Trends

The Private Practice Model is Becoming Unsustainable Shrinking reimbursement and an uncertain future More complicated billing/regulatory environment Revenue cycle risks – living check to check The costs of education – the median four year cost to

attend medical school for the class of 2013 is $278,455 at private schools and $207,868 at public schools, according to the Association of American Colleges

Practice costs are increasing – EMRs, SW&B, supplies Good help is hard to find - tough employment

environment Pressures on Clinical Time and Administrative Time…

Current Industry Trends

Practice Maintenance and Upkeep

Work / Life Balance

Charts… Bills… SCANNING!!!

Some Physicians Try to Stay Ahead…

So, as hospitals employing physicians – what issues do we face???

Shrinking reimbursement and uncertainty Average practice loss per physician FTE was $189,560

in 2011 – over $200,000 for new physicians in the first few years of practice

Practice costs increasing and physician shortages in areas of the country continue to drive salaries upward

Hard to find good help… Variance in production – private practice vs. employed Production/practice operations impacted by operating

environment

Physician Employment Environment – Do these issues

sound familiar?

So, why employ Physicians?

They examine and diagnose our patients They place orders and refer patients for

diagnostic testing, procedures, and treatment They prescribe medications They perform surgeries and procedures They are integral in the quality of the service we

offer They are an integral part of our financial

performance more than ever They make it rain

Because, they make it rain.

Physician Needs Assessment Business Plan – who, what, why, and how

much Proforma Assessment:

Compensation Practice Expense Contribution

Recruitment or Acquisition Operational Metrics Future Topics

So, before employing that physician, let’s think through a

few things…

Physician Needs Assessment: New service or a replacement? Can you obtain info from an existing physician(s)? Specialty Statistics – population and prevalence analysis

Physician needs per capital, mortality and morbidity rates Internal Analysis – Discharges/Transfers/Ancillary Revenues and Services

Look for trends and opportunities – can tell you a lot about your physician relationships

Medical Staff Input and Issues: Physician Reputation and Personality Delineation of Privileges and Hospital Services – can you deliver the physicians

expectation? Call Coverage

Community physician support – what does the landscape look like?

Practice Structure – three primary models Community Based Private Practice

Self Supporting Becoming more rare Some start up support via income guarantee?

Community Based with Internal/External MSO support Employment

Proforma Analysis for the practice and the hospital

Needs Assessment, Business Plan, & Proforma

Practice Proforma

Practice Proforma

Practice Proforma

Internal or External Recruitment: Must have an individual focused tenaciously on recruitment Recruiter must have a good track record and be trustworthy

Recruitment Package – get it all together Compensation and Model Benefits – have a document with all benefits offered including CME,

dues and subs, licensure, CME, relocation Other Topics:

Call requirements spelled out clearly Staffing and Practice Operations – who does what and what is

the physician’s role Fair Market Value assessment of the package Malpractice Coverage Non-competes, moonlighting Medical records system(s) and expectations Expense reimbursement policies Private Practice to Employee Concerns

Recruitment and Retention

Interviewing: Identify Interview Process, Team, and Itinerary – be organized and prepared

Phone interviews first before travel? CEO, Practice Manager, employed physicians, supportive community

physicians (same specialty, if possible) Tours and visits to key hospital areas/individuals

Key things to listen for: Long term commitment language Production expectations Check references AND check with your other physicians – it is a small,

small world Why are they interested in you? If there is a spouse, what do they think??? Interests or hobbies?

Community Tour: Focus on schools, if applicable, recreation and culture – do your

homework Offer and employment:

Know how far you are willing go with an offer Determine the process for the offer – who makes the decisions and

communicates with the candidate Have contracts completed accurately and ready to go – employment

agreement, loans, sign-on’s, relocation agreements Get the deal DONE

Recruitment and Retention

Life balance – a significant part of the physician mindset

Be upfront and candid about what it is like to be an employed physician

Set clear and obtainable goals and allow physicians to be a part of the decision making process [as much as possible without relinquishing total control of the practice or your organization]

Recruitment and Retention

An effective compensation model must: Be simple, easy to understand, measurable and easy to manage Be real – goals should be reasonably achievable Be aligned with organizational goals and be relevant

Production – minimizing practices loses Quality and satisfaction for both the practice and the hospital Have a big picture approach – what are we trying to achieve and what

challenges do we face. Are we rural? Bad payer mix? What is the supply and demand for this particular specialty?

Several different models each with variations: Eat what you kill: cash collections minus expenses = physician compensation Pure base salary: base salary negotiated at each term Base plus profit sharing: base salary and a profit share that is typically a % of

cash minus expenses Pure Worked Relative Value Units (WRVU): typically a rate per WRVU model

or some variation Base plus incentives (WRVUs, quality, satisfaction, operations)

Compensation Strategies and Physician Alignment

How “RVU”??? Compensation trends have been moving towards Relative Value Unit based models Medicare physician fee schedule reimbursement was implemented as part

of the Omnibus Budget Reconciliation Act of 1989. The practice expense, physician work, malpractice expenses associated to a specific Current Procedural Terminology code is scored under the RBRVS system and payment is determined.

Typically the Worked Relative Value Unit is used in production based compensation models

Implementation plan Physician input can help with buy in of the program Board driven Modeling Clear Timeline Communicate clearly, consistently and often

There are pluses and minuses to all models – there really is no silver bullet with compensation

Compensation Strategies and Physician Alignment

Compensation Strategies and Physician Alignment

Production Shortfall Options (all need to be clearly stated in the agreement or compensation plan):

Withhold from a future pay(s) Withhold from the next reconciliation Withhold at the end of the compensation year Adjust the base salary at the beginning of the

next production compensation period Adjust the base at the end of each reconciliation

period

Compensation Strategies and Physician Alignment

Setting expectations and measuring operations Tool to communicate with physicians and office Helps to have realistic and achievable metrics Can be a simple P&L to scorecards with benchmarks Benchmark data:

MGMA, industry analysts, industry consultants, recruiters, trade journals, previous performance

Make sure you are comparing apples to apples – private practice vs. hospital owned, years in practice, region

Be careful of sample sizes Scorecard Example…

Operational metrics

Measuring the contribution margin of all physicians

Many different philosophies of how to measure contribution:

The KEY is to get a model that everyone is comfortable with and agrees to

Be careful with this information – it is prone to misinterpretation and misunderstanding

Information must be timely and easily obtainable Must be comfortable with the measurement to

set benchmarks and to eventually assist with decision making

This is just a piece of the puzzle – need to consider all factors when making decisions based on this information (mission, community need, others)

Example…

Downstream Impact

CCRs Applied to Gross

Charges by Cost Center

Projected Net Revenues Should

be Actual Payments, if obtainable

Arguments over Indirect

Expenses and Incremental

Costs

Downstream Impact

Maximize Practice Operations and Efficiencies Physician Compensation, Incentives and

Alignment with Goals Physician Balance and Satisfaction Physician Integration into the Network – EHRs,

Physician Referral Relationships and Communication

Hospital Programming and Growth Inpatient Performance and Impact on Quality,

Outcomes, and Satisfaction (HCAPS, Quality Blue, etc..)

Downstream Contribution Preparation for the future…

The Big Picture: Alignment of Goals

Population Health – why are some people healthy and others aren’t? Health research driving policy

Primary Care Medical Home – comprehensive, coordinated, accessible, patient-centered care

Concierge Medicine Affordable Care Act (ACA) – Medicaid expansion,

Health Insurance Exchanges, program costs & funding Big uncertainties

Hospital and Physician Alignment – Value Based Purchasing and Surviving the Cuts Communication Coordination Let’s get comfortable – we’re going to be in this thing

together

Future Topics

Questions or Comments?