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Current Topics in Physician Employment. John C. Forester WV United Health System. Autopsy of an Income Statement. How to Herd Cats with Only Minor Scratches. How to Pull Out Your Hair in 30 Days or Less. Current Industry Trends.
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Current Topics in Physician Employment John C. Forester WV United Health System
Current Industry Trends 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…
Some Physicians Try to Stay Ahead… So, as hospitals employing physicians – what issues do we face???
Physician Employment Environment – Do these issues sound familiar? 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
Because, they make it rain. 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
So, before employing that physician, let’s think through a few things… • Physician Needs Assessment • Business Plan – who, what, why, and how much • Proforma Assessment: • Compensation • Practice Expense • Contribution • Recruitment or Acquisition • Operational Metrics • Future Topics
Needs Assessment, Business Plan, & Proforma • 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
Recruitment and Retention • 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]
Compensation Strategies and Physician Alignment • 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 • 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
Operational metrics • 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…
Downstream Impact • 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 Projected Net Revenues Should be Actual Payments, if obtainable Arguments over Indirect Expenses and Incremental Costs CCRs Applied to Gross Charges by Cost Center
The Big Picture: Alignment of Goals 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…
Future Topics • 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
