One small Texas hospital has stopped competing with bigger organizations to recruit and retain doctors. Instead, it offers physicians something they crave—financial certainty.
Health systems and hospitals in smaller communities are under the same pressure as organizations in large cities to tailor physician compensation packages that recruit and retain doctors, but instead of trying to compete with them, one Texas hospital has found a way to offer something physicians crave in a constantly changing healthcare economy—certainty.
Peterson Regional Medical Center (PRMC) is a small, private, nonprofit, 124-bed hospital in Kerrville, Texas, a pretty spot near San Antonio and Austin, in what locals call Hill Country. The town's population is about 25,000, but its catchment area means the system, which includes an ASC, a primary care practice, a specialty clinic, and an OB-GYN clinic, serves four times that number.
The trend toward hospital employment of physicians has not escaped the small town, and that led to the opening of its primary care practice group, says Peterson Regional Medical Center Practice Manager Tim Rye.
"The hospital has been [in Kerrville] since 1949, and up until the last 10 years, the physician base has been here to support that," he says. "But with the financial changes in healthcare, doctors want to be employed, so the hospital formed Peterson Medical Associates to fulfill that need and we've done a lot of primary care recruitment."
Prior to joining Peterson Regional Medical Center in 2013, Rye recruited physicians to work in Austin, an easy draw. Rye says there he could easily get physicians to participate in a pure productivity model. Productivity as a component of physician compensation is still widespread, but Rye says that last year PRMC made the decision to offer the physicians it was recruiting salary assurance.
"The number one thing in a community like ours is to build certainty," says Rye. "When I set up contracts with doctors, I say, 'Here is your base salary, guaranteed base for three years.'
Prior to the switch to a guaranteed salary, which Rye says is in line with MGMA's median salary for primary care physicians in the south ($224,532), PRMC's physician compensation contracts were highly dependent on physician productivity, with their salaries by the end of their third year being based on 45% of collections. The problem with that model, says Rye, is that PRMC's patient population is older.
"Kerrville is a thriving hill country town that has a fairly affluent retirement community," says Rye. "Ten years ago, a family practice doctor could see 25–30 patients a day easily. But Medicare and their private payers make up 75% of our patient base. That means more time and fewer visits. You can't hold a doctor hostage to your community."
Citizenship Goals
There are some volume expectations for physicians that come to work for PRMC, and also what Rye calls citizenship goals, such as getting along with peers, good charting habits, minimizing compliance risks, etc., because he wants to also be able to reward doctors, but what physicians have responded to is the certainty of receiving a guaranteed salary.
For hospitals like PRMC, preserving a local PCP and specialist base in the community is a delicate dance that other organizations in larger cities are not faced with, and that is deciding (or not) to employ the one and two-doc shops.
On one hand, it is an opportunity for the primary local community hospital and healthcare provider to employ nearly every physician its community sees. Overseeing the scope of care a patient receives is an advantage, but Rye says PRMC, and likely other community hospitals, can't bear the burden alone.
"In smaller communities, like Kerrville, you have to make very thoughtful decisions," he says. "You can only do so much at once financially. It's a huge undertaking to employ physicians. That takes tens of millions of dollars of commitment and you have to be good stewards of your resources."
Right now, PRMC's recruiting resources are focused on primary care physicians. In the last two years, Rye has hired five primary care providers, and expects the need for more to remain at least through 2016.
There is an acute need for PCPs across the country, which is only projected to worsen, according to a report released this week by the Association of American Medical Colleges. The report estimates that demand for primary care physicians and specialists will outpace supply, by tens of thousands by 2025.
Recruiting for PCPs is a trend physician placement companies continue to see, as well as an increase in placing midlevel providers who can supplement some of the work of PCPs.
The Medicus Firm, a Dallas-based physician placement organization, analyzed its more than 200 placements to hospitals, physician practices, and medical centers across the country since 2010 and found that PCP placement is 38% of their work.
There was also a significant uptick in their non-physician advanced practice providers, such as nurse practitioners. Before 2012, they didn't even track non-physician placements. In 2012, they accounted for 1.32% of all placements; in 2014, that rose to 6.34%.
"Bolstering the front line with PCPs is a significant affirmation of what we're going to continue to see," says Jim Stone, president of the Medicus Firm. "It is so competitive."
Stone also says that the increased placement of a physician who is a DO rather than an MD is another indication that primary care physicians are an acute need. DO placements have nearly doubled since 2011, increasing from 5.4% in 2011 to 9.9% in 2014.
"In the mid-1990s, there was a strong preference for MDs, but for the most part that doesn't exist anymore," says Stone. "It is very normal to hire a DO, and it's not a big deal … whether you accept that a DO has the same quality of education or no, they constitute a significant portion of the physician workforce and with the difficulty of recruiting doctors today … [physician] groups are finding ways to be more inclusive."
PRMC's physician compensation strategy of guaranteeing a base salary is barely a year old, but Rye says the physicians who've come to work in Kerrville are responsive to it. He says he's slightly increased the signing bonuses, and is now adjusting salaries for established PRMC physicians who were not recruited in the last year to maintain equity.
"It's very important to maintain transparency with doctors who are employed," says Rye. "I show them overhead so they understand. It comes back to knowing your market and how much you can do at once."
Jacqueline Fellows is a contributing writer at HealthLeaders Media.