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Physicians-for-Hire Must Tread Carefully

 |  By Don't use this Greg Freeman  
   November 12, 2013

Doctors considering accepting an employment offer from a hospital or health system should consider carefully whether the medical model and culture will be a good fit.

This article, by Greg Freeman, originally appeared in Managed Care Contracting & Reimbursement Advisor, December 2013.

Now more than ever before, hospitals are recruiting physicians to leave their private practices and join the hospital as an employee, or merge the entire practice with the hospital. Those offers will only increase as the healthcare industry moves more toward the accountable care organization (ACO) model, so how do you know what to do when the offers come?

And what if you haven't been asked yet, but you're interested in making the move?

In both cases, you should be careful to assess the potential arrangements and know what you would be getting into, says Phil Dalton, founder and CEO of Medical Development Specialists, a consulting company based in Los Angeles. Employment of physicians by hospitals or foundations is increasing at a rapid pace, he says.

With ACOs and other hospital arrangements, there is no one model that can be judged as good or bad for physicians. They each must be evaluated on their own merits, and the doctor must examine what characteristics of his or her own could determine whether an alliance with the hospital is a good plan, says Dalton.

If you haven't been approached by a hospital yet, you will be before long, says Marc Halley, ­president and CEO of Halley Consulting Group in Westerville, Ohio.

"The trend to hiring by hospitals is rampant," Halley says. "In some cities it's a feeding frenzy."

In corporate practice of medicine states, including California and Texas, hospitals are using foundations to bring in physicians-a model that is not employment per se but quite similar in practical terms, Dalton explains. There can be significant competition among hospitals for physicians, especially in primary care.

"If I were a physician in today's market, I would need to understand what is happening in my specialty as far as the trends for acquisition," Dalton says. "Then you have to look at your own practice. Do you have contracts or fee-for-service, and how are they going to be affected in the coming years? Do you have a potential for concierge service because you have a loyal following?"

Many physicians will find that staying in practice as a solo practitioner will be difficult because they will not have access to patients without being part of an organized group, Dalton says. Another motivation for ­joining a hospital group can be burdensome administrative costs in the practice. Or physicians may determine that joining some type of organization is inevitable even if they hold out for a while, so they might as well jump in now.

If your analysis suggests you should move toward employment within a hospital or other organization, one of the first thing to consider is the culture of the group you are considering.

"Is it a culture that fits with your personality? Who's going to be telling you what to do? You don't want to decide to join an organization and find out a few years later that you're really unhappy," says Dalton. "What sort of management style does this group have and do you really think it fits you? The governance of the group has to be understood clearly from the start and you have to decide if it is a style that you can work with."

The age of the physician or physicians in the practice can be an important factor, Halley says. Doctors who are older and nearing retirement may not be interested in going through the change to an ACO or other organization. Younger physicians, however, may see that employment by a hospital or some type of group is inevitable, and perhaps decide to choose their path early.

Another determining factor can be the status of your practice, Halley notes. Is it financially viable? Can you maintain that viability if reimbursement changes? Are you able to recruit and retain good physicians and staff? Do you have access to capital for improvements such as buying an electronic medical record? Will you be able to maintain referrals?

"If all the physicians who refer to me are going to work for a hospital, I probably should be concerned," Halley says. "Those referrals are probably going to go in a different direction."

Also consider the strategy of the hospital group you would be joining. As new ACOs and other groups form, some do not have a clearly defined strategy, and that could be bad news down the road, Dalton says. Make sure the strategy fits with how you want to practice medicine.

"Does their strategy turn you into a doctor who just churns patients or does it let you be a population health manager?" Dalton says. "Does the compensation arrangement reward quality and outcomes or does it just pay you based on how many patients you see in a day?"

The buyout tends to be less important when assessing the potential group you are considering, Dalton says. Unless the practice is quite large, the buyout proceeds are not likely to be enough to make much difference for the physician. But the payment arrangements and other particulars of the group arrangement will.

"I've seen practices sell to whoever had the highest bid, but I don't think that's hardly ever the way to go," Dalton says. "There are usually other factors that are more important in deciding what offer to accept."

Private practice not dead yet, even as hospitals hire more

The AMA recently reported that private practice medicine remains strong despite an increase in hospital employment. The conclusion was based on the first nationally representative study of physician practice arrangements in five years, says AMA President Ardis Dee Hoven, MD.

"To paraphrase Mark Twain, the reports of the death of private practice medicine have been greatly exaggerated," Hoven says. "This new data shows that while there has been an increase in hospital employment, more than half of physicians-53.2%-were self-employed in 2012, and 60% worked in practices wholly owned by physicians. Needed innovation in payment and delivery reform must recognize the wide range of practice types and sizes that exist today so all physicians can participate in the move to a more patient-centered system that rewards high-quality care and reduces costs."

While this new study shows 60% of physicians in ­physician-owned practices, there has been a trend toward more hospital employment during the last five years. In 2012, 29% of physicians worked either directly for a hospital (5.6%) or for a practice that was at least partially owned by a hospital (23.4%). A 2007/2008 AMA survey did not distinguish between direct hospital employment and employment in a hospital-owned practice, but found that 16.3% of physicians worked in one of the two settings.

The AMA study also found that the percentage of physicians who were practice owners in 2012 decreased eight percentage points from 2007/2008. Eighteen percent of physicians were in solo practice, down six percentage points over five years. Single-specialty practice was the most common practice type in 2012, accounting for 45.5% of physicians.

The full study report is available online at http://tinyurl.com/lflpwbr.

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