Hospitals are increasingly looking to more closely align with physicians for a variety of reasons, including the likely evolution of the healthcare industry from a fee-for-service to a global payment model. Establishing accountable care organizations are one way hospitals and physician practices are integrating in preparation for these significant reimbursements changes. In an effort to develop deeper integration, many hospitals have begun employing physicians and acquiring practices. While this move can help align physician and hospital goals, less drastic formal relationships can also achieve the same ends.
These various non-employment relationships are particularly important to hospitals in states with corporate practice of medicine laws, which prohibit hospitals and "unlicensed" persons or entities from employing physicians, says Wayne J. Miller, JD, founding shareholder, Compliance Law Group, based in Los Angeles, Calif.,
"These laws are intended to protect physicians' control over the practice of medicine," he says. "In California and the minority of other states with these laws, the bottom line is that [hospitals and health systems] have to find out how to align doctors with some kind of affiliation that stops short of employment."
Here, Mr. Miller offers three types of relationships for aligning physicians with hospitals that fall outside of employment. These relationships can be used by hospitals that are barred legally from employing from physicians as well as those who are unable to employ physicians for financial or other reasons.
1. Hospital-medical foundation integration. If permissible by your state, a hospital- medical foundation model allows for relationships most akin to a hospital-physician employment relationship. These arrangements are permitted in California and other states, under specific requirements. For example, in California foundations must be non-profit and tax-exempt and are required to include at least 10 different specialties as well as retain at least 40 primary care and specialist physicians. Medical foundations are permitted to operate outpatient clinics and are separate entities from the hospital, but the hospital is commonly included in the membership and in the management of the foundation. Typically, the hospital also serves as a manager of the practice. The hospital and the foundation work together closely to negotiate with managed care payors, which are prevalent in the state of California. This close relationship between hospitals and the participating physicians allow for alignment of interests such as quality and efficiency and allow for tying compensation to physician performance.
While such relationships can be advantageous for large health systems and allow for high levels of integration, they may be out of reach for most ordinary hospitals. "Many physicians in states with corporate practice doctrines are fiercely independent because of the way medical practices have always operated, and it can be a challenge to meet the minimum requirements for establishing a foundation for many hospitals," says Mr. Miller.
If hospitals are interested in establishing a foundation, Mr. Miller recommends hospitals perform due diligence to determine physician buy in. "Do you have enough physicians covering the breadth of specialties required?" he says. "It often helps if you can get a physician leader to serve as a cheerleader."
Leaders must also determine whether or not the foundation will acquire practices or work through them as a separate operation, and how governance will be structured. "You don't want to leave the doctors thinking you're just taking over," he says. Mr. Miller recommends acquisition in order to most fully align physicians, but cautions that any acquisition must be done with legal counsel and must be structured in a manner that meets federal and state anti-referral fee and "Stark law" standards, including payment of fair-market value for assets.
2. Medical oversight, coverage of outpatient hospital services. Another way hospitals can align themselves with physicians is to create "offshoots" of their facilities, such as outpatient clinics that exist outside of the hospital campus but are licensed as a hospital facility. Examples may include off-site primary and urgent care centers and outpatient cancer facilities. In these situations, the hospital hires a medical group to provide coverage and clinical oversight through medical directorships. The physicians bill separately for their services and are not employed by the hospital, but the hospital may have a contractual agreement to manage the practice and may share an EMR. Hospitals may also establish such facilities on the hospital campus, further aligning the two groups, says Mr. Miller. Under these arrangements, the hospital is responsible for and bills for the "technical component" (i.e. the use of the facility and its staff), and the physicians may have rental responsibilities for resources used that relate to the private practice of medicine.
3. Ad hoc relationships. Finally, hospitals can establish ad hoc relationships with physicians to achieve alignment. Examples of this include contractual relationships with individual physicians or practices for medical directorships for certain hospital departments and call coverage contracts for emergency or other services. Hospitals also may develop service arrangements between it and physicians with third party payors to share in cost savings created by coordinating care. "Although these are ad hoc, they move the organizations more toward integrated care," says Mr. Miller.
These various non-employment relationships are particularly important to hospitals in states with corporate practice of medicine laws, which prohibit hospitals and "unlicensed" persons or entities from employing physicians, says Wayne J. Miller, JD, founding shareholder, Compliance Law Group, based in Los Angeles, Calif.,
"These laws are intended to protect physicians' control over the practice of medicine," he says. "In California and the minority of other states with these laws, the bottom line is that [hospitals and health systems] have to find out how to align doctors with some kind of affiliation that stops short of employment."
Here, Mr. Miller offers three types of relationships for aligning physicians with hospitals that fall outside of employment. These relationships can be used by hospitals that are barred legally from employing from physicians as well as those who are unable to employ physicians for financial or other reasons.
1. Hospital-medical foundation integration. If permissible by your state, a hospital- medical foundation model allows for relationships most akin to a hospital-physician employment relationship. These arrangements are permitted in California and other states, under specific requirements. For example, in California foundations must be non-profit and tax-exempt and are required to include at least 10 different specialties as well as retain at least 40 primary care and specialist physicians. Medical foundations are permitted to operate outpatient clinics and are separate entities from the hospital, but the hospital is commonly included in the membership and in the management of the foundation. Typically, the hospital also serves as a manager of the practice. The hospital and the foundation work together closely to negotiate with managed care payors, which are prevalent in the state of California. This close relationship between hospitals and the participating physicians allow for alignment of interests such as quality and efficiency and allow for tying compensation to physician performance.
While such relationships can be advantageous for large health systems and allow for high levels of integration, they may be out of reach for most ordinary hospitals. "Many physicians in states with corporate practice doctrines are fiercely independent because of the way medical practices have always operated, and it can be a challenge to meet the minimum requirements for establishing a foundation for many hospitals," says Mr. Miller.
If hospitals are interested in establishing a foundation, Mr. Miller recommends hospitals perform due diligence to determine physician buy in. "Do you have enough physicians covering the breadth of specialties required?" he says. "It often helps if you can get a physician leader to serve as a cheerleader."
Leaders must also determine whether or not the foundation will acquire practices or work through them as a separate operation, and how governance will be structured. "You don't want to leave the doctors thinking you're just taking over," he says. Mr. Miller recommends acquisition in order to most fully align physicians, but cautions that any acquisition must be done with legal counsel and must be structured in a manner that meets federal and state anti-referral fee and "Stark law" standards, including payment of fair-market value for assets.
2. Medical oversight, coverage of outpatient hospital services. Another way hospitals can align themselves with physicians is to create "offshoots" of their facilities, such as outpatient clinics that exist outside of the hospital campus but are licensed as a hospital facility. Examples may include off-site primary and urgent care centers and outpatient cancer facilities. In these situations, the hospital hires a medical group to provide coverage and clinical oversight through medical directorships. The physicians bill separately for their services and are not employed by the hospital, but the hospital may have a contractual agreement to manage the practice and may share an EMR. Hospitals may also establish such facilities on the hospital campus, further aligning the two groups, says Mr. Miller. Under these arrangements, the hospital is responsible for and bills for the "technical component" (i.e. the use of the facility and its staff), and the physicians may have rental responsibilities for resources used that relate to the private practice of medicine.
3. Ad hoc relationships. Finally, hospitals can establish ad hoc relationships with physicians to achieve alignment. Examples of this include contractual relationships with individual physicians or practices for medical directorships for certain hospital departments and call coverage contracts for emergency or other services. Hospitals also may develop service arrangements between it and physicians with third party payors to share in cost savings created by coordinating care. "Although these are ad hoc, they move the organizations more toward integrated care," says Mr. Miller.