5 Questions Hospital Executives Should Ask Before Employing Physicians

Hospital alignment with physician practices is becoming a common practice, and according to Phil Dalton, president and founder of Medical Development Specialists, it will become even more common as healthcare moves toward coordinated care.

Achieving a coordinated care model is easier when hospitals and physicians are aligned. "The marketplace is moving very fast, and if you don't have a strategy for alignment, you will be left behind," Mr. Dalton says.

There are several different options for hospital-physician alignment that hospitals can put into place. Employment of physicians is one, but there are other alternatives that do not involve employment,  such as starting a physician hospital organization,  clinical co-management, working with independent practice associations, developing a management services organization, or creating a medical foundation and aligning with physicians that way.

"It's not something to embark on spontaneously," Mr. Dalton says. "Every hospital needs a strategy that fits the marketplace, fits healthcare reform and makes financial sense."

Mr. Dalton says he has seen an increasing number of hospitals use employment to align with physicians. He says that now, more than ever, hospitals need to ask themselves the following five questions to determine if the hospital is ready to employ physicians or if it should go another route for alignment.

1. What is my physician on-boarding strategy? With the physician shortage, almost every hospital needs to think about how to compete with others to keep physicians actively involved in the hospital and not looking elsewhere for employment or affiliation, according to Mr. Dalton.

"It's hard for hospitals to be successful unless they have a competitive organizational platform and an on-boarding strategy," Mr. Dalton says. Hospital executives should think about how they will maintain and grow their hospital staff , and if part of that means having an attractive employment offering and an on-boarding strategy compared to others in the marketplace. Mr. Dalton recommends having a strategy that is focused on the future of healthcare that is moving toward team based, coordinated and accessible care so physicians know the hospital has a plan to be successful under healthcare reform.

2. How do I address the financial challenges that come with buying physician practices and/or owning physician groups? Hospitals need to be aware of what the market is saying about how much it will cost to acquire a physician group. "If you are going to have a growth strategy that involves acquiring physician groups, you need to be prepared to pay a market rate in order to be successful," Mr. Dalton says. "Large, well-organized groups are looking for a big price tag." With increased competition for physician practices, hospitals should be prepared to pay a competitive fair market value.

Another financial challenge is that it is not atypical for physician groups to lose money after they have been acquired by hospitals. This can happen for a few reasons; sometimes, the hospital removes the ancillary services from the practice and brings them to the hospital, thus removing income from the medical group that was keeping it afloat, and other times, the acquisition could be part of a physician's retirement plan, and hospitals may not get as much productivity as they had expected from the physician. Additionally, the hospital will usually pay more for office staff and invest in capital improvements that were not made by the physicians.

3. What do I say to the veterans on my medical staff as they watch salary guarantees go to new physicians who have no previous alignment with the hospital? Mr. Dalton says there are different ways to handle this issue. In some markets, employment has evolved so far that it is no longer controversial. However, there are some markets where employment is a minority strategy and the majority of physicians are independent. In this situation, hospitals have to consider the reaction of medical staff members who do not want to see employment in their community.

How hospitals should deal with veteran physicians in the market depends on the situation, but Mr. Dalton does say that in general, it is a good idea to include the hospital's medical staff in the planning process. Also, he encourages hospitals to educate their staff about what is happening with reform and competition and why employment is a necessary step. "They are still likely to have issues, but it is better to address physicians in an interactive way regardless," says Mr. Dalton.

4. Do I have the proper expertise in place to manage a physician group? Hospitals have a habit of putting hospital officials in charge of medical groups, says Mr.Dalton. But hospital executives should not necessarily impose a hospital’s culture and leadership on a newly aligned medical group.

"I have seen instances when the finance director for the hospital is suddenly the finance director for the medical group," Mr. Dalton says, and he discourages that trend. "A good way to go astray is to not have proper training required for the position."

He also warns against automatically placing the hospital's information technology system on the new medical group. "Information technology is different for a medical group than a hospital," Mr. Dalton says.

5. How important is it that the physician practice be located adjacent to the hospital? Hospitals can receive a higher reimbursement for doing outpatient procedures at the hospital instead of doing them in a physician setting. This is becoming more prevalent with hospitals moving primary care out into the community for better access, but retaining ancillary services at the hospital.

However, Mr. Dalton says that strategy might not work in the long run. As healthcare moves toward becoming lower cost without sacrificing quality, the payor will not accept the higher cost of doing procedures in the hospital under the hospital's license.

More Articles on Hospital-Physician Relationships:

Hospital-Physician Alignment: 8 Core Thoughts
5 Tips For Developing a Lasting Medical Staff Plan
The 6 Types of Independent Physicians

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