When Physician Employment May Not Make Sense: How to Turn Away Physicians Seeking Employment

Physician employment at hospitals is steadily growing, and is expected to reach unprecedented levels in the coming years. A study by Accenture, for example, estimates that only 33 percent of physicians will be independent by 2013. Many hospitals are employing physicians to improve coordination of care, which is a major focus of healthcare reform legislation. Alignment with primary care physicians will be particularly important for hospitals interested in forming accountable care organizations because they will be patients' central point of contact in the ACO. In addition, many hospitals may want to employ primary care physicians to prepare for the predicted shortage of these physicians. In turn, many physicians, particularly recent medical school graduates, are seeking employment at hospitals to achieve a better work-life balance and/or to avoid the administrative burden of running an independent practice.

While there are many potential benefits of physician employment by hospitals for both parties, there are also downsides and risks that may cause hospitals to limit or exclude physician employment as part of their strategic plan. In these cases, hospitals may need to turn away physicians and must do so in a manner that minimizes conflict.

Physician employment considerations
One of hospitals' first considerations when deciding whether to hire physicians should be the hospitals' ability to manage employed physicians or physician practices, according to Allen Kram, director of physician development for LaGrangeville, N.Y.-based Health Quest.

Jennifer Metivier, MS, FASPR, executive director of the Association of Staff Physician Recruiters, agrees. "[Hospitals] may not know how to do billing for physicians or be set up to run a practice efficiently," she says. Employing physicians requires a significant investment of time, money and effort — resources that a hospital may not be able to afford, particularly as Medicare cuts threaten their continuing viability. "Certain specialties' malpractice insurance is extremely expensive and it may deter a hospital from employing a physician in that particular specialty," Ms. Metivier says. A study in the New England Journal of Medicine, for example, found that 19 percent of neurosurgeons face malpractice suits each year.

In addition to financial costs, physician employment may call for hospital executives to learn new leadership skills, especially if the employed physicians are coming from a private practice, which affords them more autonomy. To succeed with employed physicians, hospital leaders will need to truly integrate them into the hospital's structure and operations. "Signing the employment agreement is not the end of the physician engagement process," says Bryan J. Warren, manager of Select International's Healthcare Solutions division. "Now the physicians' success [or failure] is really your success or failure," he says.

Hospital leaders should also consider their competition when deciding whether to employ physicians. "If you do not hire/employ the physicians, what will your competition do?" Mr. Kram says. "In many cases, the decision to hire physicians is to make the relationship with the community physicians stronger and in other cases it is a strategic move to either increase market share or grow a service line that is not being met in the community," he says. Thus, hospitals may want to employ physicians as a defense against competition. However, this move may be seen by physician practices in the community as an aggressive or offensive move. "If there are strong practices in the community that are providing the services, you might not want to compete or risk losing the support of those practices," Mr. Kram says. Furthermore, if physicians in the community are already referring patients to the hospital, employing these physicians would incur costs without adding much benefit in terms of volume.

If hospitals decide to hire physicians, the next step is to develop a process for choosing which physicians to employ. A critical consideration in this case is the physician's alignment with hospital culture. Hospitals should not hire physicians who do not fit the organization's culture, even if they are otherwise appealing, because they can cause conflict with other physicians and employees in the hospital and impede efforts to reach the organization's short- and long-term goals. "You can't just hire the [physician] who gets many cases; you need physicians who are adaptable, can handle change and are going to be collaborative," Mr. Warren says.

He suggests hospitals first define their culture and its components and then create an interview process that targets these areas. Defining one's culture may be a challenge, however, particularly when defining the culture from the physicians' perspective, says Manoj Pawar, MD, vice president of clinical operations and physician leadership development for Englewood, Colo.-based Catholic Health Initiatives. He suggests involving the hospital's current physicians in the definition process. One technique he uses is asking physicians the three physicians they would want on their "dream team" and why. "This can very quickly and easily be translated into elements of our culture," he says.

Turning physicians away? How to minimize problems

1. Articulate your stance. One of the keys to turning down physicians seeking employment is articulating the hospital's stance towards physician employment. "Have a concrete plan [for physician employment] ahead of time," Dr. Pawar says. For example, he says hospitals should define how many physicians they want to employ, if any, what specialties they are targeting, their timeline for recruitment and perhaps most importantly, the reasons for wanting or not wanting to employ physicians. "Make sure you have an actual business plan and strategic reason for wanting to do this," he says. Establishing a business plan for physician employment will help guide hospital leaders in how to respond to physicians seeking employment.

2. Establish a recruiting process. If physician employment is part of a hospital's strategy, the leaders need to develop a deliberate process for recruitment and communicate this process to members of the team and to the physicians seeking employment. "Inconsistency in the negotiations and courting of a physician or group is the biggest mistake made by hospital leadership," Mr. Kram says. "There should be a clear understanding of the process the administration goes through in deciding to make an offer." By creating a specific plan with clear expectations, hospital leaders can more easily explain and physicians can more readily understand why they were not hired.

3. Involve current physicians. Turning down physicians may be most effective and constructive if physicians are leading the recruitment efforts. "The best possible scenario is to create a medical group with its own governance where the physicians themselves are making [the hiring] decisions," Dr. Pawar says. Peer-to-peer communication may make the physicians seeking employment more understanding of a decision not to hire them because there is not a power imbalance, as there would be with an administrator rejecting a physician applicant. "To be really successful, hospitals need to get out of the mindset of hospitals employing physicians," Dr. Pawar says. "Create a group or structure that [is] physician-led." Developing a governance structure for physicians will make them more engaged in the hospital and invested in the physician employment strategy.

4. Explore other options. If physician employment is not part of a hospital's strategy, one way to turn away physicians who are seeking employment is to explain that hiring physicians is not currently part of the hospital's business plan. However, this response may limit leaders' options, Dr. Pawar says. Instead, he suggests leaders think creatively about other ways the hospital can work with the physicians. "It's not either or," Mr. Warren says. "Within a given service line, you don't have to decide whether to employ everybody or not; it may make sense to employ some and continue to work with [others as] independent staff," he says. Other arrangements between hospitals and physicians include co-management, contracting for certain services and leasing office space.

Hospital leaders should talk to physicians about their motivation for employment to identify ways the hospital can form relationships with physicians without employing them. "It's important to not stop at the initial request [but to] dig deeper," Dr. Pawar says. This type of conversation might reveal that the physician has on-call coverage issues, economic challenges or other problems the hospital can address without hiring them. Mr. Warren suggests operational alignment as a first step in forming a non-employment relationship with physicians who may be burdened by their practices' administrative demands.

Related Articles on Physician Employment:

Study: Push for Market Share Trumps Clinical Integration in Hospitals' Rush for Physician Employment, May Lead to Higher Costs
7 Reasons Hospitals Struggle to Align With Physicians

Physician-Hospital Alignment: 4 Strategies to Align Physicians

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