Four implementation or growth strategies that work
The following is an identification of four critical success elements when employing physicians.
1. Physician recruitment
There are numerous poor approaches for physician recruitment. It has been seen that less attention is paid to the process of physician recruitment than buying capital equipment even though the cost of operating a physician practice can be significantly higher than many capital investments. Also the hiring practices tend to be reactionary versus strategically planned. Effective recruitment should be matched against a criteria or proof of need. In the mechanics of recruitment, the physician recruiter’s job is to fill the position. If you are not a high profile client you might be getting B or C level candidates.
Given this back drop, it can be a buyer’s-beware market. This is particularly true for the medium to smaller hospitals. Knowing how to read the resume is a starting point of knowing your candidate. The unexplained movement in residency programs, gaps in the resume history as well as short stays in any employment situation could be red flags needing further investigation. Also, the best candidates will be very astute to the amenities of recruitment. If future call colleagues are not present in an interview process, this will be viewed negatively by the best recruits. Lastly, make certain that the spouse or significant other is well tended in the recruitment process. Success in the long-term retention of physicians is highly dependent on family wellbeing and fit to the community.
2. Physician contracting and compensation
The general content of today’s physician employment agreements are much more uniform versus what was seen in the early days of physician employment. The major fracture is a poorly designed process of physician contracting and determining compensation. For those that have worked with physicians in the professional practice environment, it is widely understood that the compensation methodology determines the health and foundational culture of working with physicians. The employing organization should invest time and money into getting this part of physician employment well positioned. If employment agreements reflect individual compensation negotiations and special deals versus a consistent over arching compliance proof method and philosophy of compensation, this is a path for failure in a physician employment strategy. If your physician turnover rate is high, this will be one of the top reasons why. It is also costly to maintain individual contracts. Additional costs will be reflected in resources to support contract compliance as well as lost goodwill in contract terms not being met.
3. Appropriate leadership and infrastructure
Hospitals and health systems continue to use the traditional hospital infrastructure to manage employed physicians. Adherence to this structure will move the organization to a decentralized or service line orientation of provider and staff management. In most cases, this leads to a condition of hospital culture consuming strategy. In all situations where this has been seen, it has been a highly sub-optimized or failed physician employment strategy. For the majority of the organizations, hospital management staff does not possess the appropriate knowledge and tools to manage physician practices.
In the market this does not appear to be a lesson learned. The successful path for hospitals and health systems is to have the physician group as a service line unto itself or set aside in a separate organizational structure. Since physician employment has been so prevalent in the market, finding administrative leadership to manage in this environment can be achieved.
Also, physicians need to govern themselves. Reflective of “best practice” organizations’ authority guidelines, physician compact and code of conduct can be established so that physician governance groups will function at a highly efficient and productive level.
4. Understanding the economics of the strategy
There are real economic danger points that have recently been seen in the hospital employed physician market. By pursuing a decentralized or service line orientation of physician employment, the cost of the practice operations is buried in the financial reports of the service line. The philosophy becomes, “if the service line is profitable with the practice costs included, then I am ok with my strategy.” Adhering to this philosophy buries millions of dollars of losses and bad decision making in some organizations. This also significantly diminishes the capital formation ability of the organization. For best-of-breed operations, the financial operations of the employed physician practices is clearly understood, benchmarked and maximized for operational performance.
By economically knowing your operations at this level, you can significantly maximize revenue and control costs. Financial tools are available to assist leadership with this level of reporting.
The last economic consideration is that professional practice revenue cycle management should not be managed through the hospital infrastructure. In all markets where this has been seen, millions of dollars have been lost by using hospital policies and procedures for physician revenue cycle management.
Compendium of do’s
The knowledge and information to successfully manage an employed network of physicians is present in today’s market. The previous listing of thoughts is a high-level presentation of issues that need to be appropriately managed. Success is gained by effectively managing the details. The following compendium of do’s is only the beginning point of successfully employing physicians by a hospital or health system.
Physician recruitment
- Build a model of physician recruitment that is not reactionary but is tested against the strategic plan of the organization. Reactionary employment is costly.
- Get to know the red flags in a physician resume. Set high standards of expectations. It is costly and time consuming to hire poorly.
- Be astute to the amenities of the interview process. Call colleagues and spouse/significant other considerations are vital to long-term physician retention.
- Employing physicians is more costly than the purchase of most capital equipment. Give the employment process the same attention to detail that you would when making a major capital investment.
Physician contracting and compensation
- Make it a given that all physician employment agreements will be the same (except for compensation).
- Establish the scope of negotiated offerings that would be afforded to any candidate (i.e. sign on bonuses, moving expenses).
- Establish an overarching philosophy and methodology in physician compensation. The effective management of physician compensation sets the trust, retention and cultural level for the employed physician group.
Appropriate leadership and infrastructure
- Establish an organizational structure for the employed physician practices. Decentralized or service line management of physician practices will significantly sub-optimize or create financial failure.
- Employ administrative leadership that has experience in managing physician practices. Hospital management staff cannot adequately lead in the professional practice environment.
- Provide a governance structure for the physicians that include authority guidelines, physician compact and code of conduct. Physicians need involvement in the decisions that will affect their professional practice.
Economics of the strategy
- Set, as a given, the need for financial tools that provide benchmark information so that informed management decisions can be made.
- Establish revenue cycle management that is not under traditional hospital management or its policies and procedures.
Mr. Hamilton (jhamiltonamm@aol.com) is principal executive with Somerset Health Care, which provides extensive services in the employment of physicians by hospitals and health systems as well as successful venturing physician alignment strategies. Somerset Health Care has developed financial tools to benchmark the economic performance of employed physician networks as well as physicians in the private practice setting. These tools include financial reporting, coding analysis, revenue cycle performance and fee schedule analytics. Mr. Hamilton has worked in senior leadership roles for single and multi-specialty groups, large integrated health systems and single- and multi-hospital community/religious-based systems. Learn more about Somerset Health Care.
