Physicians have leverage with hospitals in getting optimal practice set-ups

Experts say hospitals aren't paying large sums to buy practices, so they are looking for other ways to lure doctors.

By Victoria Stagg Elliott — Posted Nov. 15, 2010

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In the age of health care alignment and consolidation, hospitals are getting more creative in buying practices and offering doctors employment contracts. Physicians might not get big dollars for their practice, but experts say they have leverage to ask for and get the practice set-up they want.

"In the new environment, physicians want influence and decision-making power around how they're going to be managed," said Charles Shabino, MD, senior medical adviser for the Wisconsin Hospital Assn. "It's probably more of negotiation than it has ever been."

Hospitals need to be connected to more physicians to establish accountable care organizations and other structures as part of health system reform. A recent survey by the American College of Healthcare Executives found that 72% of members were looking to align more closely with physicians. Other surveys have suggested the interest is being reciprocated, and physicians are looking at hospitals for more economic stability.

"Either they are going out to get physicians, or physicians are coming to them," said Thomas Dolan, PhD, ACHE's president and CEO.

Hospital employment remains a popular option, but not one that suits all. Rex Healthcare in Raleigh, N.C., which is part of UNC Health Care, employs some physicians directly. But the organization also has opened ambulatory surgical centers that are joint ventures with physicians, launched a nonprofit physician network and made available an electronic medical record system that can be used by all physicians in the community at subsidized rates.

"Some physicians want the benefits of interoperability with the hospital system. It's another form of alignment," said Steve Burriss, senior vice president of operations and ambulatory care at Rex.

Other health care systems are conducting events where physicians get to ask for what they want.

In October, the Western Wisconsin division of Hospital Sisters Health System brought in Pamela Wible, MD, a family physician in Eugene, Ore. She ran sessions for physicians and other community members to propose ideas for how things should be set up at Sacred Heart Hospital in Eau Claire, Wis. Dr. Wible runs a so-called ideal medical practice, a version of solo primary care with minimal staff and low operating costs. Those with the hospital say they will create these kind of micropractices if physicians say that is what they want.

"Some physicians are not really interested in an employment model and want to be a little bit more creative and look at different models," said Chris Longbella, MD., an obstetrician-gynecologist in private practice in Eau Claire, Wis., and chair for primary care development for the Western Wisconsin Division of Hospital Sisters Health System.

"Are there other ways that we can work together? Are there ways that physicians can be happy and productive and not lose some of the positive things that come with being in a small, single-specialty group practice?"

Flexibility needed

Leverage is not just for physicians seeking to maintain independence. Those working on physician recruitment are seeing increasing flexibility in schedules and workloads for those who opt for direct employment with a hospital or hospital system.

For instance, if a physician approached Randy Munson, physician recruitment program manager in the Wisconsin Office of Rural Health, a few years ago about a family medicine position that was outpatient only with no obstetrics, few institutions would be willing to meet those specifications. Now hospitals are far more receptive.

"The gap is getting wider between the demand and the supply. Hospitals are realizing, 'We need to be flexible,' " Munson said. "If you were playing cards, physicians would be holding the aces and the kings and the queens. Hospitals have the threes and the fours and the fives. It's just so competitive."

Although physicians may have more say in how they relate to a hospital or other large health institution, there are limitations, and the process is still a negotiation. Experts suggest that physicians ask for what they want as early as possible in the process.

"Transparency is key. People cannot give you what you want if you don't tell them what you want," said Tommy Bohannon, vice president of hospital-based recruiting with the physician placement firm Merritt Hawkins & Associates in Irving, Texas. "And institutions are more likely to agree if there is a commitment with the request. And if you say, 'If you change this, I will take the job,' that gives them a much greater sense of urgency."

But requests need to be reasonable, experts said. Many hospital executives involved were around in the mid-1990s, when medical practices were bought for what now appear to be high prices. Doctors became employed, and many of the deals lost money.

"A lot of money was paid for these practices," Dr. Shabino said. "Most of the physicians were put on salary, with decreased incentives to work hard and see a lot of patients. A lot of hospitals divested of their primary care practices or changed the compensation systems so physicians were paid on production."

Hospitals are hoping to avoid past mistakes and maintain physician productivity but are limited by Stark, anti-kickback and other regulations as to how these deals are structured and how much money changes hands.

"Now is not a good time to be paying too much," Burriss said. "We are really limited by fair market value, and everybody is haunted by memories of the '90s."

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