How to play nice during physician/hospital agreements

While healthcare reform will be necessary to help reduce expenses, the exact road map remains uncertain. Increasing market pressures and looming Medicare cuts have forced many physicians to integrate with hospitals in hopes to find a safe haven from the cost cuts. As more of these mergers take place, physicians and hospitals will need to understand what types of contracts will work best to align care, according to a white paper issued by consulting firm Deloitte.

“There are numerous options available when developing physician/hospital alignment arrangements depending upon the degree of alignment desired and the perceived urgency to “get the deal done,” the paper stated.

Some of these models include:

• Voluntary staff models;
• Joint  ventures and gain sharing programs: These provide a moderate degree of alignment by tying segments of physicians and hospital financial performance together in specific clinical care areas; and
• Accountable care organizations (ACOs): Being discussed as part of the current health reform debate and may offer the “highest degree of alignment by holding physicians and hospitals accountable for improving quality and lowering costs through a joint reimbursement mechanism.”

A recent survey by the Society of Healthcare Strategy and Market Development said that the percentage of physicians who will be employed by hospitals will increase from the current level of 10 percent to 25 percent by 2013.

In addition, during the next 15 years, the U.S. is projected to suffer a physician shortage of 124,000 to 159,000 physicians.

When undergoing these types of hospital/physician alignments the following points must be considered:

• Legal and compliance basics: Alignments must be legally structured so that terms, duties and compensation formulas align the incentives of the physician and hospital. This will include compensation, term and termination, duties and performance expectations and restrictive covenants/moonlighting.
• Compensation and productivity models: Compensation plans typically consist of a base salary with some combination of individual, department and group performance incentives. The more common options are net income, percent of charges and performance-based plans.
• Duties and responsibilities: Core factors should be considered in these deals, including: clinical qualifications and licensures maintenance, facilities and personnel usage, third-party reimbursement programs and assignments agreements, medical staff appointment and clinical privileges, among others.
• Special considerations for medical directors, department chairs and division chiefs; and
• Maintaining physician pelationships.

To properly maintain physician/hospital relationship hospitals must:

• Know their environment;
• Have a well planned communication strategy;
• Be able to resolve differences; and
• Establish time tables.

“Physicians and hospitals are under tremendous pressure and are looking for alternatives to manage the drastically changing landscape. The impact of health reform is forcing hospitals and physicians to revisit their relationships,” Deloitte concluded. “The most effective relationship models for the long-term are still unknown.”