Hospital-Physician Relationships: Impact of Health Reform on Physician Employment
Blog posted by Shannon LorbieckiThere is general agreement that health care reform (driven by federal action and trends that were already going on) means providers need to collaborate at a level not mandated before. This is because:
- Segmented approaches to care, chronic care management, and payment for services need to change.
- Accountability for results will become the norm—reimbursement will increasingly be based on the results delivered—not the volume of service delivered.
- Payment systems for primary care physicians (and in some cases, specialists), are inadequate to maintain competitive salaries in stand alone practices.
- Access to capital will continue to be constrained and significant capital investments are needed for electronic health record implementation.
These factors are driving a new wave of physician-hospital relationships.
Employment relationships
I was talking to a physician group and hospital board in the Midwest recently when a family doctor who had been practicing for eight years post-residency said, “All of my training pointed me to and prepared me for private practice and I came here with the intention of a career in private practice. But this model is not sustainable and something has to change.” We are seeing those changes—more dramatically in some parts of the country—but it is happening everywhere.
A recent study by the Medical Group Management Association (MGMA) shows a dramatic shift in physician employment across the U.S. during the 2000's. The changes reveal a move away from a physician ownership dominant system (with 71 percent of physicians working in physician owned settings in 2002) to less than 50 percent of physicians in physician ownership settings in 2009 reports.
Alternative relationships: the professional services agreement
In addition to employment, we are seeing a couple of alternatives emerge that many physicians find attractive because it allows the physicians to retain a level of autonomy over their medical practice. One of these is a professional services agreement (PSA) where the clinic sells its assets to the hospital, non-physician (and possibly mid-level) staff) become employees of the hospital, physicians (and potentially mid-level staff) continue to be employed by their private practice, and the hospital bills for all clinic services. This allows the hospital to bill the services as a Medicare provider based clinic.
Additional benefits of a PSA:
- Physicians can maintain their own benefits, internal compensation, and shareholder decision making structure
- It creates economic alignment of the hospital and physician interests
- It eliminates competition for ancillaries
- The PSA strengthens the local health care system potentially avoiding a “takeover” by a larger system
- It can potentially be unwound
A PSA works well with small and medium sized physician groups and single specialty practices. The biggest downside of a PSA may be the need to periodically renegotiate compensation.