Be prepared: a hospital is likely to come knocking

June 22, 2011

Are the days of solo and small physician practices numbered? Very likely for most practices, according to two recent surveys that indicate the trend of hospitals employing physicians is continuing unabated and raising new issues for all parties. Make sure you know how to protect your interests in negotiations with a future hospital employer.

Are the days of solo and small physician practices numbered?

Very likely for most practices, according to two recent surveys that indicate the trend of hospitals employing physicians is continuing unabated and raising new issues for all parties.

Merritt Hawkins’ new 2011 Review of Physician Recruiting Incentives reported that 56% of the search firm’s assignments in 2010/11 featured hospital employment of the physician, up from 51% the previous year and up from 23% in 2005/06.

In a related trend, according to the survey, the compensation model has changed dramatically, with salaries almost completely replacing income guarantees, which traditionally were used to recruit physicians to practices.  Merritt Hawkins said that only 9% of 2010/2011 physician search assignments featured income guarantees, down from 21% in 2006/07 and down from 41% in 2003/2004.

As in the past, primary care physicians were the most sought-after. Merritt Hawkins said family practice and general internal medicine were the two most-requested physician search assignments for the sixth consecutive year.

The acquisition of physician practices by hospitals does not appear to be a short-term trend, according to Accenture, the global management consulting, technology services and outsourcing company. In a recent survey, it predicts that the rate of independent physicians being employed by health systems will grow by an annual rate of 5% over three years and that by 2013 fewer than a third of physicians will be in truly independent practices.

What’s attracting physicians to the model? Accenture suggests that key drivers are the burden of administrative responsibilities; desire for more access to leading-edge technology and equipment; more manageable schedules; and stability in a business environment constantly battered by regulatory changes.

In its survey summary, Merritt Hawkins agreed that physicians are seeking employment for stability, adding that hospitals want to align with physicians because of healthcare reform “which is promoting the use of accountable care organizations (ACOs), bundled payments,and other physician-aligned and integrated delivery mechanisms.”

For primary care physicians, working inside a hospital network also provides better continuity of care for patients as they work more closely with hospitalists.

When it comes to ACOs, the advantages may run both ways. Proposed regulations say that, during a three-year contract, an ACO cannot add participants with separate tax identification numbers (TINs). That means that independent group practices, ACOs formed by physician networks, or hospital/physician practice combinations that need to replace a physician or practice will have their hands tied and could be disqualified if they lose too many primary care providers and their associated beneficiaries. When  physicians are hospital employees, however, they are all under the same TIN and that problem does not occur. 

The key for physicians, according to Accenture, is to find the alignment model that allows them the right balance between the stability of employment and autonomy.

The American Medical Association is offering some assistance in that regard with a new manual to help physicians negotiate employment agreements with hospitals.

The Annotated Model Physician-Hospital Employment Agreement is available at no charge to members and $149 for nonmembers. The AMA cautions that the manual is just a starting point, and that physicians considering aligning with a hospital should consult an attorney.

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