Considering Both Sides

In all my years working with physicians, I have never seen the magnitude of uncertainty and, might I add, fear of what the future holds for the medical field in general and the doctor in particular.

The new health care law will — more likely than not — hit consumers with increased premiums; and hit businesses, including medical practices, with the cost of mandated coverage for employees or penalties for non-coverage. But that is not where it ends for doctors. They are facing new and untested regulations and reimbursement models that will have a direct impact on their bottom line.

So where does this uncertainty lead? I have found an uptick in the number of my clients exploring the possibility of trading the angst of private practice for the perceived security of hospital employment.

According to a Merritt Hawkins study, hospitals will employ 75% of physicians by 2014. Physicians are also facing a major change in reimbursement models: Section 3007 of the PPACA establishes the Value-Based Payment Modifier, which will adjust physician reimbursements based on quality of care as defined by the secretary of Health and Human Services and cost compared to other physicians. How “fair” and “measurable” will this be?

While the lure of a “steady income” from a hospital may be appealing, doctors need to evaluate the respective risks of staying or selling. The devil you know may be better than the devil you don’t.

Doctors want to “do-good” but fear the unknown, decreased reimbursements, increased red-tape and increased expenses. They feel motivated to “sell-out and get-out.” However, physicians need to consider a number of factors before making decision, including:

• The switch to ICD-10 codes will require more documentation, revised forms, retraining of staff and physicians, changes to software and other information technology, potentially hiring more staff, costing the doctors tens of thousands of dollars.

In addition, the move to the ICD-10 will increase documentation activities about 15% to 20%, according to a study by Nachimson Advisors, LLC.

• Current or prospective patients may gravitate to ACOs and hospital-based practices and away from the solo practices for the convenience of managed care in one location.

• With more doctors joining hospital, and the pressure by the hospitals for internal referrals, solo practitioners may see a decrease in referrals.

These changes, plus others, have created a depressing future for doctors. However, before throwing in the towel each doctor needs to face-up to the many positive aspects of owning and operating their own practice: enjoying being one’s own boss, caring for one’s own patients, having a say over the quality of care being delivered, guiding and managing one’s own staff, and knowing and controlling the cash and profits of the practice.

The lure and perceived benefits of a joining a hospital can no longer be ignored. However, doctors need to be aware that while many have joined the ranks of the hospitals, many are not happy about doing so.

Potentially, there is much to attract doctors to move in this direction, if only to be shielded from the stressful pressures referred to above. There are, however, many other benefits such as better working hours, initially higher guaranteed income, less concern about cash flow or marketing to obtain patients, and so on. Nonetheless, appearances may be deceiving; there are issues that physicians need to consider before signing-up.

• Doctors typically have no control over the design or implementation of the hospital rules and procedures which are created to protect the institution and meet government standards. This leaves doctors feeling restricted in their approach to patient care.

• In a similar manner, hospital-employed doctors are bound by the measures of quality and/or productivity (impacting compensation), set and evaluated by administrators.

• The typical contract is for three to five years with a higher guaranteed income during the first three years. Incentives to increase compensation (or maintain it after five years) are usually based on RVU production. Since most hospitals strive to increase revenue and reduce costs, their strategy is to hire as many doctors as possible and capture the associated income. They then “weed out” the less efficient doctors and change the compensation system in the hospital’s favor. (Of course a 60-year-old physician may only want to work five more years, so this may be OK.)

• Carefully review contracts as they may not cover such things as medical liability insurance (including the “tail” if and when the doctor retires or leaves); payment of licenses and CME; the amount of time-off, on-call and/or vacations and any restrictions thereto; compensation to attend required meetings or other “non-productive” obligations; and terms and compensation upon retirement and terms and compensation if fired or laid-off.

Other much less tangible “control-type” issues are often the most irritating:

• What do I do and to whom do I speak if I am dissatisfied about something?

• What recourse do I have if I do not like the staff selected to work with me?

• How involved will I be in the hiring or firing of staff?

• How open is the hospital to suggestions for improvement? And how willing are they to listen?

• What if I am “compelled” to refer patients to a hospital employed doctor for whom I have little regard?

• Who wins if the “hospital” and I disagree on patient care?

• Do I have the wherewithal or desire to deal with hospital politics?

Physicians are faced with much uncertainty, complexity and considerable pressure to change their ways. I believe that each doctor needs to carefully reflect and analyze his or her own particular circumstances. This should be done from two perspectives:

1. The ramifications of accepting the future realities of practicing medicine, remaining independent but being able to develop reasonable strategies to best manage this.

2. The strategies, culture, management style, compensation arrangements, contractual conditions and obligations of the prospective hospital and the ability to create a game-plan for a favorable outcome.

Doctors should make a decision only after carefully considering these two scenarios.

John Peiser is a partner at Goldin Peiser & Peiser, LLP, a mid-market accounting and consulting firm located in Dallas, Texas. The firm provides a broad range of traditional and non-traditional services including accounting, audit, tax, specialty tax credits, SALT, business valuation and IRS representation. GPP specializes in serving the medical, dental, international and domestic manufacturing, oil & gas, and real estate/construction industries. To learn more about GPP and its medical niche, go to http://medical.gppcpa.com/about.

Goldin, Peiser & Peiser, LLP, is also a proud member of the National CPA Health Care Advisors Association. HCAA is a nationwide network of CPA firms devoted to serving the health care industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at info@hcaa.com.