Full Hospital Employment
“Many stories I have heard from physicians who have transitioned to full employment revolve around frustrations over staffing levels, frustrations over space and utilization as the hospital tries to cut back on operating expenses, and physicians losing offices and sharing cubicles with two other people—the types of things that affect their day-to-day lives and can really impact productivity and their professional lives in general,” said Mr. Boomershine. “A full employment model generally provides less control on the physician side, as far as operations, but can provide a higher degree of comfort for those who do not wish to be involved in day-to-day operations, such as oversight of coding and collecting in the revenue cycle.”
Currently, said Mr. Boomershine, “in orthopaedics, we are not seeing a rush over to hospital systems, for either full employment or PSAs, but there have been a few very significant PSAs created in the last year. More commonly, what we’re seeing is that the orthopaedic groups with generally robust ancillary services through magnetic resonance imaging (MRI), ambulatory surgical centers (ASCs), or other revenue streams outside of professional services often have a difficult time replicating that degree of income within a hospital model.”
When an orthopaedic practice transitions to a hospital-employed model, the practice is often not able to keep an MRI in that practice, said Mr. Boomershine. Similarly, the hospital will often want the practice to divest of ASC ownership.
“Some of the negotiations I have seen for hospital-affiliated models have involved orthopaedic surgeons who have gotten into heated discussions about continued participation in the ASCs as hospital-employed physicians, especially if it’s in a market where the hospital feels the physicians would be working with a partner that is not in the hospital’s family of corporate entities,” he said.
Regardless of the type of affiliation model an orthopaedic practice chooses to pursue, summed up Mr. Boomershine, the emphasis on managing clinical and interdisciplinary issues, as well as risks and costs, will increase as part of the effort to improve quality in the U.S. healthcare system.
Orthopaedists interested in some form of affiliation with a hospital might consider a comanagement agreement, sometimes known as a service line agreement.
“Generally speaking, the industry considers a comanagement agreement to be one involving management services, which is jointly owned by the practice and the hospital, from an equity perspective,” he said. “So, the hospital is a partner in the management service itself, rather than just having a contractual management agreement.”
A comanagement model, he explained, most often involves the hospital, the physician group, and a dedicated limited liability holding company (LLC). The holding company holds the services agreement with the hospital. This agreement stipulates that the practice provide contracted management services to the hospital in exchange for some type of compensation, such as a monthly management fee with performance measures attached to it related to quality, operations, and cost management.
To succeed with a comanagement agreement, the practice must have a good dialogue with the hospital. The practice should also be aware of the hospital’s and hospital system’s issues, as well as physicians’ concerns, which typically involve inpatient matters, said Mr. Boomershine.
He advised practices to hold regular, meaningful meetings with the hospital and involve the appropriate level of hospital leadership.
“If physicians are involved in the management of the service line—similar to making hiring and firing decisions regarding staff members in a surgery center, for instance—decisions can be made more quickly and alleviate physicians’ frustrations,” he said.
One variation on a comanagement model involves multiple groups that remain separate for a reason.
“If groups can’t get along, the service line steering committee or management oversight committee in which the hospital participates will have oversight of two separate management agreements,” said Mr. Boomershine. “I really don’t like this model at all because it increases administrative issues and adds complexity. It allows the two groups to stay too separate, which can create problems in coordinating how the service lines run.”
In another comanagement model, the hospital is a participant in the dedicated LLC.
“Often, these will be set up as 50/50 ownership between the hospital and one or several groups,” he said. “There are variations in how this can be structured to balance ownership. This type of agreement adds a little more complexity regarding regulatory issues. It also reduces the economics and flexibility slightly, because everything—economics and management decisions, as well as the service line—has to go through the hospital as well.”
One good outcome of comanagement agreements is more effective interactions between the physicians and the hospitals. This model “really beefs up the quality of the information that is being provided to the physicians, but it does take some time for that to happen,” said Mr. Boomershine.