OHA Annual Conference 2012

DAVID ANDRICKDIRECTOR PHYSICIAN RECRUITMENT

ADRIAN R. BYRNEPRESIDENTLUND-BYRNE ASSOCIATES

Every organization requires the right people to make it work. Ensuring the right-fit with physicians is an essential task of the physician services department that is best accomplished with a formal “due diligence” process.

Building an employed physician group practice that meets the needs of the community while supporting hospital business objectives is sensitive work.

Some local physicians are feeling the reimbursement and cost pinch and are intent on hedging their situation. They will leverage past relationships with the local hospital.

This includes exploring direct employment or some form of joint management arrangement.

James Thurber, an American cartoonist and writer best known for Walter Mitty, wrote:

"Let us not look back in anger or forward in fear, but around in awareness."

Healthcare delivery models are changing (again)

New players are entering the market to provide care (Insurers/Pharmacy’s)

New choices exist for physicians and allied health providers (Walmart, CVS, Corporate Health)

National Physician contract groups (Team) Follow the money………………..

Independent Physicians look at: “Obama Care” confusion

Perception v Reality

Belief that things are changing anyway

Independent practice is more complicated

Real erosion of practice revenues Operating costs continue to increase

Cost of technology (purchase and implementation)

Look for expert help with new reimbursement models

Do not want to be left out of new provider networks

Consumer expectations are changing

Hospitals are moving to gain economies of scale:

Increasing M&A activity Better control of costs and quality Hospitals need greater control over service area

referrals and.. larger service areas Hospital performance criteria requires active

physician support and input Harder to recruit physicians into independent

practice

A recent Merritt-Hawkins study of Residents showed:

32% of first-year Residents surveyed in 2011 said they prefer to be employed by a hospital, up from 22% in 2008.

48 % said that they feel increasingly unprepared to handle the business side of medicine.

70% of national hospitals and health systems plan to employ more physicians in the next one to three years.

Source: HealthLeaders Media Study

1. Establish a clear process for decision making

2. Conduct a preliminary due diligence

3. In depth practice and business assessment

4. Preparation of contract and making the offer

5. Acceptance or refusal - next steps

Physicians who approach the hospital to be employed will probably fall into 5 categories

1. Low volume - struggling practices

2. Those not wishing to invest in technology and/or close to retirement

3. High volume specialties seeing major income reductions (Cards/Onc/Ortho)

4. Groups and individuals wanting to leverage their current dominant role

5. Groups that are falling apart anyway

Create a check list and a decision flow chart Gets everyone on the same page Creates an evaluation process that is

supportable to and by the Board Allows for quicker decision making Process helps physician to understand future

expectations on the front end Deals with sensitive issues early

What does it mean to be an employee

Objective approach to decision

Who needs to be involved and why

Confidentiality to be managed/need to know

Physician demographics

Strategic fit definition

Options/packages for recruitment

Who makes decisions and how

Preferred time line for process

Who approached who:• If strategically important determine who is best to make first

approach to physician or work with physician(s)

• What is the strategic fit – competitive / expansion of services

• Do you understand physicians request (fishing or firm)

• Has physician approached others?

• Does the physician need to get more information (from who and by when)• Explain the process and evaluation flow chart to physician as a Board requirement

• Explain who is involved with decision process

• Agree on confidential approach

• Stand still agreement

• Provide time line (and keep to it)

Talk with dept. management.

Nurses etc

What do we know about this physician

Begin Due Diligence

VP Medical Affairs Input

Strategic or business need

for specialty

Hospital UR/QA Data

Medical RecordsCredentials

SleuthingInformation subjective

Local recruitment flow chart (sample)

- Med Staff Plan- Practice volumes- Service Lines

Who approached

Who?

Define data to be collected

Strategic Need

Physician Decision

Prepare Preliminary decision Report.

Yes/No

Objective/specific information

Issues to be addressed in a discussion with Physician: What expectations are there for an employment

agreement?

What will happen to the existing practice?

What about employees?

Are there assets that may be purchased?

Describe the process for dealing with these issues.

Use a standardized approach for a confidential report - prepare:

• Physician name, specialty, privileges, # years, practice location, community served, other hospital affiliations, practice partners.

• Physician stated interest and reason for interest in employment

• Current volumes of referrals IP/OP, practice, individual physicians

• Internal UR/QA information trends

• Observations of CMO or VP Medical Affairs, others

• Credentials review

• Is there a cultural “fit” with existing practices

• Strategic need reasoning (if required)

• Recommendations for next steps (Pursue or Not)

Use of preliminary due diligence: Obtain Senior Management input / Board approvals

to proceed

Note any limitations/issue needed to be addressed

Meet with physician Communicate issues

Reconfirm process

Confirm interest

If interest still good, get a formal confidentiality agreement and “stand still” agreement in order to get more information from the practice.

Prepare Confidentiality Agreement

Decision and

meeting

IF YES or Need More Info IF NO

Plan meeting with Physician/s

Explain Conditions that must occur to move aheadPractice

AssessmentEmployment Projections

Proposal and Negotiation Prepare Preliminary decision support.

Yes/No

Full assessment - preparation

Decision to Proceed with Step 3Full assessment

Decision NOT to proceed

You must know what the business status is now:

Request a more detailed assessment of the practice to include: (explain why needed) Full operating statements

Bank statements

Patient volumes by service

Review of patient records

Payer contracts

Staffing, salaries and benefits

Retirement plans

IT capability

What are the expectations Discuss a check list for asset types and

preferred actions

Lay out a typical employment package that conforms to existing criteria for income / salary / incentives

Suggest physician adds any additional thoughts to be presented to the Board/Senior Management.

Direct employment Hospital

Subsidiary (foundation model)

Aligned group - Multi Specialty /Single Specialty

Practice/employee acquisition-physician contractor

Joint venture on a Service Line

Most anything that is legal

Senior Management (or Board sub-Committee) should approve any formal offers.

Present this decision authority with: Physicians wish list

Current practice performance data and projected impact if hired

Overview of plan for practice assets and personnel

Cost assessment with proposed salary, incentives, benefits

Proposed contract of employment

Timeline for action

Plan for the Normal

Manage the Exceptions

Challenges will include: FMV for assets FMV for income Non competes Hours and coverage There will be System/Operational changes Collaboration New reporting Avoiding impressions of favoritism

Productivity

Payer Mix

Billing/Collections

Practice Expenses

Hospital Performan

ce

Fixed Salary

W/RVU’s

Net Collections

Net Income

Income Construction and Limitations

Physician has incentive to manage

Physician has NO incentive to manage

Meet with physician to discuss the offer: Employment/Services agreement:

Terms and conditions

Salary / incentives

Acquiring Business: Description of assets to be acquired

Formal valuation

Liquidation of other assets

Consideration of staff

Timeline for decision and action

If Acceptance: Move quickly to signature

Employment agreement Sale/transfer of assets

Agree and prepare a time table for action Schedule announcements (eg: to practice

staff) Change provider numbers/notify payors Close books on original practice Rehire staff with new contracts

If Rejection: Communicate reasons and possible issues

Is a counter proposal required/appropriate

Is there flexibility in the package without Board input?

Agree to disagree ?

Be sure to part on good terms if no deal

It’s just business

Be open but confidential (emotions may come into play)

Explain how decisions are made

Use an objective and supportable approach

Understand the physicians reasoning

Collect both objective quantifiable data and subjective (confidential) peer commentary

When agreement is reached move quickly to get contracts and make the changes

If no agreement there must be clarity and part friends.