Home Forums Discussions General Discussion Physician integration model

I just came back from a meeting with our hospital group and 15 pcp's.

The hospital presented a model where we enter into a lease agreement (5 years) and my office becomes a outpatient facility of the hospital . I will be payed as an independent contractor at 1.15 the rvu of last year. I must pick up my own malpractice and cme and vacation and health care and and personal and sick time. The Hospital covers everything else (employee's salaries, rent, utilities all other overhead). The hospital would pick up all my ancillary testing and would bill out at an increased rate due to the facility fee. my practice is 85% Medicare.

Is anyone else in a model like this or knows someone in a model like this??

Thoughts anyone.

By the way, if you cut me, I will bleed New York Yankee blue and white pinstripes during baseball season.

Am I understanding 1.15 x the rate and they cover the employee's. (that nearly 1/2 my overhead).

And each year your pay is defined based on your activity the preceding year? Calculated as 1.15 times what? You are locked-in for 5 years and then the agreement ends? An independent contractor means paid on a 1099, with no taxes taken out? You control the number of employees you have, and their hiring and firing, if need be?

Sorry for so many questions, but the devil is in the details, as they say.

I must cover my malpractice and my own benefits.

They cover everything else.

To set the rvu, the evaluate the year before entering the contract.

Then that rvu is used for the 5 years of the lease.

At the end on the 5 years, I can renew or walk away. This is not along term model as we can only look at changes in the next 3-4 year model. I know. Then why not set the lease for 3-4 years?

Yes, I would get a 1099.

All the details are not out yet.

I would control the employees, but they would pay for them and they would be hospital employees. Does not seem right.

We are meeting with a consultant in 2 weeks who will explain how to calculate the RVU's and give us more details.

Frank,
Occasionally I start a post with a qualifier like "take this with a grain of salt since I am not in your shoes, and don't have all the facts". This is definitely one of those times.
I will tell you that if the offer is as described, I would estimate that it would raise my take-home by about 40%. Not knowing your numbers, I can't say, but I would bet that is not too far off for your estimate. That is also the easy part. The tough question is exactly what are you giving up in return. The answer of course, is lots of control and autonomy. Just how much is hard to say.
Just to give a couple of examples:
1. They cover "everything else". So you decide you want a new computer for your office or a new desk chair, or a different EMR, etc, etc. Do you just order it, and they "cover it". I doubt it, but if so, get it in writing. There will be a million questions like this.
2. "I control the employees; they pay for them". So if you want to give an employee a raise, they just pay it? If you want to hire/fire, they just let you do it? If you decide you need an additional staff person, they hire them? Even if the answer to each is "yes" (and I doubt it will be) the dynamics change instantly when you are no longer their employer.
3. You decide you want to do some marketing, e.g. a practice website. Who pays? (in other words, what about practice expenses that are not anticipated going in)?
4. If you have any other sources of income (clinical trials, etc) be careful that the contract doesn't prohibit you from continuing them (or using your office for them).

These just scratch the surface of issues you should consider.

We are going through another cycle of practice take-overs by hospitals. Hospital administrators always believe that they can run our practices more profitably than we can. Sometimes they are right, but often they are not. When they are wrong, the cost for both sides may be high. This time it appears they have the federal government backing them. On the other hand, the last time around, it often didn't work out. In our area many of the practices that were bought by hospitals (or the organizations they created for management) are now back on their own. s/p a lot of cost, stress, and aggravation.

I agree totally with what Jon said. Based on a local clinic takeover, the physicians seemed to make significantly more money, but pretty much had to sell their souls. Many of them didn't mind, as the clinic was struggling prior to the takeover, and the relief of knowing they were going to be OK financially made up for calling their own shots. The hospital does nothing to encourage efficient or appropriate use of resources and hospital based testing, and patient costs are very high. But as one of my friends commented when I said they were selling their souls, "So what? They were not using them anyway."

The last time the hospitals purchased practices in my area (late 80's-90's), the details were roughly the same. As the business models began to fail for the administration, they did the same as they usually do, cut staff and services. Fewer phone personnel & nursing staff, docs filling out forms etc., messages languishing for days, slow transcription. Most docs got the hint and terminated the relationship, and rebuilt from the bottom again.

I suggest you get contract language specifying minimums for admin & clinical staff exclusive for you, approval of personnel, equipment etc. Standards & substantial changes in the relationship should be subject to approval by a board with doctors heavily represented. Pay attention to how they treat you during negotiations. How the hospital responds to your proposals for fairly structuring the relationship will speak volumes about whether it will make a good partner.

The "numbers guy " is supposed to talk to us in a few weeks. Hopefully I will get some concrete information at that time.

Thanks for the input.

Frank:

I am with Jon on this one. I started my own practice 19 months ago (yea for me lol), and I talked to two hospital groups. Both of them said the same things that you are telling us here. Here are usually the catches:

1. I don't know how long you have been in practice but is your basic income the same over the last 10 years? Are you growing? The reason is that what ify ou keep getting busier, then you still get paid on last years information?

2. do you know what an RVU is? I don't. I am on the economics committee at the my national association (AMSSM) and we can't figure out what RVU's are. The reason being, that everyone calculates it differently. So the 1.15 of RVU may not be a pay raise but a pay decrease or the same. Just take note of that and make sure you get a number from them on salary and make sure you are happy with it.

3. I bet they make you go to their EMR system. They will give you terminals andcomputers which they will givey ou refurbed or used.

4. They may tell you that you get control of your employees, but you better talk to a bunch of people who are in the system now or who have left the system. The ones who have left will really tell you the issue.

I talked to a bunch of guys in the systems here and the ones that left and the way it worked here is they give you a salary and then they give you a production percentage so you "eat what you kill". But when the guys would call billing to say hey why didn't we get paid more for this or that, they were told "you do the medicine, we do the billing, so stop inquiring"

Also they lost the employees they had and the hospital system decided who they got and how many employees and what the salary was. And if the doc told the employee they were doing things wrong, then the employee called the hospital system and usually teh doc was told hey you can't tell the employee to do that.

Just some thoughts to think about. See what they offer you on paper. Before you even hire a consultant, i would just see what they offer.

I have seen a good amount of friends get burned on these deals.

Also , since they take over the lease and the office supplies lets say in five years, you want out, you will lose the office space you may have had for many many years and your employees becuase they are now employees of the hospital system.

P.S. I CALL THIS THE PHYSICIAN CONTROL MODEL

I agree with what everyone said above. I would be very cautious with this deal. They calculate your total RVUs and pay you a salary for 5 yrs based on those RVUs? Regardless of your production for the next 5 yrs? I doubt it. What they are probably saying is that they will calculate your RVUs for the last 5yrs and then give you a $/RVU that you will make. That way you can estimate what your total reimbursement will be if you remain as productive for the next 5 yrs as you have been for the last AND that the method for calculating RVUs does not change.

Also, be aware of the distinction between Total RVUs and Work RVUs. Work RVUs exclude all the ancillary stuff that take time like rapid strep test, UA, ECG, PFTs,immunizations, etc. In private practice you get reimbursed for that. If they pay you based on work RVUs (which they probably will) you do not.

My advice: Don't do it.

Our local hospital bought a lot of local practices a few years ago and it is my understanding that many of those physicians are not too happy. They tried to buy me and after making the calculations based on RVUs I realized it was no deal at all. Remember that every penny in your pocket is a penny out of their pocket.

And just try being as productive as an employee as you can be as the boss!

Dave

I have been down this road twice in my career and both times it ended badly. Corporate medicine is far from what many of us in private practice value. And hospitals have lots of midlevel managers who suddenly think they are your boss once you sign on as an employee.

It is similar to how we have high school grads 'authorizing' procedures or Rx's for insurance companies.

Also, hospital systems are specialist dominated and I think many of us in primary care understand that specialists often do not have a high opinion of what our scope of practice should be. We, for example, had the hospital tell us that we should not be interpreting xrays because that was the radiologists area of expertise. We were to see the patient, order the xray, treat the patient w/o interpreting the xray and then amend tx based on the radiologist rpt. Crazy stuff.

Since much decision making and many functions will be out of your hands, I'd sure want them to be covering my malpractice insurance and any necessary tail if you leave or separate ways.
They are probablly going to tell you who your specialty consultants are.

You certainly have a lot of good advice above.
My input is limited to what terms I hear administrators (including physician administrator) use when referring to their employed physicians (e.g. when rolling out a new EMR)
Goes like this: "we don't have that problem because we OWN the docs".
good luck.

Wow, Roger. They say that in front of you? I think around here they are smart enough to keep that talk behind closed doors.

I was around when they did it in the 80's...didn't like it then, don't like it now. One of the major reasons I left the hospital setting was my lack of control over what the nurses, ancillary personnel and consulting doctors did to my patients. In the old days doctors had much more control over how patients were handled. Now, you can scream and beg and plead and you might find someone to get you a tongue blade. The only time I was ever sued was because a consultant (whom the er called) failed to perform up to standards. I was dragged into it and ended up settling. Call me anal but at least, when I am in control,I get to look at all the sh*t that comes my way...everything has to come by me sooner or later.

Sorry for the somewhat nebulous post. My point in all of this is that it is very important to me to maintain control over how I practice. Being employed would not have suited me at all (although as I get older there is some excitement in the thought.)

I have worked for other people, (a couple of Community Health Centers, not hospitals) who are less in tune with finances than hospitals. I now work for myself.

I trust hospitals less. If you have a hard time making money, how are they going to do it better? Hospitals are not as efficient as we are because we keep track of the bottom line more tightly than they do.

The way to cut costs is to decrease the most expensive item and that is YOUR salary. Rent, utilities and other salaries are mostly fixed expenses. Sure, they can get rid of an ancillary person but it they are more cost efficient to keep and have less of an effect on the bottom line. They can cut back on supplies or the quality of equipment and it will only effect YOU not them.

After a few years they change their mind, decide they cannot make money on this model and where are you left.

I have seen versions of the earlier posts in my friends who were working for hospitals, most of whom are now in private practice.

I appreciate the spirited and informative discussion. I feel lucky to have input from all of you.

We have requested that the "numbers guy" show us a comparison model with numbers, it should be interesting.

Just remember, numbers isn't everything