Is a hospital alliance in your future?

According to AAOS census data, hospital employment of orthopaedic surgeons grew approximately 70 percent from 2004 to 2008. Wednesday’s symposium on hospital-based employment of orthopaedic surgeons, moderated by Kevin J. Bozic, MD, MBA, addressed this trend and its significance for AAOS members.

In answering the question, “Is hospital-physician alignment here to stay or simply a passing fad?,” presenters addressed the following topics:

  • current trends in hospital employment of specialists
  • pros and cons of hospital-based employment
  • effective employee strategies
  • the hospital’s perspective on specialist employment and alignment.

Current trends
“Roughly 13 percent of healthcare dollars are spent on musculoskeletal care, yet, at the same time, the orthopaedic workforce is shrinking. As a result, hospitals are very focused on ensuring that they have orthopaedic providers,” said John Cherf, MD, MPH, MBA.

John Cherf, MD, MPH, MBA

The current move to value-based healthcare and the newer payment models that are emerging—bundled payments, episode-based payments, and limited capitation payments—are also fueling the alignment of hospitals and physicians, he said.

But when it comes to hospital employment, cautioned Dr. Cherf, one size does not fit all. For example, because newer payment models will likely strain hospital-physician relations, orthopaedic surgeons must consider how they will negotiate for their piece of the payments. Another factor to consider is that, under recent healthcare reform, hospital reimbursements will be compressed.

On the plus side, greater clinical alignment between providers (hospitals and physicians) typically results in higher profits, and physicians are moving toward leadership roles in hospitals and health systems.

“When exploring your hospital employment options, you need to weigh all the factors: opportunities and alternatives, compensation and governance, and the regulatory and legal considerations,” he told the audience. “I recommend keeping your eyes wide open.”

Employee perspective
As a hospital employee for the last 15 years, Martin W. Roche, MD, knows firsthand the pros and cons of hospital employment. At his facility, benefits of employment include guaranteed salary; no start-up costs; medical, disability, life, and malpractice coverage; and leveraged insurance negotiations. A full-time orthopaedic director and management team handle all billing, coding, and collections, and an in-house legal team is available for medical defense.

“We also have the benefit of a full-time recruitment and marketing team. Overall, I believe we offer a better team approach to patient care: our employees are in the office, in the operating room, and on the dedicated orthopaedic floor,” Dr. Roche said.

“Being part of a large group also provides us with a large multi-specialty referral base; we inter-refer with subspecialists; we have equal shared ancillaries but individual overheads, paid emergency room call, research capabilities, and strong Institutional Review Board relationships,” he added.

But these advantages must be measured against the challenges of being an employee. One of the biggest drawbacks of hospital employment is the long-term contract. “They can give you a 10-, 15-, or 20-year contract, but if it’s a 1-year release, essentially it’s a 1-year contract,” he said. Hospital employees also have a boss and are required to follow more constrained potential corporate compliance and human resource issues than orthopaedic surgeons in private practice.

In addition, Dr. Roche noted that Medicare oversight—from corporate compliance to coding and even reimbursement—is significant, especially in a not-for-profit hospital. Hospital employee contracts generally contain a local non-compete clause because the hospital is very concerned with market penetration. So, if the surgeon is released from the contract, he or she may have to establish a new office elsewhere.

Despite the drawbacks, Dr. Roche finds hospital employment very rewarding. “What’s most important is that it allows me to focus on the practice of orthopaedics,” said Dr. Roche. “I don’t have meetings every night and I’m not worrying about my overhead and costs. I have more time for the things I am passionate about, such as research and the use of new technologies.”

Being an effective partner
Not all partnerships are as fruitful as the one Dr. Roche has with his hospital. Samuel G. Agnew, MD, FACS, shared insights based on the results of a 14-year study of failed orthopaedic surgeon–hospital alliances.

Samuel G. Agnew, MD, FACS

In working toward an effective physician-hospital partnership, he said, orthopaedic surgeons must first ask themselves, “Why am I considering hospital employment—what problem am I trying to solve, and why is the hospital looking to employ?”

Orthopaedic surgeons also need to know their alignment options, their total economic value, and the methodologies they can bring to the table that will enhance that economic value. Cost containment is an important proviso that hospitals will require physicians to deliver. Most importantly, orthopaedic surgeons must determine if they are prepared to live in an environment where compliance is the guiding principle, he said.

The pillars of successful orthopaedic surgeon–hospital alliances, according to Dr. Agnew, are the ability to deliver value, the ability to increase performance, and the ability to develop and nurture strong leadership.

“The failed models we studied did not address career development, performance improvement, or longevity,” said Dr. Agnew. Conversely, “successful contract models, over time, developed return on investment metrics and performance initiatives, developed bona fide valuation processes, and developed career path development for all the personnel involved; they incentivized people to bring value back to the hospital.”

Hospital perspective
“As the country moves from a fee-for-service healthcare model to a fee-for-value model, doctors and hospitals will have to change how they deliver care,” said hospital CEO Richard Afable, MD. “That raises the question: What is the best model for physician-hospital alignment?”

In Dr. Afable’s opinion, successful physician-hospital alignments are centered around common clinical, financial, and operational goals. “Hospital employment can help strengthen these alignments when we are assured that the goals of the individual doctor and the individual medical group gel with the goals of the hospital and will be sustainable over time,” he said.

“Physician-hospital relationships are very important to the future of healthcare delivery and healthcare reform,” he added. “I believe that alignment is key and is based on the principle that physicians know the best way to care for patients and the best way to create real value in the value-based healthcare world.”

Prepared by Maureen Leahy, assistant managing editor, AAOS Now.