AAOS Now

Published 11/1/2010

The changing face of orthopaedic employment

By Jennifer M. Anderson; Mark S. Thomas; and Leslie R. Jebson

Factors driving the hospital and physician connection

Each generation of physicians has different motivators, drivers, and expectations. Many younger physicians—including orthopaedic surgeons—want to work fewer hours and expect greater flexibility in employment opportunities to match their personal priorities. This new generation of physicians may account for the large number of orthopaedic surgeons seeking hospital employment. In addition, many orthopaedists currently in private practice are exploring employment opportunities within hospitals and healthcare systems.

Recent surveys indicate that physicians are not happy in their current positions. According to the Physicians’ Perspective: Medical Practice in 2008, 6 out of every 10 doctors interviewed said that they would not recommend medicine as a career, in part due to the increasing demands on their time, resources, and energy.

Advantages to employment
Whether the shift is by choice or through necessity, healthcare systems are rapidly adding physicians from a wide range of specialties—including orthopaedic surgery—to their payrolls. A recent survey conducted by Merritt Hawkins, a physician search firm, found hospitals typically earn 5 to 10 times more in revenues from employed physicians than what they pay them in salaries. Employed orthopaedic surgeons bring in an average of $2.11 million in revenue and may improve a hospital’s market position.

Healthcare systems can realize additional benefits from integrating their services with orthopaedic specialists. According to the Medical Group Management Association’s Medical Directorship and On-Call Compensation Survey 2010 Report, orthopaedic physicians commanded the third highest average daily on-call compensation rates ($958), behind neurologic surgery and general surgery specialties. Hospital employment of orthopaedic surgeons means that hospitals will no longer have to pay independent orthopaedists for being on-call; instead, payment is integrated in the overall compensation package for employment.

Healthcare systems can potentially create cost-efficiencies among billing departments for various specialties by using bundled fees, which include both facility and physician fees. Perhaps most importantly, the hospital-physician relationship has the potential to improve quality and efficiency by providing cost-efficient, better coordinated care.

If structured properly, integration and alignment between physician and hospital can create a more flawless exchange of information, improve access, and provide the opportunity to focus more on the delivery of care to patients. Furthermore, quality assurance programs can be used to potentially improve the infrastructure of the hospital.

Legal, regulatory factors
Multiple legal and regulatory factors are also driving hospital employment of orthopaedic physicians, including economic credentialing, regulatory safe harbors, billing for ancillary services, and joint ventures. Hospitals that impose financial conditions upon employed physicians have significantly less anti-trust liability than those that use economic credentialing on nonemployed medical staff. The statutory and regulatory “safe harbor” for employed physicians also shields hospitals and physicians from liability under federal and state anti-kickback and self-referral prohibitions.

The employment safe harbor has comparatively fewer criteria than other safe harbors, making it particularly attractive and attainable. Additionally, the burdensome requirements that apply to physicians and physician group practices under the self-referral prohibitions do not apply to hospital-employed physicians. Recent amendments to self-referral regulations greatly limit “under arrangements” joint ventures between physicians and hospitals, particularly arrangements paid for on a by-encounter basis (so called “per click” contracts).

Déjà vu all over again
Ventures between physicians and healthcare systems are not new; in fact, many physicians may have a sense of déjà vu. In the 1990s, with the start of managed care, hospitals and healthcare systems began aggressively seeking primary care physicians. The difference today is that hospitals are now seeking medical specialists.

Hospitals and healthcare systems have also learned from the past. For example, many no longer compensate an employed physician based on value alone, but allow incentives to be applied for productivity, leadership, quality, and more. Often, compensation agreements are made based on formulas that consider work relative value units. More incentive plans, however, are including quality and outcome measures of a physician’s work.

Although physicians and hospitals or healthcare systems may see benefits from moving to an employment-based model, employing orthopaedic specialists has some risk, primarily financial. If the orthopaedist is not as productive as anticipated, the healthcare system may lose money on the venture.

Before agreeing to employment, orthopaedists must take several factors into consideration, including compensation and the impact on autonomy. Compensation paid to employed orthopaedists must be consistent with fair market standards; this type of limitation would not be faced within private care. Additionally, employed orthopaedists may still retain autonomy over their direct clinical activities; however, they may lose control over clerical activities such as the work environment, staffing, and coworker selection.

Numerous stipulations, including clauses regarding noncompete and buy-in options, must also be reviewed and understood before making a decision. Medical liability is another issue. Employment shifts the primary liability for medical malpractice from the physician to the hospital, which is favorable for the physician, but not so for the hospital. The law considers employed physicians to be more in the control of the employer than nonemployed medical staff. Therefore, the system is more responsible for the quality of care provided by employed physicians and may be more subject to be named in a lawsuit for medical malpractice of an employed physician.

Many factors are driving the current rise in physician employment within orthopaedics: physicians who want a more predictable work-life balance, flat physician incomes due to high practice costs and declining reimbursements, and hospitals realizing the financial and quality potentials of employment. Hospitals will potentially see increased volumes, higher revenues, eased regulatory burdens, and higher overall job satisfaction of the medical staff.

Orthopaedics has changed over the past several years and will continue to do so, leading to more employment opportunities in the near future.

Jennifer M. Anderson is a Master of Health Administration candidate at the University of Missouri in Columbia. Mark S. Thomas, of Dell Graham, P.A., in Gainesville, Fla., practices law in the following specialties: physician contracting, healthcare fraud and abuse, hospital operations, and Medicare and Joint Commission compliance. Leslie R. Jebson, is executive director of the Orthopaedics and Sports Medicine Institute at the University of Florida in Gainesville.