1. The Evolution of Physician Alignment. Core options for alignment. Hospitals generally look at three core options for aligning with physicians. These include (1) practice acquisitions coupled with ongoing employment, (2) collaborative hospital financial relationships such as joint ventures, call coverage, recruiting assistance, service line management and (3) finding ways to work with physicians that have complete financial independence. However, the era of complete independence seems to be moving towards extinction. According to a recent study by Accenture, only 33 percent of physicians will remain truly independent by 2013. Thus, much effort is placed on the employment integrated model and hybrid relationships, of which there are a variety. Overall, though, more and more hospitals seem to be focused on executing a strategy that includes a vertically integrated delivery system, which can be achieved through acquisition and employment as well as residency hiring. However, building a strong bottom-up program through residency hiring can take a decade or more. As a result, systems are increasingly focused on employment and acquisitions, which impacts the future of all physicians, including those specializing in orthopedics, spine and pain.
Physician employment. While many systems today use a mix of both the employment and hybrid models to approach their physician alignment strategy, even more physician employment is on the horizon. A study by the Medical Group Management Association reported that 55 percent of medical practices were hospital owned as of 2009. In 2005, the majority of practices (66 percent) were physician owned.1 Additionally, a Merritt Hawkins survey of hospital leaders revealed the following:
• 74 percent say they plan to employ a greater number of physicians in the next 12 to 36 months
• 70 percent say they have received increased requests from physician group for employment
• 61 percent plan on acquiring medical groups in the next 12 to 36 months2
Alignment critical to hospital survival. It has been noted “Only hospitals that are tightly aligned or integrated with critical mass of physicians will be able to organize their delivery system to meet payer/consumer demands for price, quality, efficiency and community services. Hospitals that lack a strong relationship with a group of line doctors will not survive on their own.” 3
There continues to be increased scrutiny of such relationships from a federal standpoint. This comes in the form of cases that allege unreasonable compensation being paid by hospitals to employed physicians and situations where purchasers of practices were being viewed as paying more than fair market value. As such, it is important that physicians contracting with hospitals take care to ensure their contracts meet all legal requirements.
Very truly yours,
1 Medical Group Management Assoc., Physician Compensation and Production Survey: 2010 Report Based on 2009 Data 26 (2010).
2 Merritt Hawkins, Health Reform and the Decline of Physician Private Practice: A White Paper Examining the Effects of the Patient Protection and Affordable Care Act on Physician Practices in the United States (2010).
3 Aligning Hospitals and Physicians: Formulating Strategy in a Changing Environment, A Governance Institute White Paper (2008).