Friday, April 15, 2011

Do physicians make good employees?

There has been a clamor of legislation this past year in many states, including Texas, that would allow for the employment of physicians.

For some readers of this blog that may seem like an odd statement. Texas is one of the few states that still prohibit "corporate practice." This is where physicians work directly for a business entity rather than either working for another physician or physician group.

For Texas and the states that prohibit this practice, the reasoning has always been that this separation helps maintain the clinical autonomy of the doctor-patient relationship. And I would agree with this wholeheartedly.

Having a physician's judgement clouded in any way by the perceived need to make a bottom line is a recipe for disaster. Fortunately, most physicians understand this risk and are masters at handling the tense relationship they might have with their employers.

But the question here isn't whether physicians should be employed, but will they make good employees?

Most people would define a "good employee" as one that shows up for work on time, provides dedicated service, treats the business like their own and functions well in a team environment.

Most of the physician friends that I know all show up to work on time.

And most physicians I know treat the business like their own -- if they are the owner.

And as for team play? Well, let's just say that coed basket ball games in medical school were tense at times. Team play isn't something that is necessarily a reviewed credential in medical school applications.

As a former hospital based medical director, I've seen physician groups owned by health care systems have a turnover near 25%. And with the cost of recruiting a physician close to $250K including startup costs, first year salary guarantees and signing bonus -- that's absurd.

Physicians that are hired fall into two basic groups. They are right out of school, owe $200K in school loans and are uncomfortable in the current environment with starting a new practice from scratch. They have no experience with this model anyway -- most of their teachers are already working in an employed relationship at a medical school or hospital. Their exposure to business is only through these providers.

Or, the physicians are frustrated with private practice: the alarming increase in overhead, growth in liability risks, the long hours, lack of good call coverage and the continual decline in reimbursement. They are seeking employed relationships primarily so they can continue to do what they are called to do. They want to see patients and continue to practice medicine and let someone else worry about the business.

See the commonality here? Both groups don't want to worry about the business.

Hiring employees that "don't want to worry" about the business seems like a recipe for disaster for me.

For now hospitals and health care systems can pay a premium to hire doctors. They are funded under a payment scheme that allows them to have either profits (for profit hospitals) or margin (non profit hospitals) that can be redirected to hire doctors to refer to their hospital so they can make more profits and more margin.

But, for many systems, this doesn't work long term.

Here's an example: Dr. Welby has practiced for years in a community as a family practice doctor. He is well known, works 80 hours a week, has a nurse, two office staff, and a small office that is paid for and hasn't been updated since the 70's -- including the magazines.

Despite this frugal existence he is financially challenged because of the escalating benefit costs for his employees, higher malpractice premiums, and he can't remember the last time he received a rate increase from any payer. Most of his patients are Medicare; twice in the last year he wasn't paid at all because Congress didn't fund the health care for older Americans.

He's tired and looking for help.

In rolls Sister Daughter Felicia Hospital System -- they are a not-for-profit health care system (not-for-profit means they don't pay taxes and "System" is a word right from Modern Healthcare: makes you seem like a big health care team -- read on). They have a physician run medical group that they own, but don't directly control. Well, let's just say they do control the budget for the doctor group. And it always runs at a loss, so the hospital system is perpetually in a position of having to "bail out" the group and define budgetary goals and direction. So there is some control.

They meet with Dr. Welby, show him their electronic health record, how they achieve quality metrics in virtually every measure of health improvement, how U.S. News and World Report thinks they are a Top 100 hospital, and how they will take care of the front desk operations and provide staff. And, oh by the way, they have a new medical office building that has a gym, day care, and even a Starbuck's.

To make things better for Dr. Welby they'll even buy out his practice by purchasing his accounts receivable (there aren't that many), take all of his records, and give him a guaranteed salary for a year and a signing bonus. All he has to do is sign here and start to work.

Now Dr. Welby will have the agreement looked over by a lawyer -- the same guy who did his home refinance and his divorce. The hospital will say that "it's the same agreement that we all sign" and then will grin -- they have Fulbright and Jaworski on their side.

There is back slapping, and maybe even champagne if its a Catholic hospital system, and everyone enjoys the moment and the win.

All will be good for a few months. The staff will not like the move with all the new processes and procedures and uniformity. The patients will not like it because they have to pay to park, will get bills they may not be familiar with and there will like be some changes in health insurance coverage.

The doctor won't like it all either: certain drugs won't be on formulary, there will be an electronic medical record to learn that will "hurt my work flow," and there won't be the complete control of the practice that he's used too.

But there are benefits. It is likely that he will slow down his daily schedule by 25 to 30 percent, there will be less importance on admitting his patients to the hospital ("I'll let the hospitalist do that"), and when it comes to doing procedures it will just mean more work and more risk of weekend responsibilities.

The hospital system will overlay a whole new set of overhead for the physician ranging from new office space (read: more cost/foot), "indirect costs or overhead" that is difficult to explain (but includes many things the physician never purchased before like legal retainers, marketing, telecommunications infrastructure, bill boards, JCAHO, nurse managers, case managers, coding and compliance staff, float nurses, retreats and meetings, helicopters -- you get the picture), and staff whose benefit and salary structure is the same as that of the hospital and is richer and more expensive.

So fast forward one year later.

The hospital is not happy because the physician's practice is losing money -- actually bleeding money. Patient volume is lower and revenue is stark. They don't understand why the physician isn't working harder. They are now going to roll him into an income distribution formula where part of his compensation will be based on volume and the rest on "performance measures." The result will likely be lower pay.

He's not happy with the lower pay and pushes back. He claims its the hospital system's fault: all that higher overhead, not collecting his payments, not billing his claims right, and he can't read, understand, or have access to the right financials. "And what about that indirect costs -- what's that?!?"

So one of three things will happen. He will either leave, and the hospital will have to recruit a replacement. He will stay and conform somewhat but continue to publicly gripe about the system and be disruptive and not a team player. Or, he will conform to the hospital model and all will be well.

The hospital will be in little position to do anything about the overhead issue. But, most systems will work with the physician for awhile, supporting the practice, because they don't want to be seen as "running someone off."

What's the solution?

Certainly models that allow the physician to maintain some autonomy and responsibility for their own practice will help some. Convincing the physician of the long term benefits of some of the good things the hospital has to offer (such as quality improvement and infrastructure) and getting buy-in will be good for all involved. Convincing the hospital that the physician needs to be included under the tent and as a part of the team will also be part of the solution.

Congress could go a long way by aggressively creating gain sharing models that allow both sides of the health care team to be paid for improvement in health care value. This would promote team work and alignment.

But in the end, in the current model, do physicians really make good employees? And do hospitals really make good employers?

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