Endovascular Therapy Perspectives in Vascular ...

Perspectives in Vascular Surgery and Endovascular Therapy http://pvs.sagepub.com/

Health Care Update: Hospital Employment or Private Practice? Bhagwan Satiani PERSPECT VASC SURG ENDOVASC THER published online 20 November 2013 DOI: 10.1177/1531003513510952 The online version of this article can be found at: http://pvs.sagepub.com/content/early/2013/11/19/1531003513510952

Published by: http://www.sagepublications.com

Additional services and information for Perspectives in Vascular Surgery and Endovascular Therapy can be found at: Email Alerts: http://pvs.sagepub.com/cgi/alerts Subscriptions: http://pvs.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav

>> OnlineFirst Version of Record - Nov 20, 2013 What is This?

Downloaded from pvs.sagepub.com at OhioLink on November 22, 2013

510952

research-article2013

PVSXXX10.1177/1531003513510952Perspectives in Vascular Surgery and Endovascular TherapySatiani

Original Article

Health Care Update: Hospital Employment or Private Practice?

Perspectives in Vascular Surgery and Endovascular Therapy XX(X) 1–7 © The Author(s) 2013 Reprints and permissions: sagepub.com/journalsPermissions.nav DOI: 10.1177/1531003513510952 pvs.sagepub.com

Bhagwan Satiani, MD, MBA, FACS1

Abstract The increased operating cost of running a practice, decreasing reimbursement, and general pessimism is leading to increasing number of physicians choosing employment by hospitals and large physician groups. Although over 50% of members of the Society for Vascular Surgery are currently in a practice of less than 3 surgeons and over half of all private practitioners are employed by physician groups, the landscape is shifting quickly. Younger physicians finishing training are increasingly opting for employment. Hospitals are also anxious to hire vascular surgeons to maintain or increase market share of chronic disease management and preempt hiring difficulties with future shortages of vascular surgeons. New vascular surgeons have to carefully weigh the pros and cons of employment before making a decision. Keywords employment, private practice, integration With an aging population and relentless rise in total US health care expenditure as well as per capita cost, the entire landscape related to physician hospital relations and physician employment continues to shift (Table 1). In addition to a deteriorating private practice landscape, the uncertainty prior to and after the Patient Protection and Affordable Care Act (ACA) has led to hospitals employing increasing numbers of physicians including vascular surgeons (VS). Most physicians cite rising business expense and managed care as their top concerns in seeking employment. The operating costs of running a practice have increased 63% from 1998 to 2008.1 For these reasons and general pessimism about the future of private practice, it is estimated that only about 36% of physicians will have any ownership interest in their medical practice by the end of 2013, a significant decrease from the 57% in 2000.2,3 The purpose of this article is to review recent trends in employment, compare these trends for physicians in general with VS in particular, analyze the pros and cons of employment, and present a likely scenario for VS finishing training in the future.

Trends in Employment and Type of Practice A survey by Jackson Healthcare of 118 hospital participants in 2013 showed that 52% of hospitals planned to acquire physician practices in 2013 with family practice (31%), internal medicine (22%), all primary care (13%),

cardiology (10%) and orthopedics (10%) leading the way.4 These trends have had a bigger impact on younger physicians joining the workforce. Increased debt and a desire to have a more controlled lifestyle is pushing the new generation into hospital or large group employment rather than solo or small group practice. Almost twice as many physicians (46%) under 40 years are looking for employment compared to their peer’s age 55 years and older (25%).1 The same is true of new graduates completing a residency. In a 2012 survey focusing on physician hiring, the Medical Group Management Association (MGMA) found that about 65% of established physicians and 49% of physicians finishing training were placed in hospital-owned practices.5 There has also been a significant change in the type of practice preferred by physicians in general and VS in particular. In the most recent survey of SVS members, >50% of VS were in a practice consisting of less than 3 surgeons (Figure 1). However, only 17.6% were in solo practice (Figure 2). Of the entire active and senior (not retired) membership, 63.6% were in private practice and of this group 36% were employed full-time by a health system 1

The Ohio State University Heart & Vascular Center, Columbus, OH, USA Corresponding Author: Bhagwan Satiani, MD, MBA, FACS, St# 700 376 W 10th Avenue, Columbus, OH 43210, USA. Email: [email protected]


2

Perspectives in Vascular Surgery and Endovascular Therapy XX(X)

Table 1. Change in Health Care Milieu 2013. What Was

What Is and May Be

Main hospital focus

Fill beds, cater to high-volume physicians

Physicians assuming financial risk Physician hospital governance structure Physician objective Physician autonomy Taking call Medical staff lounge

Minimal Medical staff

Decrease length of stay, cater to “efficient” physicians Increasingly Executive cabinet, medical affairs office

Working for and within the system Significant Obligation Place for social and professional interaction Not a part of compensation formula

Leading the system Decreasing even for clinical activities Paid to take call Place completing electronic medical records, for snacks and newspapers Increasingly so

Solo or small group Joint venture, MSO, PHA, IPA, alignment Nonphysician administrators

Large group or institution “Engagement,” “integration,” and value based More physician chief executives or “dyad” model Increasingly robust but financial, time savings and other benefits unproven

Quality, safety, and patient satisfaction Practice model Buzz words Hospital chief executives Electronic medical record

Rudimentary, significant paper work

Abbreviations: MSO, management services organization; PHA, physician hospital association; IPA, independent physician association. Adapted from W Jessee American Hospital Association Physician Leadership Forum.

25% 20% 15% 10% 5% 0%

1

2 3 4 5 # of physicians in the group pracce

6 or >

Figure 2. Response to survey question about structure of vascular surgery practice.

Figure 1. Number of vascular surgeons in a group practice.

2013 Society for Vascular Surgery Survey: 518 responses of 2009 members surveyed (25% response).

or hospital and 53% were employed by a physician group. In the aforementioned survey, only 14% were under the age of 40 and 58% were in a practice of 3 or less practitioners (Emily Kalata, personal communication). In contrast, a 2011 survey of final year medical students indicated that 46% of respondents preferred a group practice setting compared to the somewhat older members in the SVS survey.6 It is likely that given the trends at least in the near term, VS who are in solo private practice or in small

groups will continue to endure significant economic, regulatory, social, and political pressure to become hospital employees or work in large groups. But before VS decide to make a change, it is worth reviewing the pros and cons of being employed by a hospital or a large group. For the purposes of this discussion, “employed” means VS who work for a medical school; university; federal, state, or local government; staff model organization such as Cleveland Clinic; or a large group practice/physician owned practice but do not have any ownership interest.7 In contrast, self-employed VS are those who have full or part ownership interest in the practice either as a solo practitioner or 2- to 3-surgeon practice.

2013 Society for Vascular Surgery Survey: 518 responses of 2009 members surveyed (25% response).


3

Satiani

Why Are VS Interested in Being “Employed”? There is increasing consolidation and merger of hospitals but also a shift toward mergers of small physician groups. In the latest annual Residents and Fellows Survey conducted by Cejka Search, 46% of respondents from medical school 2012 graduating classes said group practices were the ideal choices, while 29% said hospital-affiliated practices were most preferred.8 In comparison, the 2013 SVS survey, of those in nonacademic practice 36% were employed by a health system or hospital and 56% by a medical group. Certainly, full-time hospital employment offers several advantages. The 2 most important reasons for VS to choose employment are financial security and relief from administrative and regulatory hassles. Among the many reasons for physicians leaving medicine or considering doing so, 58% mention economic factors, 50% health reform, and 45% burnout.9 Since decreasing reimbursement and ever-rising overheads are a major concern for practicing VS, the most obvious advantage of hospital employment is that employment eliminates immediate concerns about economic viability. Although most employment contracts are substantially linked to relative value units (RVUs) or work relative value units (WRVUs), the VS is no longer worried about being reimbursed for the underinsured or uninsured. Most small VS practices have trouble funding frequent capital requirements for new equipment, expensive electronic medical record systems, or consultants to advise them about accountable care organizations (ACOs), for instance, or the unending regulatory dictates. Professional liability is also covered under the hospital’s umbrella policy. In most academic medical centers and state universities, medical malpractice cases (in Ohio for instance) are heard in special Court of Claims courts where the plaintiff first has to prove that the employee (VS) in not entitled to immunity.10 Another significant concern for most VS in private practices is the daily administrative burden including but not limited to personnel, a morass of regulations, legal and accounting complexities, uncertainties of billing and collections, and constant negotiations with insurers. Hospitals have qualified administrators available to negotiate with insurers regarding reimbursement and also to respond to audits.

Why Are Hospitals Interested in Employing VS? The most obvious reason is to have a physician who has a positive contribution margin and a significant impact on the hospital’s bottom line. Other reasons include maintain

or increasing market share in vascular diseases, increasing admissions and procedures in chronic diseases (ie, vascular disease), better VS engagement, improved performance in quality metrics, and preempting future hiring difficulties due to shortages of VS. In addition, hospitals look at the opportunity cost of return on investment (ROI) versus investing in technology or facilities. This is more of a long-term strategy. A common misperception is that the primary reason for health systems employing VS is to immediately improve their bottom line. However, in a recent survey of hospital chief financial officers asking whether they believed that the hospital would achieve a positive ROI within 2 years, 76% replied in the negative.11 With passage of ACA, care coordination of patients with chronic diseases will become critical for health systems. Hospitals realize they have had disappointing results with previous models of engagement with physicians. A common strategy for hospitals is to pay new VS higher wages compared to private practice and compared to the local market for the first year or two. The significant up-front investment of hiring VS will not be recouped from direct practice income but from better coordination of care with VS given the right incentives. Indeed, in the same survey of financial officers, 72% believed the chief benefit from employing physicians was better care coordination.11

Cons of Hospital or Health System Employment These fall into categories of contractual problems, autonomy to run a practice, compensation and benefits, promised resources and feasibility of sharing call, and possible new hires.

Patient Experience VS in a small practice have control over the patient experience and can quickly address anything that diminishes the overall experience. Hospitals are restrained by bureaucratic procedures and slow decision making related to human resources policies related to suboptimal employee termination and complex federal and state regulations, which make it difficult for a lot of hospitals to achieve an ideal patient experience. Contractual Problems. No matter how many times VS have gone over an employment contract with their attorney, it is impossible to cover any and all gaps in understanding the agreement and potential future conflicts. Certainly one of the most important parts of any contract should be mention of a restrictive covenant and conditions for termination. Restrictive covenants or noncompete


4


clauses vary according to state law and are the most frequent source of serious and prolonged litigation. Similarly, employment agreements spell out conditions for terminating a VS services. Most conditions are routine such as failure to maintain a medical license or board certification, a felony conviction, debarment from the Medicare/Medicaid programs, loss of hospital privileges, and failure to fulfill contract obligations.12 Autonomy to Run Your Practice. Promises of autonomy during negotiations may mean different things to VS and the employer. VS have to come to grips with the fact that they are working for someone and have to report to usually more than one person and often a nonphysician administrator. It also means that VS have little control of any system merger or hiring of other VS. Staffing resources are a frequent source of conflict since the employer is going to have as few FTEs as possible to get the job done. In contrast to hiring and firing decisions in private practice where the VS and business manager make quick decisions, hospitals have a full human resources department that takes time and is concerned with litigation. Compensation. In general, compensation data for 20082009 has shown that specialists in private practice earn more than their employed colleagues, particularly academic VS.13 However, this is starting to change as discussed later. Income guarantees are now fading as productivity incentives gradually replace the former. Although common benchmarks such as MGMA, American Medical Group Management Association, or Faculty Practice Health Solutions from the American Association of Medical Colleges are used to ascertain the initial compensation package, the use of productivity measures such as RVU or WRVUs for future employment extensions is fraught with uncertainty.14 Many factors that influence case volume (institutional reputation for instance) and the conversion factor (determined by Centers for Medicare & Medicaid Services) are beyond the VS control. It may be prudent to have a sizeable base salary guaranteed for several years, if possible. VS must be certain of how RVU, the WRVU, the clinical full-time equivalent percentage utilized, the most appropriate benchmark for the situation, and the correct percentile level of the benchmark are being calculated for the term of the contract. In the current SVS survey, members reported that productivity was measured by WRVUs in 45%, collections in 40.6%, and a combination of several metrics in 22% (Emily Kalata, Personal Communication). New Associates. VS must try to have some say in any negotiation process if and when additional VS are hired.

If compensation is productivity based, surplus VS in the practice may negatively affect compensation and referrals, unless supported by correct market analysis.

National Perspective A 32% increase in full-time employment of surgeons by hospitals has occurred between 2006 and 2011.7 The report by Charles et al also indicated that based on American Medical Association data, 67.9% of all surgeons were “employed” (includes groups larger than 2 surgeons, academic or university groups) in 2009. The rest were self-employed, meaning they had full or part ownership interest in their practice (solo practitioner or 2-surgeon practice). The difference in “employed” surgeons between those who graduated from medical school before 2000 (65.4%) and after 2000 (86.1%) was highly significant (P < .001). The herd instinct to full employment by health care systems may or may not survive the natural instinct of physicians and surgeons in particular to be autonomous. Most VS are fully aware of the downsides of being employed by hospitals or large health systems. Employed physicians top complaints are the following: being “bossed” around by hospital administrators, not being in charge of decisions about staff or billing, and being forced to use new equipment and technology.15 VS are particularly displeased with the inefficiencies of hospital systems. In a PressGaney survey of 27 000 physicians at 300 hospitals, VS scored hospitals for inefficiency and unresponsiveness the lowest (67.5 out of 100) compared to employed physicians (75), all surgeons (70.5), and medical specialists (73).16 Clearly, hospitals and large groups are able to attract both Primary Care and Specialty physicians because all the signs point to a decline in fee-for-service and reimbursement tied to value-based care and “bundled” payments with care under the umbrella of ACOs. Currently, 67% of physicians have not seen any personal benefits from their participation in an ACO.9 There is some recent preliminary evidence that spending was lower and quality of care improved in Medicare patients cared for by large independent physician groups in ACOs.17 However, what if ACOs prove to be unprofitable or unworkable? Even without bundled payments or ACOs, hospitals figure that better care coordination, improved quality of care, and lower expenditures could give them a competitive edge and a larger market share. The question for a VS signing up with a large group or hospital is whether they will share in the success enough to mitigate the loss of autonomy and dealing with the disadvantages of a large bureaucracy. VS will need to protect themselves against the unguarded optimism that is sweeping most communities.


5

Satiani In Columbus, Ohio, all full-time VS are employed by 1 of 3 health care systems. If increase market share is the goal of all 3 health care systems, unless each one expands its reach outside their own referral area and increases the “size of the pie” (which seems unlikely), 1 or 2 of these systems will soon be potentially dealing with excess VS capacity.

Future View Belief in true integration with delivery of high-quality care provided economically is the most rational reason for physicians choosing employment with a hospital. But if physicians are not leading the system and simply employees working for a health care system, the relationship will not succeed. A recent reduction in the nation’s health care expenses is given as a prime reason for integration of physicians with health care systems. However, the premise is not based on any data. Some experts have argued that health care costs are not only likely to go down but may increase with more physicians being now employed by hospitals.18 Indeed, in a survey of 11 000 members by the American College of Physicians, one third say that costs increased after a hospital or health system purchased a physician group.19 Others argue, based on a Congressional Budget Office report, that it is the influx of large numbers of healthy baby boomers entering Medicare that are keeping costs low.20 In any case, the reprieve may be temporary and any hope of controlling health care lies in physicians choosing wisely. So what does a VS have to do? For a VS within a few years of retirement, either working for a hospital/large group or staying by in a small practice is an option depending on which trade-off is acceptable. For VS at their peak and mid-career, all signs point to considerable difficulty keeping a small practice viable. A large single specialty or multispecialty group is certainly a good option to hospital employment.21 New graduates seem to have a bright future with predicted shortages and an aging population. It is estimated that by 2030, there will only be 4 caregivers available for each person over the age of 80, compared to a ratio of 7:1 in 2010 due to the large influx of baby boomers retiring (the “2030 problem”).22 Furthermore, competition between hospitals willing to pay more than small to medium private practices for VS and other specialists may result in talented individuals skilled in negotiations being rewarded. The demand for VS may also become apparent because an increasing number of millennial VS of both sexes may choose to work less than full-time and hospitals will have to accommodate them. Increased public spending through Medicare and Medicaid will probably lead to more audits and government

investigations of billing claims. Despite advances in electronic medical records, the time spent in record keeping and documentation will continue increasing and take up a significant part of the physician’s time. Small practices may not have ancillary staff and mid-level “providers” to assist VS in being efficient with their limited time. Hospital mergers and consolidations are likely to continue steadily. VS may end up being part of an ever larger health care system and subject to the whims of new leadership just like businesses taken over by competitors. A by-product of mergers may also lead to “exclusive” or private label relationships of large health care systems with insurers, many of whom are already purchasing large physician groups and some hospitals. For the young VS, the good news is that there is and will be a workforce shortage.23 Even with the competitive entry of interventional cardiologists, demographic realities mean that the limited number of VS trainees graduating every year will find themselves heavily recruited. Indeed, even with Medicare and Medicaid insurance reimbursements not keeping up with inflation, compensation offered for VS has not declined. This is because hospitals are subsidizing compensation offers from their facility and technical revenue. Seventy-five percent of search assignments reported by Merritt Hawkins feature a salary plus bonus, with 57% of the bonus tied to an RVU.24 In addition, 39% of search assignment carried a quality component to the productivity bonus. Till there is some certainty around exactly which part of the “quality” the VS is responsible for, care must be taken to have some specificity in the employment contract so that the VS is not held solely responsible for actions of other professionals. Academic medical centers will be in competition with private health care systems and large specialty or multispecialty groups to recruit and retain VS. AMCs may be at a disadvantage because of a persisting gap in compensation compared to the private sector. While starting salaries for new physicians in hospital-owned practices have exceeded that offered by private groups for the first time since 2009, this trend may reflect the competitive effort by hospitals to lure younger physicians and may not last. According to the Hay group, a consulting firm, hospitalemployed physicians are likely to receive a 2.2% median salary raise for 2014 compared to 3.7% for physicians in large group practices.25 Solo and small VS practices will also have a difficult time offering compensation packages to match offers made by deep pocket hospitals and large groups. Because of the cost of recruiting new VS, institutions and medical groups will pay more attention to retention strategies aimed at better on boarding, mentoring, and involving them in participatory governance.26


6


Conclusions Having been through a previous torrid cycle of physician employment in the late 1980s, which was a financial debacle for hospitals, one wonders if the cycle will repeat itself. Certainly, hospitals have learnt lessons from the past in putting productivity incentives into employment contracts. However, VS who have practiced with full autonomy may have second thoughts becoming employees answering to administrators and in some cases on par with Physician Assistants and Nurse Practitioners. It would not be unrealistic to see some retrenchment in the current move to employment over the next few years. Therefore, it behooves the VS contemplating hospital or large group employment to review the restrictive covenants or noncompete clause in their employment contract carefully to leave themselves a viable alternative to having to move long distances in order to reestablish their practice. A worthwhile option will continue to be working for successful, large independent VS groups that are capital and labor intensive organizations and rapidly adjust to market forces.21 Author’s Note This article was presented at the 2013 annual meeting of the Midwestern Vascular Surgical Society, Chicago, IL, September 8, 2013.

Declaration of Conflicting Interests The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding The author received no financial support for the research, authorship, and/or publication of this article.

References 1. Lovrien K, Peterson L. Aggregate, assimilate and integrate—successfully building an employed physician group. http://www.beckershospitalreview.com/hospital-physician-relationships/aggregate-assimilate-and-integratesuccessfully-building-an-employed-physician-group.html. Accessed August 31, 2013. 2. Accenture. Clinical transformation: new business models for a new era in healthcare. http://www.accenture. com/SiteCollectionDocuments/PDF/Accenture-ClinicalTransformation-New-Business-Models-for-a-New-Era-inHealthcare.pdf. Accessed August 31, 2013. 3. Elliott VS. Doctors describe pressures driving them from independent practice. http://www.amednews.com/article/20121119/business/311199971/2/. Accessed August 31, 2013. 4. Punke H. What physician specialties are hospitals planning to acquire in 2013? http://www.beckershospitalreview. com/hospital-physician-relationships/what-physician-

specialties-are-hospitals-planning-to-acquire-in-2013. html. Accessed August 31, 2013. 5. Stewart JK. Employed vs. private physician. http://www. physicianspractice.com/employment/employed-vs-privatephysician. Accessed August 23, 2013. 6. Merritt Hawkins. 2011 survey of final year medical residents. http://www.merritthawkins.com/pdf/mha2011residentsurvpdf.pdf. Accessed August 22, 2013. 7. Charles AG, Ortiz-Pujols S, Ricketts T, et al. The employed surgeon: a changing professional paradigm. JAMA Surg. 2013;148:323-328. 8. Cejka Search. Physician recruiting survey: residents and fellows. http://www.cejkasearch.com/resources/surveys/2013residents-survey/. Accessed August 22, 2013. 9. Jackson Healthcare. Filling the void. 2013 physician outlook and practice trends. http://www.jacksonhealthcare. com/physiciantrends2013. Accessed August 31, 2013. 10. Ohio Attorney General. Court of Claims Defense. https:// www.ohioattorneygeneral.gov/About-AG/OrganizationalStructure/court-of-claims-defense.aspx. Accessed August 31, 2013. 11. Healthcare Financial Management Association. Executive survey on hospital-physician affiliation strategies. http:// www.hfma.org/hospital-physicianaffiliation/. Published April 2013. Accessed August 31, 2013. 12. Satiani B. The Smarter Physician. Volume1: Demystifying the Business of Medicine in Your Practice. Englewood, CO: Medical Group Management Association; October 2007. 13. Commins J. MGMA: physician compensation in aca demic practice trails private practices. http://www. healthleadersmedia.com/content/PHY-249069/MGMAPhysician-Compensation-in-Academic-Practice-TrailsPrivate-Practices. Accessed August 31, 2013. 14. Satiani B. Use, misuse and underuse of work relative value units in a vascular surgery practice. J Vasc Surg. 2012;56:267-272. 15. Terry KJ.4 Top complaints of employed doctors. http:// www.medscape.com/viewarticle/782136. Accessed August 31, 2013. 16. Press Ganey. Hospital checkup report 2008. Physician perspectives on American Hospitals. http://www.pressganey.com/researchResources/email.aspx?doc=http:// www.pressganey.com/Documents_secure/Pulse%20 Reports/Press6_Checkup-Physician_072308.pdf?viewFile. Accessed October 5, 2009. 17. McWilliams JM, Chernew ME, Zaslavsky AM, Hamed P, Landon BE. Delivery system integration and health care spending and quality for Medicare beneficiaries. JAMA Intern Med. 2013;173:1447-1456. 18. O’Malley AS, Bond AM, Berenson RA. Rising hospital employment of physicians: better quality, higher costs? http://www.hschange.com/CONTENT/1230/#note7. Accessed August 31, 2013. 19. Murphy K. Higher costs follow physician practice purchases, says poll. http://ehrintelligence.com/2013/07/08/ higher-costs-follow-physician-practice-purchases-sayspoll/. Accessed September 1, 2013. 20. McArdle M. Why has Medicare cost growth slowed down? http://www.bloomberg.com/news/2013-08-23/why-has-


7

Satiani medicare-cost-growth-slowed-down-.html. Accessed August 26, 2013. 21. Jain KM, Wixon CL, Satiani B. Single specialty versus multi-specialty vascular surgery group model. J Vasc Surg. 2013;57:1698-1702. 22. Bahrampour T. Baby boomers may face caregiver shortage.http:// www.dispatch.com/content/stories/national_world/2013/08/26/ baby-boomers-may-face-caregiver-shortage.html. Accessed August 26, 2013. 23. Satiani B, Williams TE, Go M. Predicted shortage of vascular surgeons in the United States: population and workload analysis. J Vasc Surg. 2009;50:946-952. 24. Commins J. Hottest job in healthcare still primary care physician. http://www.healthleadersmedia.com/content/

COM-295737/Hottest-Job-in-Healthcare-Still-PrimaryCare-Physician. Accessed August 29, 2013. 25. Herman B.Employed physicians to see lower sal ary increases in 2014 than group physicians. http:// www.beckershospitalreview.com/compensation-issues/ employed-physicians-to-see-lower-salary-increases-in2014-than-group-physicians.html. Accessed August 22, 2013. 26. Satiani B, Williams TE, Brod H, Way DP, Ellison EC. A review of trends in attrition rates for surgical faculty: a case for a sustainable retention strategy to cope with demographic and economic reality. J Am Coll Surg. 2013;216:944-953.
