2. Financial Pressure The increasing financial pressure that exists within cardiology practices is driving an increase in hospital collaboration Hospitals and cardiology practice both have motivations for collaboration A recent ACC/MedAxiom survey indicated that 2/3 of the 24,000 USA cardiologists to be integrated by years end
4. Cardiologist Motivations Personal income security Mitigate reimbursement declines Increasing private practice overhead IT strategies Work-life balance Access to capital Managed care pressures
7. Key Elements of Employment Compensation Asset purchase Governance
8. Contractual Issues Income guarantee Term of employment agreement (5 & 10) Negotiation of RWU conversion factor for the term of the agreement Fixing the RWU table (nuclear, cath bundling) Termination of physicians Operational control
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11. Compensation Physician Compensation Conversion factor X individual RWU/physician Compensation for non-RWU activities Incentive plan (business and clinical targets)
12. Asset Purchase Practice purchase (tangible & intangible) Assets (equipment & real estate) Medical records Goodwill Accounts receivable
14. Governance Continuum Direct employment Physicians have individual employment agreements Physicians have a practice operating committee Physicians have disparate medical directorships Miss opportunity for full physician investment in hospital operation Advisory CV Council Much like a clinical co-management program Practice line authority The group has been delegated line authority over hospital and practice operation
15. Legal Residence of Physicians Direct employees of hospital Employees of a wholly owned subsidiary Employees of an existing hospital multi-specialty group Note: Some groups are employed by the SYSTEM rather than any one hospital
16. Decision-Matrix Hospital “reserve powers” Set general parameters/approve budget Set general parameters/approve strategic plan Approve employment of physicians Authority of Subsidiary Board Establish clinical objectives (M&M, ACO) Establish business objectives (LOC, CPC) Business development/improve patient access Establish new clinical services Authority delegated to a “Physician Management Committee” General practice operation Elect/remove physician representatives from leadership Physician schedule Physician assignments Physician compensation Physician and staff discipline Implement budget and business plan
17. Practice Operation in Integration A “Physician Management Committee” has responsibility for: day-to-day operations determine distribution of compensation pool “unwind” top 1-3 executives hiring/firing of physicians authority to implement approved budget/business plan Re-negotiate employment agreement
18. Employment Pro’s Best time to sell (maximal practice value) Income gains over structured timeline Maximal Group-hospital alignment Preparation for reform/global reimbursement Greater market security Potential for improved physician recruiting Con’s Some loss of control Heavy reliance on PBR Will it resolve practice governance issues? Changes in hospital leadership Uncertainty regarding renewal (at 5 or 10 years)
20. Lease Many of the same components as employment Negotiate PSA & Co-management Agreement Establish a lease payment & Co-management agreement $$ with FMV support Lease a physician, sub-group of FTE physicians, or the whole practice Provider Based Reimbursement
21. Lease Maintain practice assets and structure Will not be able to secure full practice purchase price A viable alternative to employment Theoretically works better when group works at multiple systems Still have option for group employment, and practice sale in the future
23. Practice Merger Governance considerations Old competitive issues? Compensation plan Common call Economies of scale Duplication of services Better position to negotiate with hospitals , payers, primary care networks May not be enough, on its own
