The Siren Song of Hospital Employment

April 16, 2012

BY: Mark F. Weiss, J.D.

In Greek and Roman mythology, sirens lured mariners to their deaths. Lethal creatures that they were, they didn’t kill with knives, spears or other observable weapons; they didn’t even give rise to a threat. Instead, they used their enchanting voices in song to lure their seagoing victims’ ships aground on the rocky shore.

Today, there are a number of trends creating a storm in the sea of medical practice.  And, at the same time, hospitals are singing the song of physician alignment and physician employment. Are physicians being guided into a safe harbor from the storm of uncertainty, or are they being lured by the siren call of a creature lethal to physician success?

The Perfect Storm

Let’s consider a few of the trends contributing to the current state of affairs.

Healthcare “Reform”

Certainly, there’s the incredible uncertainly of the financial future resulting from ObamaCare. Even if the Supreme Court strikes the law in its entirety, will the waves it generated, bundled payments, ACO’s and cost cutting masquerading as quality initiatives continue in another form and gut the private practice of medicine?

And if the federal government’s attempt is rebuffed, will more states pick up the mantel of healthcare reform, from purchasing pools to single payor initiatives?

Paraprofessionals and Complimentary Medicine

In many areas of the country, allied health providers from nurse practitioners to CRNAs, and complementary and alternative medicine practitioners from chiropractors to naturopaths, are asserting their “right” to independent or equal practice. Many patients are receptive to their care, their aspirations and to emptying their pocketbooks in their favor.

As government, both federal and states, employers and payors seek to reduce healthcare costs, they, too, are becoming increasingly supportive of alternatives to physician delivered care.

This is resulting in increased pressure on physicians: for some it’s the pressure of potential replacement; for others it’s the impact of a lessened flow of patients due to the growing percentage of the public seeking alternative care.

National Groups

In some physician specialties, notably anesthesiology, radiology and emergency medicine, there are larger regional and national groups putting tremendous competitive pressure on historical local practice. Although probably most acutely felt by hospital-based specialists, some office-based practitioners are not immune from similar consolidation.

Direct Financial Pressure

As payors become squeezed by rising administrative costs and the pressure to provide broader coverage, they are putting increasing pressure on physicians to accept lessened increases in reimbursement or even outright reductions. Additionally, hospitals, which once more freely doled out stipend support are beginning to use the threat of replacement by national groups and the induced pressures of requests for proposal to dash physicians’ expectations of stipend support.

The Song

Faced with the difficulties described above, along with the time, effort and financial requirements of running independent practices in good times or bad, many physicians are becoming disenchanted with private practice.

The timing could not be better for hospitals.

Not that not all hospitals are in the position to do something – in fact, a significant number of hospitals close each year. Of  those hospitals with (relatively) healthier balance sheets, many see a future in which healthcare services, even services that were routinely delivered in an independent physician’s office, are provided through a hospital-centric system. Encouraged by the Medicare Shared Savings Program provisions of the Patient Protection and Affordable Care Act, a/k/a ObamaCare, they seek to “align” physicians, often through employment, either directly or via a hospital controlled practice entity or foundation.

The Rocks

But from the physicians’ viewpoint, query why hospitals are in a better position, practically, business-wise and financially, to manage a physician practice? On a meta-level, why is it that physician “alignment” requires more control by hospitals when the general impact of the microchip revolution has been the flattening of organizations as it has become much easier for independent producers of both products and services to conduct business and to coordinate their activities with other independent entities?

Wasn’t the entire notion of HIPAA that individuals’ health data had to be secured because independent entities would be coordinating the sharing of electronic health information?

And, as to the central issue for most physicians, the protection of their incomes, hospital employment comes with a challenge that has no real equivalent in the physician-owned practice world: The restrictions of fair market value compensation levels, as defined for healthcare compliance purposes, are neither generally fair nor at market value. Linked to national surveys, over time they will result in a spiraling down of physician income as hospital-engaged valuation consultants opine at less than top compensation percentiles – today’s 75th percentile will become tomorrow’s 99th percentile.

Last, all employment contracts have a term – and most have a real term provision:  the one pertaining to early termination.  What safety is there in an “alignment” that might only last for the next 60 to 90 days — the notice period for termination without cause?

As you consider these issues, you need to determine if you want a job or a career. If it’s a career, how much control do you want to have over your future? Is there more or less safety in hospital employment? Is it a safe harbor or a rocky death trap? Is there, in reality, more safety on the sea of uncertainty than there is in the hospital’s siren song?

Mark F. Weiss is an attorney who specializes in the business and legal issues affecting physicians and physician groups on a national basis. He holds an appointment as clinical assistant professor of anesthesiology at USC’s Keck School of Medicine and practices with Advisory Law Group, a firm with offices in Los Angeles and Santa Barbara, CA representing clients across the country. He offers complimentary educational materials for our readers at Mr. Weiss can be reached by email at: or at 310 843 2800.

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