Medical Practice Management, Medical Strategic Planning
Aug 19

Challenges facing hospitals that employ physicians – The $100,000 experience

Over the past five years, hospitals have increased employing community physicians. In many instances, these institutions are aggressively seeking ways to maintain and build their market share of inpatient admissions as well as outpatient procedures. At the same time, physicians are seeking employment out of fear/anxiety over the future of America’s healthcare system, which is clearly broken in many places, not to mention the challenges of implementing the Affordable Care Act.

So, both entities are seeking refuge with one another for similar and different reasons, with very mixed results to date. First, it is reported by MGMA and other national health care organizations that more hospitals are losing significant money on the Practices that they have acquired; it is not uncommon for these Practices to experience $100,000 in loses annually.

Hospitals have promised “nothing will change” but have lacked the managerial expertise and experience to manage physician practices. In many cases these physician practices operated more efficiently when they were independent – because they had to. Here are the results:

It is not unusual for physician productivity to decline once they are hospital employees. This can be due to factors such as failure to define and implement clear and attainable expectations and productivity measures.

  • Hospitals make “bad choices” of which physicians to employ.
    • A Medical Staff Development Plan was never produced that clearly presented the number and type of physician practices to acquire across most specialties over a three to five year timeframe. In some cases, hospitals have “over employed” physicians within the same specialty causing excess capacity.
    • Insufficient due diligence was performed on the physician acquisition in terms of personality fit with the hospital’s culture, not to mention an accurate evaluation of the Practices documentation, coding, staffing, operations and financial health.
    • There are numbers of physicians who are looking for a glide path to retirement and may not be as productive going forward.

Clearly, hospitals and physicians need to make better decisions on employment from both sides of the equation. Much more attention and work needs to be applied to evaluating the opportunities for hospitals to employ community based physician practices. The requirement for success is FOCUS: Start with a Medical Staff Development Plan to assure the doctors fit your needs, and then assure that the due diligence is performed by experienced consultants who are objctive in their evaluations.

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →