Physician employment is one of the fastest growing trends today with over 66% of physicians either currently employed or seeking employment (Accenture, 2013). Unfortunately, physician employment is often treated as a ‘default’ strategy rather than one that is carefully planned.
The following constitute the most common reasons why this model fails and what can be done to fix it.
Lack of a business plan
Many leaders embark upon employment and the purchase of physician practices without structuring the arrangement so that a reasonable margin can be made. For instance, there may be a lack of ‘downside’ risk to physicians, they may be offered above fair market value (FMV) compensation, or practices may be purchased without proper due diligence to determine the actual FMV practice value beyond hard assets. The answer is simple: do a careful business plan in advance, create a model that works, and execute it properly despite the temptation to expedite the process due to political pressures.
2. Lack of alignment
Employment does not equal alignment. There are few physicians who will ever place a contract agreement over and above the needs of their patients; therefore, alignment is essential for employment to realize its potential. This must be done on a foundation of cultural alignment (determining whether a mutually beneficial professional relationship is possible) followed by economic alignment (determining what type of contract is appropriate) and finally clinical alignment (placing a significant part of compensation at risk based upon mutually agreed upon quality, safety, service, and cost-effectiveness metrics). Employment without alignment is a disaster; employment with alignment works.
3. Lack of physician leadership
Physicians want and need to be led by physicians and physician leaders must be seen as competent clinicians. Many organizations err by placing either physician executives in charge (who often lack relevant clinical skills) or practice/nursing managers who have little credibility with seasoned clinicians. Leadership is key and recruiting and retaining qualified physician leaders who can serve as medical directors and role models will enable an employed group to reach its potential.
4. Lack of appropriate assignment of revenues and costs
Business plans for employed physicians should take into account downstream revenue (including ancillaries and elective procedures) and should allocate indirect costs realistically and not based upon an arbitrary historic amounts. It is both unrealistic and unfair to ascribe a loss to an emergency department service line that is responsible for a significant percentage of admissions, ancillary revenues, and elective procedures based solely upon CPT codes that isolate physician service revenue alone.
5. Lack of infrastructure
Employment cannot be an after-thought that is patched on top of a traditional medical service but as a service line with strong dyad/triad leadership of physicians, nurses, and executives with aligned goals/objectives and a performance management process that drives performance towards those goals. At risk compensation plans should be appropriately aligned with goals/objectives that are carefully and mutually chosen and physicians should be recruited and retained who share fundamental professional values to ensure organizational fit.
Physician employment and either be an asset or a liability. Please contact me at firstname.lastname@example.org or 603-733-8156 if you’d like to discuss this challenge further.