Hospital Ownership and Your Medical Practice: 10 Questions to Consider

For many new physicians, solo practice does not hold the promise it once did. Changes and complexities in the industry have made it increasing difficult for recent medical school graduates to “hang out a shingle” and expect patients to come. Markets with heavy managed care penetration prove particularly challenging. Without the support of an independent practice association (IPA), management services organization (MSO), or medical group, independent physicians lack the collective power or infrastructure to negotiate favorable contracts and reimbursement rates with payers; and there simply is not enough private pay to run a business. Add to this the harsh reality that the challenges that accompany the start-up of a practice - including paying off student loans, back-office technology needs, HIPAA paperwork, and many other tasks that are not direct patient care - are often overwhelming to new, independent physicians.

In some quarters, joining a large physician-owned group is the most logical answer for practice sustainability. But another way physicians are achieving, long-term stability, a guaranteed income, and a more balanced lifestyle is by joining a hospital-owned physician group. In fact, this trend has been met with such positive receptivity that today the number of hospital-owned physician groups in America exceeds physician-owned groups.

Physicians and hospitals have always needed each other - one providing the patients
and the other providing the place to deliver care. But despite the common denominator being the patient, the incentives of these two groups have not always been aligned. Today that is changing, triggered by not only the mounting pressures facing physicians but the coming of accountable care organizations and movement towards population health management.

Today, an increasing number of hospitals are adopting a multi-pronged approach to physician alignment that can include employing physicians, entering into joint ventures, and myriad
other innovative models. They are simultaneously embracing a variety of strategies
to not only protect their existing market share but also to grow inpatient and outpatient revenues. And hospitals contending with an aging medical staff know that they must find creative ways to appeal to new physicians in the community, and having multiple opportunities available is essential.

The convergence of all of these factors creates exciting opportunities for physicians. But before aligning with a hospital, physicians need to do their own “due diligence” regarding what joining a hospital-owned practice would mean. That begins with asking ten essential questions:

1. What is the hospital’s physician recruitment and retention strategy?

2. What compensation model is the hospital offering? Is it fair and equitable? Is it incentive-based… and do you want it to be? Do they have a model in place to reward both clinical performance and customer service?

3. What is the “culture” of the hospital and does it nicely complement my own practice and/or that of my medical group?

4. What kind of infrastructure does the hospital have in place to help manage a physician group? Is it the same people who are running the hospital or do they have a team in place that has direct experience with medical groups?

5. Is the hospital qualified to make decisions ranging from information technology to EHRs to back-office support that will greatly influence my practice?

6. How will long-standing members of the medical staff react to my becoming an employed physician? Will it be embraced or will it cause animosity that can hurt me both personally and professionally?

7. Will my practice be located adjacent to the hospital itself or in a free-standing setting?

8. Where will ancillary services be housed, and what is the short-term and long-term strategy for those? While hospitals enjoy increased reimbursement for services taking place under its license, this may potentially decrease the outpatient revenue streams that have historically allowed medical groups to be profitable.

9. What role do physicians play in the hospital’s governance - from board representation to administration?

10. What opportunities will the hospital provide relative to continuing medical education, career growth, and professional enhancement?

For physicians, joining a hospital-owned medical practice there is much opportunity for success as well as plenty of obstacles that can derail the relationship. Being just a little off in any of these ten areas can make a big difference. In the end, asking the right questions and having access to the right answers before taking the leap can add up to a partnership that is synergistic and enduring.

Phil Dalton is president and chief executive officer of MDS Consulting, a national healthcare consulting firm that helps medical groups, hospitals, health systems and other healthcare organizations achieve their goals for development, growth and profitability. E-mail him here.