The health care team of Smith Moore Leatherwood is well experienced in the full range of hospital-physician integration structures. We regularly assist hospital managers who have been tasked to develop administrative mechanisms and creative employment arrangements that incentivize physicians while allowing administrators to protect their hospitals, comply with an ever-changing regulatory environment, and achieve their financial goals.
To these ends, our team has facilitated an array of different hospital-physician integration strategies that fall under two distinct categories:
The Employment Model
In many environments, this is the preferred model. Direct employment of physicians permits easy compliance with federal and state regulatory frameworks, permits collaborative negotiations on price in ways that physician-hospital organizations (PHOs) do not, and creates more certain pathways for the continuum of care, through which the associated streams of revenue are protected. However, the employment model does have some drawbacks. In addition to the acceptance of unlimited malpractice risks for employed physicians, as well as labor law risks associated with inappropriate workplace behaviors, the acquisition of physician practices can provide challenges to hospitals to develop compliant compensation formulae that attempt to maintain physician pay scales at pre-employment levels. It can also be difficult to provide appropriate financial incentives to employed physicians, particularly when the entrepreneurial value in the practice cannot be fully recognized due to regulatory concerns.
These less aggressive integration methods create closer collaboration with physicians without paying them a salary. Management services organizations (MSOs), for instance, allow hospitals to have increased administrative, clerical, and financial control over the business of medicine while enabling physicians to focus on practicing medicine. In addition, more robust PHOs permit community-wide managed care contracting and can result in increased reimbursement for all health care services without the need for employing the physician participants. Traditional real estate joint ventures, service line management agreements, and centers of excellence all provide financial incentives to physician groups without the necessity of employment, thereby preserving the entrepreneurial motivations for physician involvement and the clinical independence of the physician stakeholders.
There are many permutations of these relationships, and creative solutions can be found in a number of ways. Our direct experience in hospital-physician integration includes:
- "Bricks-and-mortar" real estate joint ventures
- Acquisitions and divestitures of physicians practices
- Development of various employment and compensation models with hospital-affiliated entities
- Formation of PHOs and MSOs
- Development of multi-site physician organizations affiliated with hospitals
- Service line joint ventures involving multiple hospitals and multiple physician groups to present a center of excellence in a single treatment environment (cancer, cardiac services, etc.)
- Service line management agreements for the operation of entire departments of hospitals (lithotripsy, outpatient surgery, imaging, etc.)
- HIPAA and information technology issues relating to practice acquisition and integration
- Liability risks associated with physician employment, including "lending" and "borrowing" physicians from other institutions
Smith Moore Leatherwood's health care team can help your hospital achieve its physician relationship goals and assist in the development of more effectively integrated patient service structures, whether you choose a traditional approach or another pathway.