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Strategic Physician Onboarding: 7 Tactics for Minimizing Losses on Employed Medical Practices

Posted by Matthew Smith on Apr 17, 2013 2:38:00 PM
By Sabrina Burnett, Vice President, and
Cami Hawkins, Managing Associate, Health Directions


1. Measure Twice, Employ Once

Many hospitals today are on a practice acquisition "spree," employing practices they do not need and making financial commitments they do not yet understand. These acquisitions are expensive in terms of both upfront investment and future operating costs. They also carry a steep opportunity cost since they take capital away from other growth projects. 

To avoid wasting money on unnecessary acquisitions, start by developing a sound physician strategy. Most hospital planners focus on high-end specialties such as cardiology, neurology and oncology, but it is also important to build the primary care base that will feed these services. Once your strategy is set, insist that all potential acquisitions align with defined strategic needs.

For every promising acquisition target, develop a financial pro forma to model the practice's performance under hospital ownership. The pro forma should take into account productivity, expenses, compensation, payor mix, current contracts and existing staffing. Include a network allocation to cover hospital administrative overhead. Use industry benchmarks, such as data from the Medical Group Management Association, to identify opportunities for improvement and cost control. A realistic pro forma will enable the hospital to forecast an employed practice's expected net operating income — or its potential losses.

2. Maintain the Link Between Productivity and Pay

Private practice physicians are accustomed to a lean organizational structure. Joining a large health system with complex demands can reduce physician productivity. To maintain productivity once employment begins, develop compensation plans that incorporate performance incentives. For example, tie physician salary to work RVUs and include bonuses for meeting quality metrics aligned with value-based care programs.

Alternatively, engage physicians under a provider services agreement. A PSA allows a hospital to collect revenue for an independent practice, pay its salaries and reimburse its operating expenses. Productivity expectations can be built into the compensation agreement. A PSA is often preferable when full acquisition would require purchasing a physician's office building. It can also make sense for a physician who would prefer a trial employment period before signing a long-term contract. 

3. Establish and Optimize Payor Relationships

Newly employed physicians need to be credentialed with several payors. Unfortunately, most hospital employees are unfamiliar with physician credentialing. A hospital system in the Southwest experienced this problem with a multispecialty spine practice it acquired in 2011. Administrative staff spent a full year attempting to credential the physicians and non-physician providers with the hospital's workers' compensation contracts. During this period, the system lost approximately $500,000 on under-reimbursed care. 

To avoid this scenario, create a centralized team whose sole responsibility is to manage physician credentialing. Develop standardized processes and employ a dedicated software application to ensure credentials for all providers stay completely up to date.

As part of the credentialing process, take steps to optimize payor contracts. Many private practices accept health plan contracts indiscriminately, regardless of adverse fee schedules or adjustment policies. When a physician joins your organization, analyze the practice's payor mix and identify health plans to eliminate or leverage for better rates. 

4. Declare War on Payor Denials

According to the MGMA, medical practices have an average claim denial rate of 30 percent on first submission. Unfortunately, these denial problems can get even worse after acquisition. To maintain practice revenue, hospitals need to devote resources to combating payor denials. Here's how:

  • Create effective workflows. Establish solid processes for entering charges, submitting claims, posting payments and appealing rejections. Assign clear responsibilities, whether the work is organized through a central billing office or a dedicated biller for each physician.

  • Set benchmarks and monitor collections. Establish key practice indicators for collections (daily, weekly, monthly) and denials by type (coding denials, prior authorization, etc.). Compare KPIs to industry benchmarks and act on variances.

  • Create a denial follow-up process. Appealing denials is labor-intensive, but it is crucial to maintaining revenue. Establish processes and timelines for denial follow-up. Identify staff members with the best appeal success rates and share their methods across the organization.

    Consider outsourcing. Contracting with a billing company or management services organization to manage the physician revenue cycle may be less expensive and more efficient than maintaining operations in-house.

5. Strike a Balance on EHR

Many physician electronic health record systems do not integrate well with hospital IT systems and do not support population management goals. Yet, forcing physicians to adopt the hospital EHR system can be dangerous. Hospital EHRs are usually too expensive and complex for ambulatory providers.

Strike a balance between permissiveness and rigidity on EHR. One system will not work for all specialties and practice sizes, so study popular compatible vendors to find a range of appropriate options. All approved systems should support the hospital's strategic goals. 

Take a project management approach to EHR implementation. Create IT project teams to work directly with practices to optimize system capabilities. Before implementation, perform an onsite workflow analysis to spot opportunities to redesign daily practice operations. Wasteful workflows will only be exacerbated with a new EHR system.

As part of the workflow analysis, perform a meaningful use gap analysis to make sure practices can earn government EHR incentives. The additional reimbursement will offset costs and help ensure the hospital gets the most value from its EHR investments.

6. Provide "Concierge Onboarding"

Transitioning physicians to employment is a 90- to 180-day process that requires attention to hundreds of details. Important steps can slip through the cracks, causing frustration and negative first impressions for newly employed physicians. The solution? Establish a well organized onboarding approach that emphasizes physician service.

Create an onboarding checklist with deliverables, timeframes and milestones. Cover activities such as human resources orientation; IT assessment and connectivity; revenue cycle optimization; office workflow redesign; credentialing and contracting; and marketing integration. Make the list as detailed as possible — down to ordering supplies and new office signage. 

Streamline the process for physicians. In many health systems, new physicians might have to interact with a dozen departments to iron out details in finance, HR, IT, etc. Instead, assign one liaison to each acquired practice to serve as the go-between and project manager for all onboarding issues. 

The concierge approach enables the hospital to customize the onboarding process to the specific needs of individual practices. Making sure every practice is "good to go" on day one will help maintain continuity in productivity and patient care.

7. Lay the Groundwork for Clinical Integration

The ultimate aim of physician employment is to achieve greater coordination around clinical improvement and cost management. Hospitals will receive less than full value on any employed practices that do not contribute toward this goal. Onboarding efforts need to focus on aligning physicians with clinical integration objectives in quality, patient care and cost control.

First, establish measurement processes within acquired practices. Physicians and practice staff will need the right workflows, processes and IT tools to reliably capture cost and quality metrics. 

Second, create feedback systems to keep physicians focused on system goals. Provide regular dashboard reports with KPIs in productivity, patient volume, budget performance and clinical quality outcomes. Hold regular operations reviews (monthly or quarterly) to give physicians feedback on practice performance. 

Most importantly, establish organizational milestones for cost and outcomes goals. Physicians need to understand how they can help the system develop disease management initiatives, transition from fee-for-service to value-based payment and prepare to operate as an accountable care organization. 

Smooth Transitions Require Preparation

Without appropriate preparation, hospitals stand to lose significant money on employed physicians. The key to a sustainable investment is to focus on sound strategy, aligned incentives, practice efficiency and clear overall goals. Optimizing practices clinically, operationally and financially during the onboarding phase will minimize losses and help hospitals get the most out of physician employment.

Provider Credentialing Analysis

Topics: Clinical Integration, Employed Physicians, Physician Onboarding, Onboarding, Concierge Onboarding

5 Questions with an Employed Physician: Keys for Onboarding Success

Posted by Matthew Smith on Dec 5, 2012 11:32:00 AM

Employed PhysiciansThe trend of hospital physician employment continues and the process of transitioning a formerly independent practice is critical to the long-term success of the hospital/physician relationship. Once the “deal” is negotiated, legal contracts are drafted, signed, and executed, the process of physician “onboarding” begins. Onboarding involves all of the operational and cultural changes needed to adapt the practice to a larger organization structure and management mindset. Issues that seem minor or unimportant to hospital management may be extremely important to the recently employed physician.

Business Valuation Resources (BVR) recently interviewed two experts: Health Directions Physician Advisory Board member James P. Valek, MD, and Lucy Zielinski, VP, Health Directions, about some of the key components that make an onboarding process successful.

BVR: Can you provide an example of where a disconnect may occur in the hospital/physician relationship?

James P. Valek: Some hospital administrators do not understand the things that practicing physicians consider important. Ideally, the hospital administration and the doctors will sit down, discuss and agree on the details that make the doctors practice special. Here is an example of something that may seem silly, but it was important to me nonetheless: We had designed our office very thoughtfully and included a beautiful fish tank. This tank was specifically in place to reduce patient anxiety in the waiting area. One day, about nine months after the acquisition, a hospital administrator approached me and said, “Dr. Valek, we're taking out the fish tank. It’s not cost effective.” It was a done deal—no discussion. I was flabbergasted. The fish tank was a key feature in our office, and a lot of thought went into its placement because I valued its calming effect on patients; many of our patients over the years had commented on it, and I wanted to keep it. We ultimately kept the fish tank in place, but we could have avoided that entire situation with better upfront communication.

BVR: Who typically brings up these issues in a meeting?

Valek: Well, are there meetings? Typically, physicians rarely have meetings; they see patients. If physicians are lucky enough to be employed by an organization that actively wants to hear what they think, there would be meetings. If so, both parties bring up the issues. Administrators should not be afraid to tell doctors their specific concerns. However, administrators need to communicate in a style that works with doctors. Doctors are taught to be autonomous and patient care comes first. That may make us lousy team players, but if we are respected and listened to, it makes for easier negotiations.

Zielinski: In my experience, physicians are very interested in resolving problems, but often feel left out of any meaningful discussions and ignored. If given the chance, physicians will diagnose and think these problems through. If administrators are responsive, this will help strengthen physician relationships.

BVR: Is poor communication among administrators and physicians a deal breaker?

Valek: I've seen poor communication break down a deal, and situations were allowed to fester to the point where another party comes in and acquires that physician.

Again, it is important that hospitals acknowledge physicians’ most important needs, such as practicing styles. For example, for some physicians it's very important that they practice with the same medical assistant every day, because it is an important piece of their practice. Obviously, an administrator would want a one-size-fits-all program, but that can be difficult to achieve.

Zielinski: The hospital and the physician have to blend well as far as culture is concerned. Philosophy of care is important– how physicians treat patients; the volume of patients they see; what kind of patients they see; how long they spend with the patients. Is it a half-hour physical? Is it an hour physical? These types of questions are crucial because asking physicians to change their philosophy or how they practice is tough. You want to do that homework beforehand, because there's a honeymoon period and then the fun starts.

BVR: So how do you identify what's important and what's not during an acquisition?

Ziellinski: When I work with hospitals and physicians during an acquisition, I ask the physician, “What's important to you?” “How do you want to practice?” “What are some of your goals for the future?” “What's working now, and what's not working?” Factors that are becoming more important in setting expectations for physicians revolve around ACO participation and clinical integration requirements. Are the physicians motivated to participate in these programs? I get to the meat of those sorts of details and then ask myself “is this a good fit?” Because I want the acquisition to succeed for both parties– it has to be a “win-win.”

Valek: Doctors also want to understand the data administrators give them. There is rarely a situation where the hospital says, “Here's your monthly numbers and let's sit down and talk about them.” Some doctors just dismiss the reports because they don’t understand the data.

BVR: What does a hospital look for in a physician practice acquisition?

Zielinski: From a hospital's perspective, quality and productivity are important. In addition, many hospitals look for physicians who are leaders, because they will do a better job at leading the other physicians in the entire physician group. I see a lot more physicians who are involved in administrations and get stipends to be on committees, task forces, etc. The physician leader may be a practicing physician but also acts in an administrative way. Physician leaders help the other physicians through the whole process and assists with the transition and onboarding piece. In these situations, however, physician leaders should talk to the other physicians peer to peer, because the physician-to-physician relationship is important.

The hospitals need to consider all the operational aspects of the practice. How is the practice currently operating? What will change once they become a hospital employee? Here's an example: If the physician performs a professional courtesy for a patient—which they shouldn't be doing—but if they're treating patients a certain way, or discounting, that will change. If they're charging patients who don't have insurance $20 for a visit, that may change and the whole dynamic of the operation changes.

Valek: That’s true. Hospitals want to look at finances during the onboarding process. For example, most doctors in private practice use as many ancillary services as they can to generate income. However, once the physicians become employed that income disappears and revenues drop.

Zielinski: HR is another important piece to consider. What kind of the benefits will the physician employees receive? How are vacations and time off structured? What is and isn’t permitted at the work site? What other policy and procedures exist? These are important questions that need to be addressed early on before the ink is put to paper.

Even after the formal onboarding process is completed, the need for ongoing communication with the physician is important. In a sense, the onboarding process never ends if the goal is to have a successful employed physician relationship.

Topics: Employed Physicians, employed physician practices, Hospital Physician Employment, Physician Onboarding, Onboarding, Physician Employment Models

Q&A with James Valek, MD: Keys for Successful Physician Onboarding

Posted by Matthew Smith on Oct 17, 2012 11:01:00 AM

Q&AThe trend of hospital physician employment continues and the process of transitioning a formerly independent practice is critical to the long-term success of the hospital/physician relationship. Once the “deal” is negotiated, legal contracts are drafted, signed, and executed, the process of physician “onboarding” begins. Onboarding involves all of the operational and cultural changes needed to adapt the practice to a larger organization structure and management mindset. Issues that seem minor or unimportant to hospital management may be extremely important to the recently employed physician.

Business Valuation Resources (BVR) recently interviewed two experts, Health Directions Physician Advisory Board member James P. Valek, MD, and Lucy Zielinski, VP, Health Directions, about some of the key components that make an onboarding process successful.

BVR: Can you provide an example of where a disconnect may occur in the hospital/physician relationship?

James P. Valek: Some hospital administrators do not understand the things that practicing physicians consider important. Ideally, the hospital administration and the doctors will sit down, discuss and agree on the details that make the doctors practice special. Here is an example of something that may seem silly, but it was important to me nonetheless: We had designed our office very thoughtfully and included a beautiful fish tank. This tank was specifically in place to reduce patient anxiety in the waiting area. One day, about nine months after the acquisition, a hospital administrator approached me and said, “Dr. Valek, we're taking out the fish tank. It’s not cost effective.” It was a done deal—no discussion. I was flabbergasted. The fish tank was a key feature in our office, and a lot of thought went into its placement because I valued its calming effect on patients; many of our patients over the years had commented on it, and I wanted to keep it. We ultimately kept the fish tank in place, but we could have avoided that entire situation with better upfront communication.

BVR: Who typically brings up these issues in a meeting?

Valek: Well, are there meetings? Typically, physicians rarely have meetings; they see patients. If physicians are lucky enough to be employed by an organization that actively wants to hear what they think, there would be meetings. If so, both parties bring up the issues. Administrators should not be afraid to tell doctors their specific concerns. However, administrators need to communicate in a style that works with doctors. Doctors are taught to be autonomous and patient care comes first. That may make us lousy team players, but if we are respected and listened to, it makes for easier negotiations.

Zielinski: In my experience, physicians are very interested in resolving problems, but often feel left out of any meaningful discussions and ignored. If given the chance, physicians will diagnose and think these problems through. If administrators are responsive, this will help strengthen physician relationships.

BVR: Is poor communication among administrators and physicians a deal breaker?

Valek: I've seen poor communication break down a deal, and situations were allowed to fester to the point where another party comes in and acquires that physician.

Again, it is important that hospitals acknowledge physicians’ most important needs, such as practicing styles. For example, for some physicians it's very important that they practice with the same medical assistant every day, because it is an important piece of their practice. Obviously, an administrator would want a one-size-fits-all program, but that can be difficult to achieve.

Zielinski: The hospital and the physician have to blend well as far as culture is concerned. Philosophy of care is important– how physicians treat patients; the volume of patients they see; what kind of patients they see; how long they spend with the patients. Is it a half-hour physical? Is it an hour physical? These types of questions are crucial because asking physicians to change their philosophy or how they practice is tough. You want to do that homework beforehand, because there's a honeymoon period and then the fun starts.

BVR: So how do you identify what's important and what's not during an acquisition?

Ziellinski: When I work with hospitals and physicians during an acquisition, I ask the physician, “What's important to you?” “How do you want to practice?” “What are some of your goals for the future?” “What's working now, and what's not working?” Factors that are becoming more important in setting expectations for physicians revolve around ACO participation and clinical integration requirements. Are the physicians motivated to participate in these programs? I get to the meat of those sorts of details and then ask myself “is this a good fit?” Because I want the acquisition to succeed for both parties– it has to be a “win-win.”

Valek: Doctors also want to understand the data administrators give them. There is rarely a situation where the hospital says, “Here's your monthly numbers and let's sit down and talk about them.” Some doctors just dismiss the reports because they don’t understand the data.

BVR: What does a hospital look for in a physician practice acquisition?

Zielinski: From a hospital's perspective, quality and productivity are important. In addition, many hospitals look for physicians who are leaders, because they will do a better job at leading the other physicians in the entire physician group. I see a lot more physicians who are involved in administrations and get stipends to be on committees, task forces, etc. The physician leader may be a practicing physician but also acts in an administrative way. Physician leaders help the other physicians through the whole process and assists with the transition and onboarding piece. In these situations, however, physician leaders should talk to the other physicians peer to peer, because the physician-to-physician relationship is important.

The hospitals need to consider all the operational aspects of the practice. How is the practice currently operating? What will change once they become a hospital employee? Here's an example: If the physician performs a professional courtesy for a patient—which they shouldn't be doing—but if they're treating patients a certain way, or discounting, that will change. If they're charging patients who don't have insurance $20 for a visit, that may change and the whole dynamic of the operation changes.

Valek: That’s true. Hospitals want to look at finances during the onboarding process. For example, most doctors in private practice use as many ancillary services as they can to generate income. However, once the physicians become employed that income disappears and revenues drop.

Zielinski: HR is another important piece to consider. What kind of the benefits will the physician employees receive? How are vacations and time off structured? What is and isn’t permitted at the work site? What other policy and procedures exist? These are important questions that need to be addressed early on before the ink is put to paper.

Even after the formal onboarding process is completed, the need for ongoing communication with the physician is important. In a sense, the onboarding process never ends if the goal is to have a successful employed physician relationship.

Topics: Employed Physicians, employed physician practices, Hospital Physician Employment, Physician Onboarding, Onboarding, Physician Employment Models

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