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Mapping Your Medical Staff Development: Keys to Success

Posted by Matthew Smith on Feb 26, 2013 10:21:00 PM

Medical staff development mappingTraditional medical staff development planning is no longer enough. In today’s market, hospitals need to understand the physician segments within their medical staffs and create relationship-building strategies focused on meeting physicians’ lifestyle, financial, and status needs.

In most hospitals, medical staff development planning begins and ends with the organization’s needs. The hospital determines its market requirements, prioritizes specialties for development, allocates recruitment funds, and hopes to connect with physicians interested in relocating. This level of planning is important, but it does not go far enough. In today’s tight market for physician talent, there is a big gap between what a hospital needs and what it can easily get.

Better performing hospitals and health systems create powerful physician strategies by taking staff development planning one step further. In addition to looking at their own needs, they identify the needs and aspirations of key physicians and physician groups. The resulting psychosocial “map” enables these hospitals to develop individualized strategies for building strong physician relationships.

Understand Physician Motivations

How do you map your medical staff? Start with a traditional medical staff development plan. Look at revenue and contribution margin by specialty, and overlay market share data and demographic projections. Prioritize the specialties by profitability, growth opportunity, and strategic value, and develop recruiting targets.

Now, instead of launching directly into recruiting, investigate and categorize the concerns, aspirations, and priorities of the various physicians within these target specialties. In my experience, physicians today fall within a number of different “need segments”:

Lifestyle. One segment is made up of physicians who are very interested in work/life balance. They are typically younger physicians who do not want professional demands to overwhelm their family responsibilities. This drive is most common among primary care physicians, but it is becoming more prevalent among specialty providers.

Financial. In today’s environment of declining reimbursement and rising practice costs, many physicians are very motivated by financial pressures. This includes family practitioners with lower incomes and highly trained specialists who want a greater payoff on their career investment.

Status. A third major driver among physicians today is the need for status and recognition. This need segment cuts across the entire physician spectrum, from doctors who want to be offered the opportunity to reinvent healthcare delivery to entrepreneur physicians looking for business leadership opportunities.

There is no such thing as a doctor who is focused exclusively on lifestyle issues or an MD who is motivated purely by financial concerns. Rather, physicians generally experience all these motivations in varying degrees. Underlying them all is the desire to practice medicine without distractions. The point is to understand how these motivations exist within your medical staff so you can engage physicians constructively.

Develop Alternative Solutions

After you have mapped your medical staff in terms of their motivations and aspirations, work with individual physicians and groups to develop alternative strategies for meeting their key needs.

Physicians with lifestyle priorities

Hospitals can take a variety of approaches to deliver on the needs of physicians with lifestyle priorities. For many, an employment arrangement will be the most effective means. Hospital employment can stabilize the practice environment for physicians and, within a large group, limit call demands. Well-run employed groups will also take many of the headaches of practice management away from physicians.
Physicians with financial priorities.

Hospitals are also in a good position to help physicians satisfy financial needs. The best way for primary care physicians to supplement their income is to develop sources of ancillary revenue. Hospitals can facilitate this by creating an employed multispecialty practice that incorporates both primary care and specialty physicians. CT, MRI, and other ancillary services structured within this group can increase physician income by 15 percent or more. In addition, improved practice management can lead to further improvements in billing and collections.

Procedural specialists who are focused on financial priorities often require a different approach. These physicians have many options before them, so hospitals should be willing to offer more. When working with surgical specialists, creating a joint-venture ambulatory surgical center (ASC) continues to be the best avenue. ASCs offer significant profit potential for physicians and great strategic value for hospitals.

Physicians with status needs

Hospitals can partner constructively with physicians who are focused on status by giving them opportunities for leadership. One effective approach is to establish a “center of excellence” within the hospital and appoint physicians to comanage it. For example, engage key neurosurgeons to provide leadership for a hospital spine center. You can also provide an ambitious physician with an opportunity to innovate in the area of care delivery—for instance, as medical director of a joint venture endoscopy center. Mapping your medical staff by needs and aspirations—and using the map to forge new physician connections—can help a hospital achieve a variety of financial, strategic, and marketing goals.

Case Study 1: Penetrating a New Region

A hospital in the Midwest struggled with a poor payer mix in its primary market. Recognizing the need to reduce its dependence on this market, it sought to expand into a secondary market with more favorable financial demographics. The organization identified key surgical specialties it needed to develop, then took the extra step of engaging a number of surgeons in discussions about their needs.

The talks revealed that the physicians were dissatisfied with schedule access, turnover times, and anesthesia coverage at the local hospital’s OR. In addition, the surgeons were looking for investment opportunities to supplement their income.

The hospital offered to partner with the surgeons on creation of a joint-venture ambulatory surgery center. The ASC was run using a new collaborative leadership model. A group of surgeons established the center’s direction, and day-to-day management was shared between a medical director and the OR nursing director. Through physician leadership, the ASC emphasized efficient perioperative processes and engaged a service-oriented anesthesia group. Over several years, the center provided a 68 percent annual return to the surgeon investors and created a significant new revenue base for the hospital.

Case Study 2: Protecting a Key Revenue Stream

A hospital in the Midwest depended on cardiology for more than 30 percent of its total revenue. The problem was that its cardiology staff was aging, and recruiting new providers to the community was difficult. Salary expectations exceeded local benchmarks, partly because of the age, payer mix, and seasonality of the local patient population.

Discussions with the cardiologists revealed a wide range of financial needs, many of them stemming from practice management inefficiencies. The hospital addressed these problems by partnering with the physicians to develop a cardiovascular institute.

The institute was governed by a board made up of both hospital administrators and physicians. By incorporating ancillary services and cardiac rehabilitation, the institute provided new sources of income for the physicians. Better practice management resulted in better revenue cycle performance, and improved infrastructure and IT support led to a better practice environment. Altogether, these enhancements increased physician income by approximately $100,000 per provider. The institute also provided attractive leadership opportunities for several physicians.

The improved practice environment and income potential enabled the hospital to recruit two new cardiologists within six months and stabilize its crucial cardiology market share for the long term.

Three Guidelines for Negotiation

Medical staff mapping can help healthcare leaders manage the natural conflict between hospitals and physicians—both the financial conflicts and the conflict of diverging goals. Because relationship building is at the heart of this strategy, it is important to keep in mind three negotiation parameters:

  1. Be open to working with all segments. If physicians perceive that the hospital is doing backroom deals with a select few, you will end up alienating large sections of your medical staff. Although you cannot offer the same opportunity to every physician, make it known you are willing to explore possibilities with every segment.
  2. Realize you cannot work with everyone. Although you are open to working with every member of your medical staff, understand that some physicians simply are not suitable negotiation partners. If an individual or group clings to irrational expectations or cannot display basic courtesy, you will not be able to develop a shared vision or work together constructively.
  3. Make sure every arrangement makes good business sense. Before you enter into any agreement—whether it is an employment arrangement, a joint venture, or a new program—make sure the financial or strategic benefits are in line with the costs. Identify objective measures of success, and build them into the agreement. Develop mechanisms for holding each party accountable for its responsibilities and performance.

The ultimate value of medical staff mapping is that it bridges the gap between a basic medical staff development plan and a set of strong physician relationships. Taking the time to create a shared vision and workable goals with a wide cross-section of physicians will pay off in a high degree of integration between your hospital and its medical staff.

Strategic Provider Planning, Specialty Mix

Topics: Physician Practice Solutions, Physician Recruitment, Physician Acquisition, Physician Acquisition Strategy, Medical Staff Development, Medical Staff Mapping

Top 9 Physician Recruitment Perks Offered (Other Than Salary)

Posted by Matthew Smith on Nov 29, 2012 11:05:00 AM

Physician RecruitmentSalary is the most basic component of any physician recruitment and compensation package, but what are the most common benefits outside of salary that hospitals and practices offer physicians? 

According to Merritt Hawkins' 2012 report of physician recruiting incentives, there are several primary perks, including signing bonuses and payment for continuing medical education. Here are nine of the most common benefits, based on the study's examinations of physician job searches last year.

1.    Malpractice insurance (offered in 99% of searches)
2.    Pay for continuing medical education (98%)
3.    Health insurance (97%)
4.    Relocation allowance (95%)
5.    Retirement benefits (82%)
6.    Signing bonus (80%)
7.    Disability (75%)
8.    Education forgiveness (26%)
9.    Housing allowance (5%)

Strategic Provider Planning, Specialty Mix

Topics: Employed Physicians, employed physician practices, Physician Practice Solutions, Physician Recruitment, Physician Onboarding, Physician Acquisition, Physician Acquisition Strategy, Physician Practice Acquisition, owned physician practices, Physician Employment Models

6 Steps to a Better Physician Practice Acquisition Strategy

Posted by Matthew Smith on Oct 31, 2012 8:58:00 AM

Physician Acquisition StrategyFor a number of solid reasons, your hospital has decided to pursue a physician employment strategy. You clarified your goals and identified a physician group that you think is a good candidate for acquisition. Now comes the hard part.

How do you bridge the gap between hospital and physician economics? How do you negotiate with an organization that in some ways is more a collection of individuals than a unified group? Hardest of all, how do you overcome the historical conflicts that often characterize hospital-physician relations?

Hospital leaders across the country are finding that physician acquisition takes more than just dangling the right carrot. You need to iron out hundreds of financial, organizational and often personal details before you can reach a workable agreement.

Although the issues are complex, working through them does not have to be chaotic. The key is to focus the negotiation process on addressing each party’s priorities, concerns and values.

Critical Situation

The challenge in most practice acquisitions is that the stakes are high. That was the situation faced recently by Northern Michigan Regional Hospital, a 243-bed facility in Petoskey, Michigan.

Like many referral hospitals, Northern Michigan depends on its cardiology services both financially and strategically. In 2004, the hospital opened an $11 million heart and vascular center. In 2007, cardiology generated 22 percent of net revenue. At the same time, the hospital’s cardiac care program has been facing increasing competition from other regional providers. In spring 2007, Northern Michigan’s leadership assessed the challenges facing its cardiology program. One issue that stood out was the fact that the service line’s success depended almost entirely on a single seven-member cardiology practice, Michigan Heart and Vascular Specialists (MHVS). The problem was that MHVS was experiencing significant challenges, including serious difficulty recruiting new physicians.

Compensation was not competitive on a national level, several members were nearing retirement and a recently recruited cardiologist was considering leaving the group. In addition, internal conflicts meant the group was not well positioned to deliver on the hospital’s service, quality and operational goals.

Together, these problems were a major threat to Northern Michigan. Without the ability to grow and move forward on service goals, the hospital’s heart and vascular center was in serious danger. The only way to ensure the level of service the hospital depended on was to employ the physicians directly. In August 2007, Northern Michigan entered discussions with MHVS about acquiring the practice.

Obstacles & Concerns

From the start, the negotiations faced many obstacles, and each party came to the table with serious concerns.

On the hospital side, apprehensions centered around economic and organizational risks. The board was ambivalent about the acquisition concept, and several members expressed the need for assurance that the physicians would align themselves with hospital goals.

On the physician side, concerns focused on control and independence. Although the cardiologists were interested in employment, they were not quite ready to become “employees.” They also had multiple concerns related to compensation.

One complicating issue for Northern Michigan was what to do with the approximately 50 staff members employed by MHVS—from the practice administrator to receptionists, coders, billers and others. Adding these employees to the hospital benefit structure would make the group financially unsustainable.

Each side also brought its special handicaps to the table. Hospital administration had little understanding of physician practice management. At the same time, the cardiology group did not have an effective leadership structure. Decision making among the physicians was a difficult process and it was not clear who, if anyone, was empowered to negotiate on behalf of the group.

Underlying all these issues was a history of mistrust between the hospital and the cardiology group. Each party brought wariness to the negotiations and a fear of becoming trapped in a bad agreement.

1. Open up the lines of communication

Physician acquisition is a major step for both sides of the transaction, and it can supply the perfect environment for suspicion and rumors. To keep mistrust from sinking the deal, hospital and practice leaders need to keep everyone fully informed at all times.

During the recent employment negotiations, Northern Michigan and MHVS created several lines of communication:

Was it an impossible situation? Actually, in less than 12 months Northern Michigan and MHVS were able to overcome the obstacles to create a comprehensive, hospital-owned, fully integrated cardiology practice.

Goodwill played an important role—and so did careful management of the negotiations. During the process, six practical points emerged as guideposts for developing a successful physician employment agreement:

  • Biweekly teleconferences. The hospital and the medical group held a 7:30 a.m. teleconference every two weeks to provide updates on decisions and next steps. All physicians were invited to phone in for the conference.
  • Whole-group meetings. Practice administration held several all-physician meetings to discuss concerns and vote on interim agreements.
  • Compensation committee. A working group made up of three physicians and one hospital representative met regularly to study and refine compensation plan models. The physicians reported back regularly to the rest of the group.
  • Overnight retreat. At a critical point, hospital leaders and all seven physicians convened for an offsite, day-and-a-half retreat to hammer out the details on the most difficult outstanding issues.

In addition to verbal interaction, written communication proved to be very important. Written meeting minutes, written work plans—even written invitations to meetings—provided clarity and an extra layer of credibility. Documenting decisions was critical for keeping the process moving forward.

One of the most effective communication tools was simply good data. During compensation discussions, national and regional benchmark data and historic practice data were instrumental in persuading physicians that the agreement would have a positive financial impact.

2. Build strategic and financial goals into compensation

The biggest danger in a practice acquisition is the risk that the employed group will fall short of critical economic and service-related goals. Northern Michigan minimized this risk by incorporating financial and operational targets into the physician compensation plan.

The finalized physician pay plan has three components—a base salary, a productivity incentive and a quality incentive. All three components work together to align physicians with hospital goals:

  • The base salary, a percentage of a national benchmark, provides group members with a degree of stability in compensation.
  • The productivity incentive is based on practice revenue targets.
  • The quality incentive rewards physicians for achieving specific organizational quality and service goals (improving patient/referring physician satisfaction, core measure compliance, outreach participation, cath lab operations, etc.).

Both incentive components are based on group—not individual— achievement, minimizing the risk of internal competition and giving physicians additional motivation to work together to meet financial and servicerelated goals.

The compensation plan also supports the hospital’s recruiting goals. It includes a first-year salary guarantee for new physicians and support for current physicians impacted by practice expansion.

Most importantly, the complete package is competitive within the national cardiology market. By providing both pay stability and the opportunity to increase compensation, the plan supports the long-term viability of Northern Michigan’s cardiology service line.

3. Leave day-to-day operations to physicians

While many physicians today are interested in employment, most do not want to give up their autonomy. At the same time, the typical hospital administrator does not have the expertise to run a physician practice. Northern Michigan and MHVS addressed both issues through governance design.

Under the employment agreement, decision-making responsibilities for the practice are divided between two bodies—a physician oversight committee and a board of trustees.

The physician oversight committee consists of three doctors selected by the physician members of the practice. The committee has full control over all day-to-day operations. Responsibilities include office administration (hours, staffing, expenses), physician scheduling (call, vacations), physician performance reviews (including bonuses) and other internal issues.

The group’s board of trustees is made up of three hospital administrators, three physicians and the medical director of the heart and vascular center. The board is responsible for enterprise-level decisions, including budgeting, physician recruiting, hospital operations, compensation planning and strategic planning.

Delegating operational issues to the practice preserves physician autonomy, keeps the doctors active in performance- related decisions and retains ground-level practice management expertise. Vesting overall authority in a hospital-controlled board ensures that practice decisions are aligned with organization-wide goals.

4. Take advantage of the peer effect

When it comes to issues like care standards and clinical workflows, hospital leaders have little credibility with physicians. The only way to make headway on these matters is to leverage the perspective of other physicians.

Northern Michigan addressed its service concerns by contracting with a cardiologist from outside the area to work with the MHVS physicians on a peer-to-peer basis. The consulting cardiologist conducted several group teleconferences and spent two days meeting with every physician individually.

He evaluated the group’s service model and made recommendations regarding patient access, call responsibilities, referral relationships and clinical processes. Most importantly, he was able to win the trust of the other physicians. They accepted his recommendations and incorporated several changes into their practice model, including the optimal use of mid-level providers.

The peer effect was also important in persuading physicians to embrace organizational change. During the MHVS negotiations, one member of the group emerged as a strong advocate for employment. An internal physician champion can help build trust, smooth communication between physicians and the hospital, align agendas and facilitate the acquisition process.

In general, outside experts who are independent of the hospital can be effective at resolving issues that are hard to address head-on. As part of the acquisition process, MHVS engaged an industrial psychologist to work on internal dynamics.

Through facilitated discussions, the psychologist was able to help the physicians improve their communication and sense of teamwork, ultimately positioning them to be more valuable as an employed group.

5. Create safeguards against common pitfalls

There are many reasons why a physician employment arrangement can fail. One of the most important tasks of the negotiation phase is to build in protections against those pitfalls.

One common hazard is neglecting to perform complete due diligence. If a hospital does not fully grasp a practice’s financial situation, it could be making a big investment in a costly problem.

Due diligence should include an audit of the physician group’s revenue cycle performance. A revenue cycle audit lets a hospital gauge not only the current value of a practice, but also the time and resources required to maximize the organization’s investment.

In addition, financial planning for an acquired practice requires special attention. Hospital budgeting is different from medical group budgeting. Formulating a realistic five-year projection based on medical group reimbursement performance will help ensure that the acquired practice contributes predictably within overall hospital finances.

Practice management is another common pitfall. While daily decision making is best left to physicians, hospitals need to pay careful attention to the hospital side of practice operations.

Northern Michigan hired a cardiac service line director to keep the entire heart care enterprise on track. The director is responsible for making sure the heart center achieves quality and service targets and meets hospital goals for volume and growth.

An additional pitfall is the risk of disrupting the acquired practice’s organizational infrastructure. To maintain group business operations, Northern Michigan retained more than 95 percent of MHVS’s office staff.

To accommodate these employees without overwhelming the practice’s expense structure, the staff were employed (along with the physicians) in a separate non-profit corporation with a separate set of benefits. The employee benefits of the new corporation mirror the package formerly offered by the group.

6. Create multiple exit pathways

One of the biggest obstacles to putting together a practice acquisition agreement is the fear of getting stuck in a bad arrangement. Negotiation leaders can mitigate this risk by clearly spelling out how each party can exit the employment agreement if it simply does not work out.

The agreement finalized between Northern Michigan and MHVS includes a three-year non-compete clause. It provides an avenue for physicians to return to private practice as part of an organization that does not compete (and is not affiliated with an entity that competes) with Northern Michigan.

While it may feel pessimistic, a clear exit strategy actually helps both parties come together with confidence and maintain the positive attitude necessary to work out problems that arise along the way.

Patience rewarded

Because negotiating a physician practice acquisition is detail-intensive, the process rewards organizations that are patient, focused and willing to work together to discover solutions.

Thanks to the careful approach pursued by Northern Michigan and MHVS, the employment arrangement they forged is working well, with strong physician commitment to meeting organizational objectives and effective collaboration between physicians and hospital leaders.

Taking the time to structure a strong employment agreement can ensure that all parties achieve their strategic, financial and professional goals.

Strategic Provider Planning, Specialty Mix

Topics: Employed Physicians, employed physician practices, Physician Acquisition, Physician Acquisition Strategy, Physician Practice Acquisition

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