Download - Cardiology partnership options 2010
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Cardiology Partnership Options
2010
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Financial Pressure
• The increasing financial pressure that exists within cardiology practices is driving an increase in hospital collaboration
• Hospitals and cardiology practice both have motivations for collaboration
• A recent ACC/MedAxiom survey indicated that 2/3 of the 24,000 USA cardiologists to be integrated by years end
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Hospital Motivations
• Physician alignment• Performance imperatives• Physician staffing shortages• Hospital competition & physician loyalty• ED call coverage• Stability & growth in market share
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Cardiologist Motivations
• Personal income security• Mitigate reimbursement declines• Increasing private practice overhead• IT strategies• Work-life balance• Access to capital• Managed care pressures
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Options
• Employment• Lease• Practice merger• Stay the course
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EMPLOYMENT
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Key Elements of Employment
• Compensation• Asset purchase• Governance
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Contractual Issues
• Income guarantee• Term of employment agreement (5 & 10)• Negotiation of RWU conversion factor for the
term of the agreement• Fixing the RWU table (nuclear, cath bundling)• Termination of physicians• Operational control
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CompensationDirect Employment
FMV must be established for RWU (assume $52/RWU)Individual physician RWU compensation (no group model)
• Doctor 1 – 12,000 RWU’s/year = $624,000• Doctor 2 – 11,450 RWU’s/year = $595,400• Doctor 3 – 6,700 RWU’s/year = $348,400
Notes:• Expense side has no impact on physician compensation• Benefits are paid in addition to compensation• Purchase of practice assets is a separate transaction• “Provider based” non-invasive billing, purchase revenue stream• Better commercial provider agreements• Better benefits, mal-practice cost structure
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Compensation
• Physician Compensation– Conversion factor X individual RWU/physician– Compensation for non-RWU activities– Incentive plan (business and clinical targets)
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Asset Purchase
• Practice purchase (tangible & intangible)– Assets (equipment & real estate)– Medical records– Goodwill– Accounts receivable
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Governance/Management in Integration
Hospital Board
Hospital
Wholly Owned Subsidiary
Practice CV Service Line Co-management
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Governance Continuum
• Direct employment– Physicians have individual employment agreements– Physicians have a practice operating committee– Physicians have disparate medical directorships– Miss opportunity for full physician investment in hospital
operation• Advisory CV Council– Much like a clinical co-management program
• Practice line authority– The group has been delegated line authority over hospital
and practice operation
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Legal Residence of Physicians
• Direct employees of hospital• Employees of a wholly owned subsidiary• Employees of an existing hospital multi-
specialty group• Note: Some groups are employed by the
SYSTEM rather than any one hospital
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Decision-Matrix• Hospital “reserve powers”
– Set general parameters/approve budget– Set general parameters/approve strategic plan– Approve employment of physicians
• Authority of Subsidiary Board– Establish clinical objectives (M&M, ACO)– Establish business objectives (LOC, CPC)– Business development/improve patient access– Establish new clinical services
• Authority delegated to a “Physician Management Committee”– General practice operation– Elect/remove physician representatives from leadership– Physician schedule– Physician assignments– Physician compensation– Physician and staff discipline– Implement budget and business plan
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Practice Operation in Integration
• A “Physician Management Committee” has responsibility for:– day-to-day operations– determine distribution of compensation pool– “unwind”– top 1-3 executives– hiring/firing of physicians– authority to implement approved budget/business
plan– Re-negotiate employment agreement
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Employment• Pro’s
– Best time to sell (maximal practice value)– Income gains over structured timeline– Maximal Group-hospital alignment– Preparation for reform/global reimbursement– Greater market security– Potential for improved physician recruiting
• Con’s– Some loss of control– Heavy reliance on PBR– Will it resolve practice governance issues?– Changes in hospital leadership– Uncertainty regarding renewal (at 5 or 10 years)
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LEASE
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Lease
• Many of the same components as employment
• Negotiate PSA & Co-management Agreement• Establish a lease payment & Co-management
agreement $$ with FMV support• Lease a physician, sub-group of FTE physicians,
or the whole practice• Provider Based Reimbursement
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Lease
• Maintain practice assets and structure• Will not be able to secure full practice
purchase price• A viable alternative to employment• Theoretically works better when group works
at multiple systems• Still have option for group employment, and
practice sale in the future
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PRACTICE MERGER
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Practice Merger
• Governance considerations• Old competitive issues?• Compensation plan• Common call• Economies of scale• Duplication of services• Better position to negotiate with hospitals ,
payers, primary care networks• May not be enough, on its own