At the edge of Chicago in suburban Oak Park, Ill., Sally Pinkstaff, M.D., could be said to be sitting pretty.
Pinkstaff is part of a small endocrinology practice called Endocrine Associates. Though not employees of Oak Park Hospital, she and her colleagues run their practice out of an office located in a former wing of the hospital.
The hospital pays for the physicians' overhead as well as hiring and paying for all office personnel of the group, which fluctuates between four and five physicians.
"We don't rent the space, and we're not employed," Pinkstaff says. "We're basically independent contractors for a projected amount of outpatient business and revenue generated for professional services."
The arrangement has a number of advantages, Pinkstaff says. But she's just as quick to note things weren't always so good.
In fact, her current arrangement followed a much more trying one, where in the midst of failing contract renegotiations, the hospital from which she and her colleagues rented office space eventually changed the locks on the physicians' office doors.
Such is the range of possibilities in physician-hospital tenant relationships these days: good, bad and occasionally ugly.
One thing it is not is invisible. In fact, some observers suggest, the relationship may be poised to re-enter the spotlight.
"Healthcare is returning to back-to-basic, tried-and-true strategies, especially with the collapse or obvious failure of some strategies of the '90s," says Alan Morrison, managing director of Z.A. Consulting in Jenkintown, Pa. "And one of the strategies that has worked a million times for hospitals is to put doctors into their medical office buildings, be it on the hospital campus, in a satellite facility or in large ambulatory care facility. It's nothing new, it isn't fancy, but it's been very, very, very successful when done right," he says.
"Right" is a relative term, of course. What works for hospitals may not necessarily work for physicians, and vice versa, especially when finances come into play.
When Northwestern Memorial Hospital in Chicago began leasing physician office space in its new downtown medical center, cardiologist Benjamin Lumicao, M.D., declined to make the move. Rather than continuing to rent space from the hospital, he transferred instead to an office across the street from the new facility.
"Renting space in the new building would have its advantages," Lumicao admits, pointing to the convenience of nearby ancillary facilities and ease of making rounds. "But so does not renting there. Renting space in the new place would cost me nearly double what I'm paying now--that's significant enough for me to forgo those advantages."
"Besides," he adds with a laugh, "I feel like I now have better boundaries between me and the hospital."
Trying to establish a mutually beneficial relationship between physicians and hospitals is a double-edged sword, says Tom Spreitzer, director of property management for Chicago-based Resurrection Health Care Corp. Resurrection operates four Chicago-area hospitals, plus those institutions' neighborhood satellite facilities and nursing homes affiliated with each hospital.
"Physicians are being squeezed so they are looking to downsize into smaller office spaces. And hospitals don't have as much capital as they've had in the past, so we're looking to cut costs wherever we can."
"I hate to be grim," he continues, "but it's a never-ending battle. And I don't see it getting any better."
Spreitzer has his hands full. At flagship Resurrection Medical Center alone, the system leases out 108 suites in its physician office building. Somewhere between 200 and 300 physicians are housed there, he estimates. The system leases another 66 suites in Evanston at St. Francis Hospital's physician office building.
Still, the symbiotic relationship between physicians and hospitals is likely to keep both sides at the negotiating table, he says. "Doctors can't exist without us, and we can't exist without a good relationship with the doctors." The upshot, in his view, is the physician-hospital tenant relationship "will become much closer in the future, so that both of us can survive."
For that to happen, several important elements must come together.
From Pinkstaff's perspective, a good physician-hospital tenant relationship--or any type of physician-hospital relationship, for that matter--is nigh impossible without fair and clear communication.
That's particularly essential when the contracts are as complicated as those involving physicians can be. Pinkstaff's group, for example, doesn't pay a specific amount of rent.
The physicians contract for a projected amount of outpatient business and revenue generated for professional services. Each quarter the two sides reassess the payment situation and even up the draw. Currently this process is based on projections, but she predicts they will eventually make quarterly adjustments based on actual figures.
"What's essential is following the rules of negotiations," she says. "Unfortunately, that doesn't happen between a lot of physicians and hospitals. Instead, it becomes very personality-driven and adversarial."
The biggest mistake, she says, is not defining common goals at the beginning of the meeting. These range from hiring and firing of support staff to appropriate removal of medical waste to who owns the patients' medical records. The second-biggest mistake? "Not defining the issues that you don't agree about."
"And once you've figured out how to compromise and agree on something that you didn't agree on, make sure that issue gets off the table and never gets on it again," says Pinkstaff, who also serves as the medical director of the diabetes center at West Suburban Hospital in Oak Park.
Once a lease agreement has been reached, neither side can afford to take it for granted.
Physicians tend to hold hospitals, at least informally, to a higher standard than they might other landlords. They generally expect a higher degree of professionalism from hospital landlords, particularly concerning patient issues.
Robin Uchitelle, M.D., found out the hard way that nonhospital landlords don't always understand the specific needs of physicians. When she was renting office space from a private individual, the River Forest, Ill.-based family practitioner recalls that she and her practice partner "had a lot of troublewith the heat and with the air conditioning, just to name two things. And I don't think the owner of the building really understood our needs in terms of why the temperature is so important for patients."
Uchitelle and her colleague rent office space in a building owned by West Suburban Hospital. "We haven't had any problems," she says. "Either the hospital is doing a better job, so the temperature issue hasn't come up, or they understand our needs and stay on top of it."
Says Morrison: "Physicians figure,and they probably should,that because of their relationship with the hospital, the hospital will be a good landlord. Physicians figure they have more influence over the hospital as a landlord than if they were just renting from a real estate developer.
"And they do," he adds.
Hospitals are not without their own expectations. Whether they're met, however, depends on a number of factors.
On the most basic level, those leasing office space to physicians are required by law to do so at fair market value. "So at heart, the hospital-physician tenant relationship is nothing more than a regular old lease arrangement," says David Anderson, a principal at Itasca, Ill.-based consultants Health Care Futures.
"Where it really gets interesting is the area of hospital ownership of all or part of physician practices," Anderson says. "A lot of hospitals over the years have acquired, in particular, primary care practices, in the hopes that they would drive referrals toward their hospitals and ancillary services."
Certainly hospitals can and do benefit from leasing office space to physicians. But loyalty to patients, rather than to the hospital, appears to strike more of a chord with physicians.
In Uchitelle's case, the close proximity of other West Suburban medical services has proven to be a major reason why she and her colleague like their current space so much. (In fact, they just signed another multiyear lease with the hospital.)
"We have X-ray downstairs, and a mammogram unit nearby, as well as a cancer center and a breast center," she says. "It's extremely convenient for our patients, and they really like it."
At the same time, she notes, "It's no secret that we're not on staff anywhere else. So the majority of our patients would use the West Suburban system anyway."
As Anderson puts it, "Many hospitals are learning that you may buy a physician's practice, but nobody buys the physician's heart."
Karen Titus is a Chicago-based healthcare and technology writer.