Your recent cover story (“Making physicians pay off”) highlighted a significant issue in our current marketplace. Hospitals are aggressively growing their employed physician networks. There are two questions, however, that many CEOs overlook in their quest for more FTEs: Why do we need to employ these physicians? And are the resulting operating losses a given? Competitive issues are driving the need to grow, while a focus on the strategic issues—although more difficult—might help systems avoid the problems that the article highlighted.
It is clear that as the reimbursement models change from a “do more, make more” model to a “do better, make more” approach, hospitals and physicians will need to get along and foster a mutually beneficial environment. A paycheck does not guarantee this result. Some of the most forward-thinking physicians may have no interest in an employed relationship. Hospital leadership needs to devote more effort to addressing the needs and wants of this group. Hospital management has a better understanding of the evolving healthcare landscape as a result of their professional contacts and educational opportunities.
Physicians simply don't have the time to devote to this and, as a result, have a much more limited understanding of what might be needed to thrive in the future. Hospitals should devote time and resources to educating their medical staff. Collaborative models need to have a non-employed component as well as folks on the payroll.
Losing $176,463 on each employed physician is the result of poor planning, unrealistic promises and the failure to foster meaningful physician involvement in the structure and operation of the physician program. Private physicians can run their practices and make a comfortable living. Unless physicians are hired for strictly strategic reasons, such as bringing a critical specialty to the community, the hospital network should be able to do so as well. Yes, ancillary services typically get stripped out of hospital-owned practices, but this does not have to make six-figure losses inevitable. Revised physician compensation models, consolidating locations into more efficient practices, and better matching staff to efforts will have a dramatic impact on operating margins.
As hospital margins shrink, leaders need to rethink their affiliation models and operating structures for their physician program. It's never too late to get things right.
Gregory MertzManaging directorPhysician Strategies GroupVirginia Beach, Va.