In contract renewals, Reiboldt said “money is always the biggest issue.” But with reimbursements down and future revenues uncertain, one way to mitigate economic concerns is to work doctors into an organization's governance structure. They don't necessarily have to be business partners, but physicians need to have a role as “functional decision makers,” he said. “You have to treat your doctors like partners. Most hospitals get it, some don't. You still have a few old-school CEOs who think that doctors are indentured servants and not partners.”
The other key issue affecting contract renewals is clinical integration. Having doctors involved in governance and decisionmaking can make the process smoother while also helping to identify areas where integration and reimbursement issues intersect.
Once they become employed, doctors never again have the leverage they had during negotiations to sell their practice, said Bob Collins, managing partner of the Medicus Firm, a Dallas-based physician recruitment firm. But they're finding ways to make up for it. “The biggest change is that physicians are becoming much wiser in the use of data for their own benefit,” he said. “They can come to the table showing they made this metric or that metric while showing how much direct and indirect revenue they generated.”
One sticking point that may arise in renewing an employment contract is that hospitals may decide they no longer need every physician who was part of a group practice they acquired. A hospital system may decide they only need 12 of the 15 physicians they hired when acquiring a 15-physician specialty group.
“If it's a good deal for 12 and a bad deal for three, (the doctors) are going to wish those three well,” Collins said. “The smaller the group, the greater the loyalty and the tendency to say 'All of us or none of us.' But the larger the group, the easier it is to say majority rules.”
Collins added that the most frequent disconnect in negotiations between doctors and hospitals is over the value of the physician practice. Doctors may want to include intangibles such as community goodwill in the value of the practice while hospitals only want to include the cold bottom line. He advised doctors, “Don't take it personally.” It often takes them some time to “get over the sticker shock.”
Contracts for newly hired physicians are also in a state of flux. Travis Singleton, senior vice president at Irving, Texas-based physician recruiter Merritt Hawkins & Associates, said organizations struggle to find the “Goldilocks Zone” where they offer physicians the right mix of a base salary and quality incentive payments. This struggle is reflected in his company's recent review of its physician searches, which found that fewer clients now are offering quality incentives to new recruits.
Between April 2013 and April 2014, Singleton said the number of Merritt Hawkins clients offering quality incentives to new doctors fell from 39% to 24%. “Clients are putting the brakes on this until they figure out how to do it,” he said.
But those that still offer quality incentives are basing a growing percentage of compensation on those quality metrics. In 2011, organizations that used quality incentives kept the level at around 5% of their compensation packages. That figure has increased to nearly 15%.