Twenty years ago, hospitals excessively employed physicians in anticipation of managed care, says Brad Logan, vice president, Physician Consulting Services, at Quorum Health Resources. "The hospitals ended up struggling to manage the relationships and the tactic failed miserably," he says. "The market today is similar. Hospitals are, yet again, employing physicians at high rates across the country. However, this time, the physicians are actually going to hospitals and asking to be employed."
As a result of the demand (and need) for increased physician employment, hospitals nationwide need to change their approach to managing the physician relationship – and learn to develop effective physician contracts that support physician satisfaction and ensure referrals to the hospital. Hospitals must do their homework, Mr. Logan says. He offers seven best practices for creating physician contracts.
1. Understand the marketplace. Both large and small hospitals should research their market demographics to understand which specialty physicians are needed. Populations with an active patient-base might require more orthopedics, while hospitals serving primarily older populations may need to pursue more cardiologists. Conduct a demand analysis in order to determine the number of full-time and specialty physicians the hospital needs to appropriately serve the market.
2. Determine appropriate salary benchmarks. Mr. Logan says many hospitals are contracting experienced physicians, and the influx of new physicians requires different salary benchmarks. When negotiating salary, Mr. Logan recommends using Medical Group Management Association benchmarks for mid-small practice physicians and American Medical Group Association benchmarks for larger practice operations and academically focused practices.
3. Determine a salary model. All contracts should include a base salary for the physician, as well as a production incentive. "If it appears that the particular market has a low case volume that might not generate enough income to attract a physician to that market, the typical model that applies is usually a straight salary model," says Mr. Logan. If the market supports a high likelihood of performance, a full contract is good for the physician. The production model contract can include one of the following: gross charges, percent revenue and percent of collections.
4. Include a patient satisfaction bonus. Include a 5-10 percent bonus potential in the contract based on patient satisfaction reports, which encourages physicians to represent the hospital well. Quality indicators, such as patient satisfaction surveys included in the quantitative metrics of the hospital, should be used to assess the bonus. "A movement to align physician and hospital incentives can improve the hospital performance and quality of care," says Mr. Logan. "Aligning incentives between the hospitals and physicians is really important."
5. Use clear and simple phraseology. Hospitals should keep contracts simple by using clear language the physician can understand. The contract model should be outlined in a short document, such as a letter of offer, so both parties have appropriate expectations for the partnership.
6. Ensure contract transparency. Hospitals should have an open discussion with the physician while constructing the contract. "Physicians are now more accustomed to different models of employment and they can recognize whether the contract is fair and balanced," says Mr. Logan. The open discussion allows for a strong hospital/physician relationship from the start.
7. Accommodate younger physicians. Hospitals may need to adjust old contract models to accommodate younger physicians. Mr. Logan says many young physicians are not willing to take on the 60-80 hour work week, as previous generations of physicians did. "Hospitals should recognize that younger physicians don't want the same lifestyle as the previous generation, and should adjust the model for someone who is going to be less productive," says Mr. Logan.
Learn more about QHR.
As a result of the demand (and need) for increased physician employment, hospitals nationwide need to change their approach to managing the physician relationship – and learn to develop effective physician contracts that support physician satisfaction and ensure referrals to the hospital. Hospitals must do their homework, Mr. Logan says. He offers seven best practices for creating physician contracts.
1. Understand the marketplace. Both large and small hospitals should research their market demographics to understand which specialty physicians are needed. Populations with an active patient-base might require more orthopedics, while hospitals serving primarily older populations may need to pursue more cardiologists. Conduct a demand analysis in order to determine the number of full-time and specialty physicians the hospital needs to appropriately serve the market.
2. Determine appropriate salary benchmarks. Mr. Logan says many hospitals are contracting experienced physicians, and the influx of new physicians requires different salary benchmarks. When negotiating salary, Mr. Logan recommends using Medical Group Management Association benchmarks for mid-small practice physicians and American Medical Group Association benchmarks for larger practice operations and academically focused practices.
3. Determine a salary model. All contracts should include a base salary for the physician, as well as a production incentive. "If it appears that the particular market has a low case volume that might not generate enough income to attract a physician to that market, the typical model that applies is usually a straight salary model," says Mr. Logan. If the market supports a high likelihood of performance, a full contract is good for the physician. The production model contract can include one of the following: gross charges, percent revenue and percent of collections.
4. Include a patient satisfaction bonus. Include a 5-10 percent bonus potential in the contract based on patient satisfaction reports, which encourages physicians to represent the hospital well. Quality indicators, such as patient satisfaction surveys included in the quantitative metrics of the hospital, should be used to assess the bonus. "A movement to align physician and hospital incentives can improve the hospital performance and quality of care," says Mr. Logan. "Aligning incentives between the hospitals and physicians is really important."
5. Use clear and simple phraseology. Hospitals should keep contracts simple by using clear language the physician can understand. The contract model should be outlined in a short document, such as a letter of offer, so both parties have appropriate expectations for the partnership.
6. Ensure contract transparency. Hospitals should have an open discussion with the physician while constructing the contract. "Physicians are now more accustomed to different models of employment and they can recognize whether the contract is fair and balanced," says Mr. Logan. The open discussion allows for a strong hospital/physician relationship from the start.
7. Accommodate younger physicians. Hospitals may need to adjust old contract models to accommodate younger physicians. Mr. Logan says many young physicians are not willing to take on the 60-80 hour work week, as previous generations of physicians did. "Hospitals should recognize that younger physicians don't want the same lifestyle as the previous generation, and should adjust the model for someone who is going to be less productive," says Mr. Logan.
Learn more about QHR.