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From Independent Medical Practice to Hospital Employment: A Physician’s Perspective

March 2012, Vol 2, No 2

On March 1, 2010, Consultants in Blood Disorders and Cancer (CBC), PSC, in Louisville, KY, sold all its assets to Baptist Medical Associates, a division of Baptist East Hospital, and the physicians became employees of the hospital.

The events leading up to this decision culminated over several years and are not unique to this particular oncology/hematology practice. However, the outlook for this medical practice almost 2 years later may be unique.

Michael D. Kommor, MD, current President of CBC, shared his insights and experiences with me as his practice made this transition from an independent practice to hospital employment.

Three years ago, the physicians at CBC were beginning to face financial and market challenges that would not only affect long-term patient care but also compensation and the overall viability of the practice. Revenue reductions were the result of different reasons, beginning with the reduced reimbursement for available generic drugs.

The use of oral generics enhances the ability of patients to directly purchase and administer many medications that were previously administered in the office, and the widespread reduction in insurance reimbursements significantly contributed to the monetary decline. In addition, the recent implementation of electronic medical records required a substantial capital investment.

The Options
The group began to explore options that might reduce its financial risks, as well as offer the providers a more stable income and increase the level of patient care. The options considered included:

  • Consolidation with other practices
  • A joint venture with a hospital
  • Selling the practice to a hospital and becoming hospital employees.

After careful study and weighing all the options, an agreement was entered with Baptist Hospital East to purchase the practice, with each individual provider entering into a separate employment contract with the hospital.

The hospital presented a “captured practice model,” in which the medical practice would be acquired by the hospital, but the hospital would not manage the practice.

Through the cooperative management of Baptist Hospital East, the transition was nearly seamless: there were no interruptions of any kind in patient care. The group was allowed to continue to practice their most important operating systems.

The Benefits of Partnership
The hospital management took on the responsibility of employee benefits and management, and subsequently increased the value of these benefits, contributing to higher employee morale. The assumption of these clerical and administrative tasks also affords the members more time for patient care. Of course, one of the most popular benefits is an increased compensation level for the individual members.

The partnership with Baptist Hospital East has afforded the practice many more opportunities to improve care and facilities. An up­graded pharmacy and laboratory were made available, encompassing all the latest protocols, a feat that most likely would have been beyond the reach of the private practice.

The hospital’s ability to procure the best possible pricing for drugs and for supplies further enhances the elements of financial success. More important, patient care has been substantially improved by using the hospital “forum” concept.

This pro­cess affords doctors of different specialties—thoracic, radiation, pathology, and oncology—the time to collaborate on individual patient care.
Meeting weekly, this previously unbillable time is now not only compensated by the hospital but is a requirement of the institution. The ability to share expertise and compare and explore the effects of various types of care adds a dimension of care heretofore unavailable

Some of the downsides have been complaints by patients about the addition of facility fees that are being billed by the hospital. Also, the doctors are busier now than before, because there are more meetings and committee memberships, along with more regulatory requirements under the hospital system.

The physicians are also expected to cover more locations than they had in the past. However, being a formal part of the hospital network, the physicians now talk to more primary care physicians to consult with them on patient care, and the un-billable time they spend in these meetings and consultations is being funded by the hospital, as part of their patient care initiative.

Expert Advice
Dr Kommor offers the following advice for any practices pursuing a similar relationship:

  1. Compare the practice model of your group and the new partner to make certain they align
  2. Weigh the quality-of-care issues that may affect overall patient well-being and treatment
  3. Consider how location changes and additions may challenge individual lifestyles
  4. Although compensation is a major consideration, secondary benefits can outweigh the cost of change
  5. Evaluate how the arrangement will affect your current patient flow and referral network
  6. Consider an early and enthusiastic commitment to this process that could yield the additional benefit of helping to shape the oncology vision for the hospital.