As detailed in our CEO's biography, our Group has a unique advantage with our CEO having negotiated hundreds of hospital's physician contacts over the last 24+ years as a Hospital General Counsel and health system CEO/CFO/COO. She has also negotiated hospital contacts on behalf of many Physician Groups, including employment contracts and partnership agreements. She has expertise as a Corporate Officer of many Joint Ventures, Independent Physician Associations (IPAs), nonprofit hospitals, and a large publicly traded for profit organization. As hospital leader she fully comprehends the flexibility necessary to structure and negotiate the best overall contract to be able to achieve a competitive and equitable agreement for both parties. In her prior roles as a Compliance Officer, she gained a keen understanding of how to avoid the potential pitfalls of the Anti-Kickback Statute and Stark Law issues. None of our competitors have 24 years' experience in hospital legal roles as well as senior hospital operations roles. It's a niche market and we love advocating on behalf of hospitals and physicians!
Here are just a Few of the Types of Hospital Contacts We Negotiate:
Hospital Service Agreements & Professional Service Agreements
Group Stipends & Subsidy Arrangements
Medical Director Agreements
Joint Venture Agreements
Income Guarantees & Revenue Guarantees (& Repayment Obligations)
Hospital buy-out of practices (and asset valuations)
Independent Physician Associations and Medical Service Organizations
Payor Mix Stipends
Operating Room Un-utilized or Underutilization Pay
Reasons Why Physicians Get Paid Less Than Fair Market Value
Often Physicians don't have the time to conduct a full due-diligence assessment. We specialize in mining the right data so that the information being relied upon that which is considered the “gold standard” in terms of reliability and metrics that are sound. Information is power.
Also, we've found a significant proportion of Physicians don't feel confident in negotiating for themselves or their group. This is common across a myriad industries. While you can be a very effective advocate for others, when it comes to negotiating for yourself, you need a professional with a fresh perspective that can help be objective in evaluating the most favorable terms for your or your group. That's where we come in.
Due Diligence Approach in Working with Physician Groups
Negotiating in a vacuum is almost always the source of an inequitable deal. We utilize a due diligence approach when defining which key parameters to negotiate and leverage a symbiotic agreement between hospitals and physicians. The data we incorporate is a catalyst for defining why the current contract terms or the proposed terms could result in a below-market outcome.
As part of our due diligence approach, we utilize each hospital's key data to demonstrate how the hospital is performing versus how its physicians are performing for use in our negotiations. Risk and reward should be shared fairly between the hospital and its physicians to balance out any one-sided terms or performance measures.
The following are examples of hospital contracts where fair market value was a challenge:
- Required staffing levels that are inequitable (e.g. “staffing up” for more operating rooms than there are patients scheduled or underutilized or un-utilized surgical block times)
- Compensation below fair market value, which most often should be between the 50%ile and 75%ile depending on the specialty (or higher data depending on productivity or unique qualifications)
- Contracts that result in reimbursement that is unreasonable given the scope of responsibility
- Unpaid duties (sometimes undefined duties keep being added without commensurate compensation)
- Unreimbursed patient care (nonprofit hospitals must accept uninsured patients but that doesn't always mean that should apply to its Physicians for non-emergent care)
- Cross-coverage for other Physicians or groups required by the Hospital but without commensurate reimbursement
- Excessive on-call coverage for the ER (the hospital may need to hire Locums or Hospitalists to ensure fair on-call requirements)
- Expensive malpractice requirements (e.g. high-risk patient populations)
- Federal and State funding for disproportionate share reimbursement is not shared appropriately.
Our Approach in Working with Hospital Administrators
We endeavor to achieve a win-win philosophy when working with Hospital Administrators. Hospital administrators are complex problem solvers. Managing a hospital or healthcare system is not easy! Reimbursement (or the lack thereof) is becoming more challenging and confusing every day, and hospital administrators must make decisions based on incentives that keep the hospital running, not necessarily based on whether a particular physician group contract is able to operate in a fiscally sustainable way.
If a department (or contracted service) is bringing in sufficient revenue or serving an organizational mission, often the hospital administrator assumes that there is a fair exchange for both the physician(s) and the hospital. However, more often than not, this is not accurate. ‘No margin, no mission' applies to both the hospital and its physicians.
Engaging the hospital in a mutually beneficial collaboration yields results in which both parties emerge better off and yet not at the other's expense. Hospitals need each specialty to be able to provide care across the continuum of specialists. If one specialty or group can't sustain themselves, this jeopardizes care at that hospital and sometimes in the community at large resulting in patients traveling long distances to receive specialty care.
Managed Care Pitfalls
A common issue we see with hospital-based physician groups is that hospitals often require them to accept all managed care contracts that the hospital itself accepts. While a contract may make sense for the hospital (e.g. the money they “lose” on certain services can be made up on other services, for example, diagnostic testing), it may put a huge burden on the physician's practice. Many of our physicians/physician groups have never negotiated a managed care agreement, let alone have an in-depth understanding of all the contracting rates and changes in reimbursement that have become more prevalent with all the ACO changes and health care reform.
It is imperative to negotiate a reciprocal agreement, as both partis share a common interest in serving the community, which includes a mutual duty to ensure the best practices and industry protocols are being implemented and followed. This is compromised when a practice's financial viability is at issue. Both should be able to negotiate their reimbursement rates independent of each other to protect their own interests, or should those rates be too low, hospitals should allow the physician/physician group to opt out of any unreasonable contracts.
Cookie-Cutter Hospital Contracts
Hospitals typically require physicians and groups to utilize their boilerplate or templated contracts for Professional Service Agreements, Hospital Service Contracts, and Employment Agreements. They have their attorneys draw up these contracts so that they are utilizing contact language that favors them throughout the contact, often beginning with a version highly prejudiced to them. They may say, “we don't negotiate contact terms or language” but in our experience 95+% of the time there is room to negotiate at lease some, if not all, of the terms or language to reflect better terms.
For large groups, sometimes this can mean involving the corporate office, especially for large increases in subsidies and stipends. For example, a local hospital CEO might need the health system CEO or designee to agree to fund, for example, an Anesthesiology Stipend that puts the anesthesia group back into a range from the 50%-75%ile. Sometimes, contact changes require the Corporate Legal team to approve any modifications.
For them, it's easier to have every contract be the same, but each hospital's key indicators are different. For example, in areas where health insurance coverage is low, ER's take up the slack and become the default provider to patients without insurance. Paying a higher rate for ER physicians in these areas is justifiable because ER care is how many patients get access to a system and those services that do make more money for the hospital.
Another example, in areas of the country where malpractice liability is higher (due to either a lack of tort reform or other issues) or hard to get, you see those specialties becoming rare. This means more patients are leaving that geographical area for that type of specialty care. Then the hospital misses out other “down-stream” ancillary revenue. In these situations, hospitals can subsidize some of all of the malpractice cost or provide this coverage themselves (sometimes they are able to get better rates and sometimes they use self-insured products or offshore captives to limit exposure).
We make sure that productivity formulas and other contractual obligations start with a good foundation that is based on fundamental fairness. We make sure physicians have a strong understanding of what it's going to take to achieve those contact terms, especially in achieving their productivity bonus or incentives. One item we like to review is whether prior physicians in those roles have been able to achieve some or all of the productivity incentives. If it hasn't happened for the last 3 physicians in that same role, is there something wrong with the required terms or environment that makes it impossible to achieve those goals?
Hospitals and physicians come out ahead when both are highly effective and efficiently working together in collaboration. Often, we are able to restructure agreements to achieve the goals of both parties for a win-win outcome for both parties.
Payor Mix Concerns
It is important for physicians and physician groups to understand challenging payor mix ratios before signing a hospital contract. In areas of the country where there are access to care issues, physicians often end up seeing a higher ratio of patients that are emergent or who need stabilization because these patients' lack insurance and it's a requirement of EMTALA (i.e. ER Physicians, OB/GYNs, and other specialties).
Sometimes a payor mix stipend or various types of subsidies can be used to make up the difference between uninsured rates or under-reimbursement rates. Additionally, if a specialty physician sees an adversely large number of uninsured patients, there should be a stop-gap agreement that reimburses that provider or group consistent with market rates applicable to that geography and specialty.
This ensures no one provider or group sees more than their share of low or non-paying patients, especially on elective or non-emergent care.