How Did My Practice Change by Becoming Hospital-Employed James B Hermiller, MD, FACC, FSCAI St Vincent Medical Group St Vincent Heart Center Indianapolis, IN

Disclosure Statement of Financial Interest Within the past 12 months, I or my spouse/partner have had a financial interest/arrangement or affiliation with the organization(s) listed below. Affiliation/Financial Relationship Company Consulting Fees/Honoraria Speaker Bureau Abbott, BSC, and St Jude Lilly

Indiana Heart Institute Tom Linnemeier Cass Pinkerton Merged Groups Late 1990s

California

Can Traditional Private Practice Survive? Trends toward employment

Why join a hospital?

Why consider integration? Regulatory complexity becoming burdensome Pre-Approval for Nuclear Stress Test

Regulatory complexity becoming burdensome

Desire to reduce stress and pressure of management

Strength and leverage in size and alignment with hospital entitiy

Declining Reimbusement Increasing Practice Costs Why -- The Squeeze Declining Reimbusement Increasing Practice Costs

Why consider integration? In 2009, CMS reduced the relative value units assigned to specific cardiology-related procedures. The cuts ranged from between 10% to 40%, depending on the procedure, with nuclear imaging witnessing a 41% decline in reimbursement. This decrease continued the trend of the last decade. According to the American College of Cardiology (ACC), the value of RVU payments to physicians is just 50% of what it was in 1995.

Why consider integration?

Medical Home and ACOs

Accountable Care Organizations Components Patient population Government or private payer – well defined & long-term agreement Integrated providers: PCP’s, Specialists, Hospital Aligned suppliers (devices, pharmacy) Establish participation criteria

Payment Models Overuse vs Underuse Bundled payments/Episodic Treatment Compromise between fee for service and capitation CABG/PCI: one fee for facility/MD/inpatient/outpatient evaluation and follow up Multiple disciplines involved in care and decision making so underuseage should be limited

Disadvantages of integration You can’t force people to follow directions they deem arbitrary

Disadvantages of integration Loss of control Physician autonomy may be compromised Now we would have a boss We would be accountable to a corporate culture that may, or may not, have similar values Hospital bureaucracy may/would be frustrating

Who’s your partner?

Shotgun Wedding?

Agreed on a Philosophy We asked: does hospital have a similar vision Think of it as a first date What is their culture? What do they want out of the transaction? Are they looking for a partner, or a group of employees.

Negotiations What is the market position of the practice? Market competition? What is the age of the physicians in the practice? How is the practice performing – quality and financially? Do you practice at one or multiple hospitals?

Negotiations

Negotiated Governance How will the integrated group governed? Wholly owned subsidiary Straight employment Lease model How will the new entity report in the organization? How will decisions be made – operational and financial?

Money Matters

Valuations Practice valuation Compensation valuation Agree on who will perform the valuations One side provides a list, the other side picks from the list Don’t be afraid to interview the potential valuation companies – what other transactions have they done? Understand the concept of Fair Market Value (FMV)

Negotiate other terms What are the terms of the agreement What happens after the agreement expires What happens if compensation migrates from a production basis in the future Is employment for the physicians guaranteed? For how long? What happens to the employees of the practice? Are there key employees? Call coverage

Negotiate other terms Non-compete clauses? What happens if the market changes and productivity declines due to no-fault of the physicians? What other responsibilities does the acquired practice have? What happens to AR? Old debt obligations? Malpractice claims? Does either party maintain “reserve powers”

Dr Lemming

How has practice changed? Day to day – not a bit of difference Fewer headaches – primarily practicing medicine with less administration Strategic view – physicians more willing to take on a loss-leader for the good of the entire enterprise Decisions however take time to make and especially implement

Pulling on rope in similar direction

It’s Early

Final Thoughts – Eye on Ball

Thanks for your attention!