How Physicians Can Negotiate the Best Hospital Employment Deal —Physicians Practice

Keys:  Talk to Existing Staff.  Hire a Specialist Attorney.  Don’t Negotiate Directly.  Exercise Care—and Sleep on it Before Signing. 

James Doulgeris at Physicians Practice describes a common scenario where physicians agree to a buy out and later come to regret it:

The prospect sounds appealing: Your local hospital or hospital-owned medical group makes you an offer to join them. Money up front, the practice is run for you, reduced calls, no payroll, no expenses — you just do what you were trained to do and still get financially rewarded for doing well. Whether you go with a group or as a solo, the precedent is already well established — 65 percent of physicians are already similarly employed, a number that is rapidly approaching 75 percent.

A proposal is made and an agreement tendered. Assets are purchased, debt goes away, and you have guaranteed income, performance incentives, and benefits. It seems like heaven on earth, but the devil lives in the details. Dense and often misinterpreted small print rises to get you when you least expect it. But it is not just the small print; it is far more often the plain, unambiguous terms and conditions having to do with compensation that create problems.

Performance clauses are the most common cause of disputes and disappointments, particularly when compensation includes bonuses dependent on revenue-based goals. Not because they are unrealistic, and most often not because of the physician, but because there is often little or no marketing support, and little appreciation for the impact of payer mix because hospitals are reimbursed more generously than physicians.

Things are fine at first — the patients that follow you will make your initial payer mix more balanced but, over time, as your original patients thin out by attrition, the void is typically filled with lower reimbursing patients through the general referral system.

Complicating matters, hospitals are generally not very good at collecting deductibles and copays, causing your accounts receivable to mount, further impeding accessing performance incentives. Further, hospitals are also quick to send past due amounts to collections, alienating many patients and giving others incentive to drift to other physicians, further diluting patient volume in the most critical area, private insurance.

It gets harder and harder to achieve incentive income until, as often happens, you don’t.

These are an often repeated laments, and ones that are difficult to remedy. The obvious choice is to avoid the situation in the first place, however, with precedent having been set by predecessors, it is easier said than done. It’s no one’s fault, nor is it everyone’s fault, it’s just business.

The good news, Doulgeris reports, is that there are steps you can take to protect your interests.   Those steps involve being careful to investigate, hiring a specialist to manage the negotiation, and avoiding inserting yourself directly in negotiations.  Read the whole piece here.   

Find Out Keys to Successfully Negotiating a Healthcare Practice Sale to a Hospital 

More from James Doulgeris:

• Valuation Strategies for Physicians’ Practices
• Top 10 Changes in Patient Expectations (Part I)
• Top 10 Changes in Patient Expectations (Part II)
• How Market Resarch Can Position Physician Practices to Succeed
• The Five Biggest Medical Practice Marketing Mistakes
• Managing Patient Referrals, Retention, and Risk the Disney Way
• Physicians’ Online Reputations Under Attack from Turned-away Drug Seekers
• Medical Insurance Primer for Practice Staff