Category Archives: Physician Compensation

I’m Glad I’m not a California Hospital or Practice Administrator…

Posted on by • Posted in Competition, Health System, Hospital, Hospital Industry, Law, Non-Compete Agreements, Physician Compensation, Physician Contracts, Physician Employment, Retention, Talent Competition, Talent Management, Talent Pipelines • Leave a comment
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On January 1st, 2024 #AB1076 and #SB699, two draconian noncompete laws go into effect. It could put many #employedphysicians in a new position to walk away from #employeeremorse.

AB1076 voids non-compete contracts and require the employer to give written notice by February 14th, 2024 that their contract is void.

Is this a good or bad thing? It depends.

If the contract offers more protections and less risk to the employed physician, and the contract is void – does that mean the whole contract is void? Or is the non-compete voidable?

But for the hospital administrator or practice administrator, we’re about to witness the golden handcuffs come off and administrators will have to compete to retain talent that could be lured away more easily than in the past. But the effect of the non-compete is far more worrisome for an administrator because of the following:

The physicians many freely and fairly compete against the former employer by calling upon, soliciting, accepting, engaging in, servicing or performing business with former patients, business connections, and prospective patients of their former employer.

It could also give rise to tumult in executive positions and management and high value employees like managed care and revenue cycle experts who may have signed noncompete contracts.

If the employer does not follow through with the written notice by February 14th, the action or failure to notify will be “deemed by the statute to be an act of unfair competition that could give rise to other private litigation that is provided for in SB699.

The second law, SB699, provides a right of private action, permitting the former employees subject to SB699 the right to sue for injunctive relief, recovery of actual damages, and attorneys fees. It also makes it a civil violation to enter into or enforce a noncompete agreement. It further applies to employees who were hired outside California but now work in or through a California office.

What else goes away?

Employed physicians can immediately go to work for a competitor and any notice requirement or waiting period (time and distance provisions) are eliminated by the laws. So an administrator could be receiving “adios” messages on January 2nd, and watch market share slip through their fingers like a sieve starting January 3rd.

And what about the appointment book? Typically, appointments are set months in advance, especially for surgeons – along with surgery bookings, surgery block times, and follow up visits.

Hospitals may be forced to reckon with ASCs where the surgeons could not book cases under their non-compete terms and conditions. They could up and move their cases as quickly as they can be credentialed and privileged and their PECOS and NPPES files updated and a new 855R acknowledged as received.

Will your key physicians, surgeons and APPs leave on short notice?

APPs such as PAs and NPs could also walk off and bottleneck appointment schedules, surgical assists, and many office-based procedures that were assigned to them. They could also walk to a new practice or a different hospitals and also freely and fairly compete against the former employer by calling upon, soliciting, accepting, engaging in, servicing or performing business with former patients, business connections, and prospective patients of their former employer.

Next, let’s talk about nurses and CRNAs. If they walk off and are lured away to a nearby ASC or hospital, or home health agency, that will disrupt many touchpoints of the current employer.

Consultants’ contracts are another matter to be reckoned with. In all my California (and other) contracts, contained within them are anti-poaching provisions that state that I may not offer employment to one of their managed care, revenue cycle, credentialing, or business development superstars. Poof! Gone!

The time to conduct a risk assessment is right now! But many of the people who would be assigned this assessment are on holiday vacation and won’t be back until after January 1st. But then again, they too could be lured away or poached.

What else will be affected?

Credentialing and privileging experts should be ready for an onslaught of applications that have to be processed right away. They will not only be hit with new applications, but also verification of past employment for the departing medical staff.

Billing and Collections staff will need to mount appeals and defenses of denied claims without easy access they formerly had with departing employed physicians.

Medical Records staff will need to get all signature and missing documentation cleared up without easy access they formerly had with departing employed physicians.

Managed Care Network Development experts at health plans and PPOs and TPAs will be recredentialing and amending Tax IDs on profiles of former employed physicians who stand up their own practice or become employed or affiliated with another hospital or group practice. This comes at an already hectic time where federal regulations require accurate network provider directories.

The health plans will need to act swiftly on these modifications because NCQA-accredited health plans must offer network adequacy and formerly employed physicians who depart one group but cannot bill for patient visits and surgeries until the contracting mess is cleared up does not fall under “force majeure” exceptions. If patients can’t get appointments within the stated NCQA time frames, the health plan is liable for network inadequacy. I see that as “leverage” because the physician leaving and going “someplace else” (on their own, to a new group or hospital) can push negotiations on a “who needs whom the most?” basis. Raising a fee schedule a few notches is a paltry concern when weight against loss of NCQA accreditation (the Holy Grail of employer requirements when purchasing health plan benefits from a HMO) and state regulator-imposed fines. All it takes to attract the attention of regulators and NCQA are a few plan member complaints that they could not get appointments timely.

Health plans who operate staff model and network model plans that employ physicians, PAs and NPs (e.g., Kaiser and others who employ the participating practitioners and own the brick and mortar clinics where they work) are in for risk of losing the medical staff to “other opportunities.” These employment arrangements are at a huge risk of disruption across the state.

Workers Compensation Clinics that dot the state of California and already have wait times measured in hours as well as Freestanding ERs and Freestanding Urgent Care Clinics could witness a mass exodus of practitioners that disrupt operations and make their walk in model inoperative and unsustainable in a matter of a week.

FQHCs that employ physicians, psychotherapists, nurse practitioners and physician assistants could find themselves inadequately staffed to continue their mission and operations. Could this lead to claims of patient abandonment? Failed Duty of Care? Who would be liable? The departing physician or their employer?

And then, there are people like me – consultants who help stand up new independent and group practices, build new brands, rebrand the physicians under their own professional brands, launch new service lines like regenerative medicine and robotics, cardiac and vascular service lines, analyze managed care agreements, physician, CRNA, psychotherapist, and APP employment agreements. There aren’t many consultants with expertise in these niches. There are even fewer who are trained as paralegals, and have practical experience as advisors or former hospital and group practice administrators (I’ve done both) who are freelancers. I expect I will become very much in demand because of the scarcity and the experience. I am one of very few experts who are internationally-published and peer-reviewed on employment contracts for physicians.

Indiana system to pay $345M in case tied to physician pay

Posted on by • Posted in Corporate Integrity Agreement, Dept of Health and Human Services (HHS), False Claims Act, Health System, Lawsuit, Lawsuit Settlement, Leadership Integrity, Leadership Intent, Patient Referrals, Patient Volume, Physician Compensation, Whistleblower Lawsuit • Leave a comment
https://www.beckershospitalreview.com/legal-regulatory-issues/indiana-system-to-pay-345m-in-case-tied-to-physician-pay.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Indianapolis-based Community Health Network has agreed to a $345 million settlement to resolve allegations that, dating back to 2008, it violated the False Claims Act and Stark law.

The settlement, announced Dec. 19, stems from a whistleblower complaint filed in 2014 by the nonprofit health system’s former CFO and COO under the qui tam provisions of the False Claims Act. 

The United States filed suit against CHN in 2020, alleging that the system violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred in violation of the Stark law, which requires that the compensation of employed physicians be fair market value and cannot account for the volume of referrals. 

The U.S. complaint alleged that, starting in 2008, CHN’s senior management engaged in a scheme to recruit physicians for employment with outsized pay in an effort to secure profitable referrals. The salaries offered to cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons for CHN employment were sometimes up to double what physicians earned in private practices, the complaint alleged. 

The government alleged that CHN provided false compensation information to a valuation firm, ignored the consultants’ warnings about legal risks of overcompensation and awarded bonuses to physicians based on their referrals to providers within the CHN network. 

CHN said the $345 million settlement will be paid from its reserves, which reported operating revenue of $3.1 billion in 2022. The nonprofit system has more than 200 sites of care and affiliates throughout Central Indiana, including 10 hospitals. 

“This is completely unrelated to the quality and appropriateness of the care Community provided to patients,” CHN Spokesperson Kris Kirschner said in a statement shared with Becker’s. “This settlement, like those involving other health systems and hospitals, relates to the complex, highly regulated area of physician compensation. Community has consistently prioritized the highest regulatory and ethical standards in all our business processes.” 

The system said it “has always sought to compensate employed physicians based on evolving industry best practices with the advice of independent third parties” and “has always sought to provide complete and accurate information to our third-party consultants.” 

“When doctors refer patients for CT scans, mammograms or any other medical service, those patients should know the doctor is putting their medical interests first and not their profit margins,” Zachary Myers, U.S. attorney for the Southern District of Indiana, said in the Justice Department news release. 

“Community Health Network overpaid its doctors. It also paid doctors bonuses based on the amount of extra money the hospital was able to bill Medicare through doctor referrals,” Mr. Myers said. “Such compensation arrangements erode patient trust and incentivize unnecessary medical services that waste taxpayer dollars.”  

Under the settlement, CHN will enter into a five-year corporate integrity agreement with HHS in addition to its $345 million payment to the U.S.

Sweeping health reform takes a back seat for this election cycle

Posted on by • Posted in 2024 Election Issues, Cost Management, Cost Reduction, Health Policy, Health System, Healthcare Reform, Hospital, Hospital Industry, Medicare for All, Medicare Site Neutral Payment, Physician Compensation • Leave a comment

https://mailchi.mp/79ecc69aca80/the-weekly-gist-december-15-2023?e=d1e747d2d8

After a presentation this week, a senior physician from the audience of our member health systems reached out to discuss a well-trod topic, the future of health reform legislation. But his question led to a more forward-looking concern: 

“You talked very little about politics, even though we have an election coming up next year. Are you anticipating that Medicare for All will come up again? And what would the impact be on doctors?” 

As we’ve discussed before, we think it’s unlikely that sweeping health reform legislation like Medicare for All (M4A) would make its way through Congress, even if Democrats sweep the 2024 elections—and it’s far too early for health systems to dedicate energy to a M4A strategy.

Healthcare is not shaping up to be a campaign priority for either party, and given the levels of partisan division and expectations that slim majorities will continue, passing significant reform would be highly unlikely. 

Although there is bipartisan consensus around a limited set of issues like increasing transparency and limiting the power of PBMs, greater impact in the near term will come from regulatory, rather than legislative, action. 

For instance, health systems are much more exposed by the push toward site-neutral payments. How large is the potential hit? One mid-sized regional health system we work with estimated they stand to lose nearly $80M of annual revenue if site-neutral payments are fully implemented—catastrophic to their already slim system margins.

Preparing for this inevitable payment change or the long-term possibility of M4A both require the same strategy: serious and relentless focus on cost reduction.

This still leaves a giant elephant in the room: the long-term impact on the physician enterprise. 

As referral-based economics continue to erode, health systems will find it increasingly difficult to maintain current physician salaries, further driving the need to move beyond fee-for-service toward a health system economic model based on total cost of care and consumer value, while building physician compensation around those shared goals.

Medicare finalizes physician pay cuts as Congress considers stepping in

Posted on by • Posted in American Medical Association (AMA), Center for Medicare and Medicaid Services (CMS), Medicare Payment Advisory Commission (MedPAC), Medicare Reimbursement, Physician Compensation, Physician Fee Schedule, Primary Care • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

Last week, the Centers for Medicare and Medicaid Services (CMS) issued the final 2024 Physician Fee Schedule, which reduces overall payment rates for physicians by 1.25 percent, including a 3.4 percent decrease in the conversion factor for relative value units, compared to 2023. 

The rule also implements a new add-on payment for complex evaluation and management visits, which is expected to boost pay for primary care physicians.

The American Medical Association (AMA) strongly opposes these cuts and immediately appealed to Congress for a reprieve. In response, the Senate Finance Committee unanimously advanced a bill to the Senate floor that would reduce the conversion-factor rate cut from 3.4 percent to 2.15 percent, while also delaying reductions in Medicaid disproportionate share funding for safety-net hospitals. Senate Majority Leader Chuck Schumer (D-NY) has indicated he intends to assemble a broad healthcare bill, including some or all of these provisions, by the end of this year. 

The Gist: Physicians were hopeful that inflation’s toll on labor and supply costs would earn them a break from continued Medicare pay cuts, but CMS remains committed to reductions within its budget neutrality framework.

Earlier this year, the Medicare Payment Advisory Commission (MedPAC) recommended for the first time that physician payments be tied to an index of physician practice inflation, but that would require legislative intervention, which Congress has not taken up. 

The AMA calculated that Medicare physician pay has lagged inflation by 26 percent since 2001, pointing to burnout and large numbers of physicians exiting the profession as a result. 

Until calls for Medicare payment reform are heeded, physicians, like health systems, will have to adopt new, lower-cost models of care to cope with what they will continue to see as insufficient reimbursements.

Physician Flash Report: Q3 2023

Posted on by • Posted in Physician Compensation, Physician Productivity, Physician Subsidy • Leave a comment
https://www.kaufmanhall.com/insights/research-report/physician-flash-report-q3-2023?utm_source=mkto&utm_campaign=physician-report&utm_medium=em&utm_term=q3-231102&mkt_tok=NjU0LUNOWS0yMjQAAAGPL9fvKzCCo1yvOrGiSvhy0-t5–VjENs1Ks4XXQJpQy7Z-G6Vx0UmDTOTaG6FKy-rttEiqWJglijrIfiQmyiVBmAI2zvwD0HdugwfVHjZ7iHm

Above Chart: Q3 2023 Key Performance Metrics Summary

Physicians are operating at record-high levels of productivity compared to recent years but receiving less pay per unit of work. The median investment/subsidy per provider continues to increase, but the pace is slowing with only a 1% change from Q3 2022 to Q3 2023.

The October issue of the Physician Flash Report features the most up-to-date industry trends drawn from the same data physician groups use to track their finances and operations. For more detailed benchmarks by specialty or custom peer groups, please email PhysicianFlashReport@kaufmanhall.com.

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Employed physians at Allina Health vote to unionize

Posted on by • Posted in Health System, Hospital, Hospital Industry, Labor Spend Management, Labor Union, Physician, Physician Compensation, Physician Workforce • Leave a comment

https://mailchi.mp/59f0ab20e40d/the-weekly-gist-october-27-2023?e=d1e747d2d8

Around 400 primary and urgent care physicians, along with 150 nurse practitioners and physician assistants, employed by Minneapolis, MN-based Allina Health System have voted to unionize with the Service Employees International Union, forming the largest private-sector union of physicians in the country. 

Allina, which operates 12 hospitals across Minnesota and Wisconsin, already saw over 100 inpatient physicians at its Mercy Hospital vote to unionize earlier this year. While Mercy’s physicians organized against pressure to adhere to the hospital’s new length-of-stay guidelines, this larger group of clinic-based providers say they are motivated by chronic understaffing that they claim has caused burnout and threatened patient safety. Allina Health laid off 350 workers this summer after posting a nearly $200M operating loss in 2022.

The Gist: When health systems originally recruited physicians into their newly developed employed medical groups, many pitched the arrangement as more of a partnership than traditional employment.

However, now that a majority of the nation’s physicians are employed by hospitals, some physicians are rethinking their relationships with their employers. 

Only six percent of doctors were unionized in 2021, but a recent spate of unionization efforts by residents and physicians suggest that number is on the rise.

Health systems hoping to address physicians’ concerns and unionization activity should note that the motivating factors cited by organizing physicians surround working conditions, including a lack of support staff and professional autonomy, rather than personal wage demands.

Are doctors destined to make less money? 

Posted on by • Posted in Physician Compensation, Supply and Demand • Leave a comment

https://mailchi.mp/d29febe6ab3c/the-weekly-gist-august-25-2023?e=d1e747d2d8

At a meeting last week, a surgeon (and loyal Weekly Gist reader) shared his thoughts on our recent coverage of research evaluating physician earnings, and analysis comparing the incomes of American doctors with those in other Western countries.

(The gist: unsurprisingly, American doctors make more money—and one of the primary reasons is that there are simply fewer physicians per capita here than in most other Western nations.)

His retort: “It sounds like you’re rooting for doctors to get paid less!” Given the number of emails we received on the piece, it’s clear that the topic touched a nerve. 
 
A few doctors pointed out the limitations of simple supply and demand in driving physician salaries. Of course there are important structural differences between our delivery and payment system and those in other nations: fee-for-service versus global payment; length of training and degree of student debt; and relative salaries of specialists versus primary care physicians, just to name a few.

But if anything, the effects of supply and demand are amplified in a more market-driven system like the US. Plus, there are factors, like regulation of the number of residency training slots, that keep supply artificially low—and physician incomes in competitive specialties high.

At a high level, the data do show that prices—both physician and hospital—are higher in the US than other countries, whereas utilization is roughly similar. 

Over time, we’d expect that there will be continued price pressure driving down doctors’ incomes, but large swings in physician salaries will take a generation or more to emerge. 

And should physicians experience more salary pressure, expect more of them to seek additional sources of entrepreneurial and investment income—further increasing the spread between the lowest- and highest-paid doctors. 

Physician contracts are changing

Posted on by • Posted in Employee Compensation, Employee Incentive, Health System, Hospital, Hospital Industry, Physician, Physician Compensation, Physician Contracts, Physician Employment • Leave a comment
https://www.beckershospitalreview.com/compensation-issues/physician-contracts-are-changing.html?origin=RCME&utm_source=RCME&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Shorter contracts, noncompete agreements and increased emphasis on value-based components are among the shifts occurring in physician contracts as hospitals and medical groups build recruitment pipelines and offer incentives to retain physicians. 

Changes in how physician contracts are layered echoes a trend that has been occurring in the labor market itself. Physicians are increasingly opting for employed opportunities and contracts within those models are changing accordingly. 

From 2019 to 2021, more than 108,700 physicians left private practice for employment opportunities, with 58,200 physicians joining hospitals. About three in four physicians are now employed by hospitals, health systems, private-equity-owned groups, payers or other corporate entities. 

The rising costs of private practice, increasing administrative burdens and reimbursement hurdles are also making solo practice a challenging model for many physicians today.

Fewer large medical groups are offering salaries with production bonuses, according to an AMN Healthcare report on physician and advanced practitioner recruiting incentives. The company’s 2017 report found that 75 percent of contracts featured a salary with production bonus, while only 17 percent had a straight salary.

Some medical groups have stopped offering production bonuses because they found that the straight salary model has less ambiguity and is less likely to cause friction with physicians, according to the report. 

AMN also found that a relatively high percentage of academic medical centers do not offer the salary with production bonus model, which may account for the decline in the use of this compensation structure in its report. 

Income guarantees, which are essentially loans that must be repaid generally (but can be forgiven over time) are used to establish physicians in solo or small independent practices. Income guarantees were once the standard contract model, but as the number of private practices has declined, so has the use of income guarantees, according to the report..

Health systems continue to rethink physician contracts as healthcare continues its shift away from fee for service, but challenges remain when it comes to compensation in these models. Systems at the forefront of this shift are developing ways to incentivize physicians in value-based care as the trend towards team-based compensation gains traction and fosters collaboration among providers.

Are American doctors overpaid? 

Posted on by • Posted in Health Policy, National Bureau of Economic Research (NBER), Physician Compensation, Physicians Per Capita, Supply and Demand • Leave a comment

https://mailchi.mp/27e58978fc54/the-weekly-gist-august-11-2023?e=d1e747d2d8

A recent National Bureau of Economic Research (NBER) working paper analyzed the individual income tax records of 965,000 US physicians between 2005 through 2017 to provide a comprehensive look at physician earnings. As doctors’ incomes are often a combination of wage and business income, earnings are commonly underestimated in survey data. Researchers found that the average physician earned $350K per year, which rose to $405K annually during the prime earning years of ages 40-55. However, researchers found a large gap between the lowest and highest earners: the top ten percent of physicians in that age band averaged $1.3M per year, with those in the top one percent averaging over $4M (and 85 percent of that income coming from business income or capital gains versus wages).  

The Gist: Many policymakers long believed that increasing the number physicians nationally would drive higher medical spending, and worked to constrain supply by freezing funding for residencies in the late 1990s, a move that has yet to be fully unwound. Recent research, however, has found that the impact of physician supply on excess treatment is small or nonexistent.

Meanwhile, the imbalance in supply and demand has led to relatively high prices for physician labor. Compared to other western countries, the US has far fewer physicians per capita, and we pay our doctors significantly more.

Case in point:

Germany has 69 percent more physicians per capita, and American doctors are paid roughly 50 percent more than their German counterparts.

The Physician Employment Model, Continued

Posted on by • Posted in Customer Acquisition, Customer Loyalty, Health System, Hospital, Hospital Industry, Labor Spend Management, Physician, Physician Compensation, Physician Employment, Strategic Attention, Strategic Change, Strategic Imperative, Strategic Issue • Leave a comment

https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/physician-employment-model-continued

From time to time the blogging process stimulates a conversation between the author and the audience. This type of conversation occurred after the publication of my recent blog, “The Hospital Makeover—Part 2.” This blog focused entirely on the current problems, financial and otherwise, of the hospital physician employment model. I received responses from CEOs and other C-suite executives and those responses are very much worth adding to the physician employment conversation. Hospital executives have obviously given the physician employment strategy considerable thought.

One CEO noted that, looking back from a business perspective, physician employment was not actually a doctor retention strategy but, in the long run, more of a customer acquisition and customer loyalty strategy.

The tactic was to employ the physician and draw his or her patients into the hospital ecosystem. And by extension, if the patient was loyal to the doctor, then the patient would also be loyal to the hospital. Perhaps this approach was once legitimate but new access models, consumerism, and the healthcare preferences of at least two generations of patients have challenged the strategic validity of this tactic.

The struggle now—and the financial numbers validate that struggle—is that the physician employment model has become extraordinarily expensive and, from observation, does not scale.

Therefore, the relevant business question becomes what are the most efficient and durable customer acquisition and loyalty models now available to hospitals and health systems?

A few more physician employment observations worth sharing:

  • Primary Care. The physician employment model has generally created a one-size-fits all view of primary care. Consumers, however, want choice. They want 32 flavors, not just vanilla. Alternative primary care models need to match up to fast-changing consumer preferences.
  • Where Physician Employment Works. In general, the employment model has worked where doctor “shift work” is involved. This includes facility-based specialists such as emergency physicians, anesthesiologists, and hospitalists.
  • Chronic Care Management. Traditional physician employment models that drive toward doctor-led physical clinics have generally not led to the improved monitoring and treatment of chronic care patient problems. As a result, the chronic care space will likely see significant disruption from virtual and in-home tools.

All in all, the four very smart observations detailed above continue the hospital physician employment conversation. Please feel free to add your thoughts on this or on other topics of hospital management which may be of interest to you. Thanks for reading.