PHYSICIAN ALIGNMENT: End of Era of Doctor-As-Employee?
In the early 1990s, hospitals across the nation raced to buy up physician practices and hire doctors as employees, convinced that a broad network of physicians was the key to scoring more managed care contracts. But the acquisition trend has left hospitals "seeking ... to stanch the flow of money in what is turning out to be a costly employment relationship," the Memphis Business Journal reports in a profile of three Tennessee hospitals' new physician alignment strategies. The Balanced Budget Act of 1997 and the financial distress of TennCare have led Methodist Healthcare, Baptist Memorial Health Care Corp. and Saint Francis Hospital to devise means of "retaining their commitment to primary care and physician alignment" while staying afloat financially.
Methodist, which is losing about $150,000 per year on each of its 30 primary care physicians, is considering revamping the doctors' compensation model to better align physician incentives. The incentives, as established in 1994 when the hospital purchased each physician's assets, assumed all liabilities and became each one's employer, "were fairly one-sided," according to Jim Schmerling, Methodist senior vice president. Methodist also plans to consolidate some of its one-physician practice sites and relinquish its 50% ownership in a management services organization with 15 physicians.
Baptist has largely abandoned its strategy of employing physicians, recognizing that physicians "have an entrepreneurial spirit" focused on medical care, not on "turning out widgets," said R. Lynn Buff, system director of physician recruitment, development and operations. While still open to the idea of employing physicians, Buff said that "direct employment of physicians is not a money-making venture."
St. Francis Says
Saint Francis, owned by Tenet Healthcare Corp., has reduced its care sites due to "the inefficiencies of operating multiple locations," and has plans to eliminate more, said Jim Crews, managing director of Saint Francis' affiliated practice management group, Pinnacle Health Care Services. Crews noted that physician employee networks "is a phase like branch banking in the 1970s. They built a branch on every street corner and then all of a sudden you've got four on each street corner and you don't need them all" (Roman, 5/31).