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Cardiology partnership options 2010

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  • 1. Cardiology Partnership Options
    2010
  • 2. Financial Pressure
    The increasing financial pressure that exists within cardiology practices is driving an increase in hospital collaboration
    Hospitals and cardiology practice both have motivations for collaboration
    A recent ACC/MedAxiom survey indicated that 2/3 of the 24,000 USA cardiologists to be integrated by years end
  • 3. Hospital Motivations
    Physician alignment
    Performance imperatives
    Physician staffing shortages
    Hospital competition & physician loyalty
    ED call coverage
    Stability & growth in market share
  • 4. Cardiologist Motivations
    Personal income security
    Mitigate reimbursement declines
    Increasing private practice overhead
    IT strategies
    Work-life balance
    Access to capital
    Managed care pressures
  • 5. Options
    Employment
    Lease
    Practice merger
    Stay the course
  • 6. Employment
  • 7. Key Elements of Employment
    Compensation
    Asset purchase
    Governance
  • 8. Contractual Issues
    Income guarantee
    Term of employment agreement (5 & 10)
    Negotiation of RWU conversion factor for the term of the agreement
    Fixing the RWU table (nuclear, cath bundling)
    Termination of physicians
    Operational control
  • 9. Compensation
    Direct Employment
    • FMV must be established for RWU (assume $52/RWU)
    • 10. Individual physician RWU compensation (no group model)
    Doctor 1 – 12,000 RWU’s/year = $624,000
    Doctor 2 – 11,450 RWU’s/year = $595,400
    Doctor 3 – 6,700 RWU’s/year = $348,400
    • Notes:
    Expense side has no impact on physician compensation
    Benefits are paid in addition to compensation
    Purchase of practice assets is a separate transaction
    “Provider based” non-invasive billing, purchase revenue stream
    Better commercial provider agreements
    Better benefits, mal-practice cost structure
    9
  • 11. Compensation
    Physician Compensation
    Conversion factor X individual RWU/physician
    Compensation for non-RWU activities
    Incentive plan (business and clinical targets)
  • 12. Asset Purchase
    Practice purchase (tangible & intangible)
    Assets (equipment & real estate)
    Medical records
    Goodwill
    Accounts receivable
  • 13. Governance/Management in Integration
  • 14. Governance Continuum
    Direct employment
    Physicians have individual employment agreements
    Physicians have a practice operating committee
    Physicians have disparate medical directorships
    Miss opportunity for full physician investment in hospital operation
    Advisory CV Council
    Much like a clinical co-management program
    Practice line authority
    The group has been delegated line authority over hospital and practice operation
  • 15. Legal Residence of Physicians
    Direct employees of hospital
    Employees of a wholly owned subsidiary
    Employees of an existing hospital multi-specialty group
    Note: Some groups are employed by the SYSTEM rather than any one hospital
  • 16. Decision-Matrix
    Hospital “reserve powers”
    Set general parameters/approve budget
    Set general parameters/approve strategic plan
    Approve employment of physicians
    Authority of Subsidiary Board
    Establish clinical objectives (M&M, ACO)
    Establish business objectives (LOC, CPC)
    Business development/improve patient access
    Establish new clinical services
    Authority delegated to a “Physician Management Committee”
    General practice operation
    Elect/remove physician representatives from leadership
    Physician schedule
    Physician assignments
    Physician compensation
    Physician and staff discipline
    Implement budget and business plan
  • 17. Practice Operation in Integration
    A “Physician Management Committee” has responsibility for:
    day-to-day operations
    determine distribution of compensation pool
    “unwind”
    top 1-3 executives
    hiring/firing of physicians
    authority to implement approved budget/business plan
    Re-negotiate employment agreement
  • 18. Employment
    Pro’s
    Best time to sell (maximal practice value)
    Income gains over structured timeline
    Maximal Group-hospital alignment
    Preparation for reform/global reimbursement
    Greater market security
    Potential for improved physician recruiting
    Con’s
    Some loss of control
    Heavy reliance on PBR
    Will it resolve practice governance issues?
    Changes in hospital leadership
    Uncertainty regarding renewal (at 5 or 10 years)
  • 19. lease
  • 20. Lease
    Many of the same components as employment
    Negotiate PSA & Co-management Agreement
    Establish a lease payment & Co-management agreement $$ with FMV support
    Lease a physician, sub-group of FTE physicians, or the whole practice
    Provider Based Reimbursement
  • 21. Lease
    Maintain practice assets and structure
    Will not be able to secure full practice purchase price
    A viable alternative to employment
    Theoretically works better when group works at multiple systems
    Still have option for group employment, and practice sale in the future
  • 22. Practice merger
  • 23. Practice Merger
    Governance considerations
    Old competitive issues?
    Compensation plan
    Common call
    Economies of scale
    Duplication of services
    Better position to negotiate with hospitals , payers, primary care networks
    May not be enough, on its own