Cardiology Partnership Options<br />2010<br />
Financial Pressure<br />The increasing financial pressure that exists within cardiology practices is driving an increase i...
Hospital Motivations<br />Physician alignment<br />Performance imperatives<br />Physician staffing shortages<br />Hospital...
Cardiologist Motivations<br />Personal income security<br />Mitigate reimbursement declines<br />Increasing private practi...
Options<br />Employment<br />Lease<br />Practice merger<br />Stay the course<br />
Employment<br />
Key Elements of Employment<br />Compensation<br />Asset purchase<br />Governance<br />
Contractual Issues<br />Income guarantee<br />Term of employment agreement (5 & 10)<br />Negotiation of RWU conversion fac...
Compensation<br />Direct Employment<br /><ul><li>FMV must be established for RWU (assume $52/RWU)
Individual physician RWU compensation (no group model)</li></ul>Doctor 1 – 12,000 RWU’s/year = $624,000<br />Doctor 2 – 11...
Compensation<br />Physician Compensation<br />Conversion factor X individual RWU/physician<br />Compensation for non-RWU a...
Asset Purchase<br />Practice purchase (tangible & intangible)<br />Assets (equipment & real estate)<br />Medical records<b...
Governance/Management in Integration<br />
Governance Continuum<br />Direct employment<br />Physicians have individual employment agreements<br />Physicians have a p...
Legal Residence of Physicians<br />Direct employees of hospital<br />Employees of a wholly owned subsidiary<br />Employees...
Decision-Matrix<br />Hospital “reserve powers”<br />Set general parameters/approve budget<br />Set general parameters/appr...
Practice Operation in Integration<br />A “Physician Management Committee” has responsibility for:<br />day-to-day operatio...
Employment<br />Pro’s<br />Best time to sell (maximal practice value)<br />Income gains over structured timeline<br />Maxi...
lease<br />
Lease<br />Many of the same components as employment<br />Negotiate  PSA & Co-management Agreement<br />Establish a lease ...
Lease<br />Maintain practice assets and structure<br />Will not be able to secure full practice purchase price<br />A viab...
Practice merger<br />
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Cardiology partnership options 2010

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Cardiology partnership options 2010

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

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