The document summarizes the keynote presentation by David Andrick and Adrian Byrne at the 2012 OHA Annual Conference on physician recruitment and employment. [1] Physician services departments need a formal due diligence process to ensure the right fit with physicians. [2] Building employed physician groups requires sensitivity to meet community needs while supporting hospital objectives. [3] Some local physicians may seek employment or joint arrangements due to reimbursement pressures and changing healthcare models.

1. OHA Annual Conference 2012
DAVID ANDRICK
DIRECTOR PHYSICIAN ADRIAN R. BYRNE
RECRUITMENT PRESIDENT
LUND-BYRNE ASSOCIATES

2.  Every organization requires the right people to make it work. Ensuring
the right-fit with physicians is an essential task of the physician
services department that is best accomplished with a formal “due
diligence” process.
 Building an employed physician group practice that meets the needs
of the community while supporting hospital business objectives is
sensitive work.
 Some local physicians are feeling the reimbursement and cost pinch
and are intent on hedging their situation.
 They will leverage past relationships with the local hospital.
 This includes exploring direct employment or some form of joint management arrangement.

3. James Thurber, an American cartoonist and writer best
known for Walter Mitty, wrote:
"Let us not look back in anger or
forward in fear, but around in
awareness."

4.  Healthcare delivery models are changing (again)
 New players are entering the market to provide
care (Insurers/Pharmacy’s)
 New choices exist for physicians and allied
health providers (Walmart, CVS, Corporate
Health)
 National Physician contract groups (Team)
 Follow the money………………..

5. Independent Physicians look at:
 “Obama Care” confusion
 Perception v Reality
 Belief that things are changing anyway
 Independent practice is more complicated
 Real erosion of practice revenues
 Operating costs continue to increase
 Cost of technology (purchase and implementation)
 Look for expert help with new reimbursement models
 Do not want to be left out of new provider networks
 Consumer expectations are changing

6. Hospitals are moving to gain economies of scale:
 Increasing M&A activity
 Better control of costs and quality
 Hospitals need greater control over service area
referrals and.. larger service areas
 Hospital performance criteria requires active physician
support and input
 Harder to recruit physicians into independent practice

7. A recent Merritt-Hawkins study of Residents
showed:
 32% of first-year Residents surveyed in 2011 said they
prefer to be employed by a hospital, up from 22% in
2008.
 48 % said that they feel increasingly unprepared to
handle the business side of medicine.
 70% of national hospitals and health systems plan to
employ more physicians in the next one to three years.

8. Source: HealthLeaders Media Study

10. 1. Establish a clear process for decision making
2. Conduct a preliminary due diligence
3. In depth practice and business assessment
4. Preparation of contract and making the offer
5. Acceptance or refusal - next steps

11. Physicians who approach the hospital to be employed
will probably fall into 5 categories
1. Low volume - struggling practices
2. Those not wishing to invest in technology and/or
close to retirement
3. High volume specialties seeing major income
reductions (Cards/Onc/Ortho)
4. Groups and individuals wanting to leverage their
current dominant role
5. Groups that are falling apart anyway

13. Create a check list and a decision flow chart
 Gets everyone on the same page
 Creates an evaluation process that is supportable to and
by the Board
 Allows for quicker decision making
 Process helps physician to understand future
expectations on the front end
 Deals with sensitive issues early
 What does it mean to be an employee
 Objective approach to decision

15.  Who needs to be involved and why
 Confidentiality to be managed/need to know
 Physician demographics
 Strategic fit definition
 Options/packages for recruitment
 Who makes decisions and how
 Preferred time line for process

17. Who approached who:
• If strategically important determine who is best to make first approach to
physician or work with physician(s)
• What is the strategic fit – competitive / expansion of services
• Do you understand physicians request (fishing or firm)
• Has physician approached others?
• Does the physician need to get more information (from who and by when)
• Explain the process and evaluation flow chart to physician as a Board requirement
• Explain who is involved with decision process
• Agree on confidential approach
• Stand still agreement
• Provide time line (and keep to it)

18. Local recruitment flow chart (sample)
Who Physician Decision
approached
Who? Strategic Need
What do we know
about this physician
Begin Due Diligence Define data to
be collected
Strategic or
VP Medical Affairs
business need
- Med Staff Plan Input
for specialty
- Practice volumes
- Service Lines
Hospital
Talk with dept.
UR/QA Data
management.
Medical Records
Objective/specific Nurses etc
Credentials
information Sleuthing
Information subjective
Prepare Preliminary
decision Report.
Yes/No

20.  Issues to be addressed in a discussion with
Physician:
 What expectations are there for an employment agreement?
 What will happen to the existing practice?
 What about employees?
 Are there assets that may be purchased?
 Describe the process for dealing with these
issues.

21. Use a standardized approach for a confidential report -
prepare:
• Physician name, specialty, privileges, # years, practice location, community served,
other hospital affiliations, practice partners.
• Physician stated interest and reason for interest in employment
• Current volumes of referrals IP/OP, practice, individual physicians
• Internal UR/QA information trends
• Observations of CMO or VP Medical Affairs, others
• Credentials review
• Is there a cultural “fit” with existing practices
• Strategic need reasoning (if required)
• Recommendations for next steps (Pursue or Not)

22. Use of preliminary due diligence:
 Obtain Senior Management input / Board approvals to
proceed
 Note any limitations/issue needed to be addressed
 Meet with physician
 Communicate issues
 Reconfirm process
 Confirm interest
 If interest still good, get a formal confidentiality agreement
and “stand still” agreement in order to get more information
from the practice.

24. Full assessment - preparation
Decision NOT to proceed
Decision to Proceed with Step 3
Full assessment
Proposal and Negotiation Prepare Preliminary
decision support.
IF YES or Need More Info Yes/No IF NO
Prepare Confidentiality Agreement Plan meeting with Physician/s
Decision Explain Conditions that
and Employment Practice must occur to move ahead
meeting Projections Assessment

25. You must know what the business status is now:
 Request a more detailed assessment of the practice to
include: (explain why needed)
 Full operating statements
 Bank statements
 Patient volumes by service
 Review of patient records
 Payer contracts
 Staffing, salaries and benefits
 Retirement plans
 IT capability

26. What are the expectations
 Discuss a check list for asset types and preferred
actions
 Lay out a typical employment package that
conforms to existing criteria for income / salary /
incentives
 Suggest physician adds any additional thoughts
to be presented to the Board/Senior
Management.

27.  Direct employment
 Hospital
 Subsidiary (foundation model)
 Aligned group - Multi Specialty /Single Specialty
 Practice/employee acquisition-physician
contractor
 Joint venture on a Service Line
 Most anything that is legal

28.  Senior Management (or Board sub-Committee)
should approve any formal offers.
 Present this decision authority with:
 Physicians wish list
 Current practice performance data and projected impact if hired
 Overview of plan for practice assets and personnel
 Cost assessment with proposed salary, incentives, benefits
 Proposed contract of employment
 Timeline for action

30. Plan for the Normal
Manage the Exceptions

31. Challenges will include:
 FMV for assets
 FMV for income
 Non competes
 Hours and coverage
 There will be System/Operational changes
 Collaboration
 New reporting
 Avoiding impressions of favoritism

32. Income Construction and Limitations
Productivit Payer Billing/ Practice Hospital
y Mix Collections Expenses Performanc
e
Fixed Salary
W/RVU’s
Net Collections
Net Income
Physician has incentive to manage
Physician has NO incentive to manage

33. Meet with physician to discuss the offer:
 Employment/Services agreement:
 Terms and conditions
 Salary / incentives
 Acquiring Business:
 Description of assets to be acquired
 Formal valuation
 Liquidation of other assets
 Consideration of staff
 Timeline for decision and action

36. If Acceptance:
 Move quickly to signature
 Employment agreement
 Sale/transfer of assets
 Agree and prepare a time table for action
 Schedule announcements (eg: to practice staff)
 Change provider numbers/notify payors
 Close books on original practice
 Rehire staff with new contracts

37. If Rejection:
 Communicate reasons and possible issues
 Is a counter proposal required/appropriate
 Is there flexibility in the package without Board
input?
 Agree to disagree ?
 Be sure to part on good terms if no deal
 It’s just business

38.  Be open but confidential (emotions may come into play)
 Explain how decisions are made
 Use an objective and supportable approach
 Understand the physicians reasoning
 Collect both objective quantifiable data and subjective
(confidential) peer commentary
 When agreement is reached move quickly to get contracts and
make the changes
 If no agreement there must be clarity and part friends.