1. How Did My Practice Change by Becoming Hospital-Employed
James B Hermiller, MD, FACC, FSCAI
St Vincent Medical Group
St Vincent Heart Center
Indianapolis, IN

2. Disclosure Statement of Financial Interest
Within the past 12 months, I or my spouse/partner have had a financial interest/arrangement or affiliation with the organization(s) listed below.
Affiliation/Financial Relationship
Company
Consulting Fees/Honoraria
Speaker Bureau
Abbott, BSC, and St Jude
Lilly

3. Indiana Heart Institute
Tom Linnemeier Cass Pinkerton
Merged Groups Late 1990s

5. California

9. Can Traditional Private Practice Survive? Trends toward employment

10. Why join a hospital?

11. Why consider integration? Regulatory complexity becoming burdensome
Pre-Approval for
Nuclear Stress Test

12. Regulatory complexity becoming burdensome

13. Desire to reduce stress and pressure of management

14. Strength and leverage in size and alignment with hospital entitiy

15. Declining Reimbusement Increasing Practice Costs
Why -- The Squeeze
Declining Reimbusement
Increasing Practice Costs

16. Why consider integration?
In 2009, CMS reduced the relative value units assigned to specific cardiology-related procedures. The cuts ranged from between 10% to 40%, depending on the procedure, with nuclear imaging witnessing a 41% decline in reimbursement.
This decrease continued the trend of the last decade. According to the American College of Cardiology (ACC), the value of RVU payments to physicians is just 50% of what it was in 1995.

17. Why consider integration?

18. Medical Home and ACOs

19. Accountable Care Organizations
Components
Patient population
Government or private payer – well defined & long-term agreement
Integrated providers: PCP’s, Specialists, Hospital
Aligned suppliers (devices, pharmacy)
Establish participation criteria

20. Payment Models Overuse vs Underuse
Bundled payments/Episodic Treatment
Compromise between fee for service and capitation
CABG/PCI: one fee for facility/MD/inpatient/outpatient evaluation and follow up
Multiple disciplines involved in care and decision making so underuseage should be limited

21. Disadvantages of integration
You can’t force people to follow directions they deem arbitrary

22. Disadvantages of integration
Loss of control
Physician autonomy may be compromised
Now we would have a boss
We would be accountable to a corporate culture that may, or may not, have similar values
Hospital bureaucracy may/would be frustrating

23. Who’s your partner?

24. Shotgun Wedding?

25. Agreed on a Philosophy We asked: does hospital have a similar vision
Think of it as a first date
What is their culture?
What do they want out of the transaction?
Are they looking for a partner, or a group of employees.

26. Negotiations
What is the market position of the practice? Market competition?
What is the age of the physicians in the practice?
How is the practice performing – quality and financially?
Do you practice at one or multiple hospitals?

27. Negotiations

28. Negotiated Governance
How will the integrated group governed?
Wholly owned subsidiary
Straight employment
Lease model
How will the new entity report in the organization?
How will decisions be made – operational and financial?

29. Money Matters

30. Valuations Practice valuation Compensation valuation
Agree on who will perform the valuations
One side provides a list, the other side picks from the list
Don’t be afraid to interview the potential valuation companies – what other transactions have they done?
Understand the concept of Fair Market Value (FMV)

31. Negotiate other terms What are the terms of the agreement
What happens after the agreement expires
What happens if compensation migrates from a production basis in the future
Is employment for the physicians guaranteed? For how long?
What happens to the employees of the practice? Are there key employees?
Call coverage

32. Negotiate other terms Non-compete clauses?
What happens if the market changes and productivity declines due to no-fault of the physicians?
What other responsibilities does the acquired practice have?
What happens to AR? Old debt obligations? Malpractice claims?
Does either party maintain “reserve powers”

33. Dr Lemming

34. How has practice changed?
Day to day – not a bit of difference
Fewer headaches – primarily practicing medicine with less administration
Strategic view – physicians more willing to take on a loss-leader for the good of the entire enterprise
Decisions however take time to make and especially implement

35. Pulling on rope in similar direction

36. It’s Early

37. Final Thoughts – Eye on Ball

39. Thanks for your attention!