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How value-based medicine can impact physician recruitment - Summer/Fall 2016
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By Marcia Horn Noyes, contributing writer for the Journal of ASPR

Upwards of 50 to 100 physician recruitment agreements pass across the desk of Pennsylvania attorney Dennis Hursh annually. As he examines and reviews contracts for physicians preparing to be employed by an organization or joining a community practice, Hursh looks for legal language that could potentially impact that doctor’s financial future and lifestyle. Within those evaluations, he has seen the fair, not so fair, and thoroughly unfair agreements tendered to physicians. 

Physicians often ask attorneys like Hursh to step in during the contract phase of the negotiations because, while they’ve spent seven to nine years honing medical skills, the business side of health care hasn’t been a priority. 

Today, the health care landscape is undergoing cataclysmic change in reimbursements, and Hursh points out that efforts made by providers and payers toward value is now being reflected in many physician recruitment agreements. “In the ‘good old days,’ doctors received a base salary with some sort of incentive compensation,” he mentions. “While many of the contracts I review today still have incentive compensation, I’m seeing a higher percentage of contracts where the base compensation has some portion at risk.” Hursh adds that he has seen some cases where the hospital or group practice withholds as much as 24 percent of salary, should the doctor not meet the value production stipulated in the contract.

Uncertainty from every angle
Anytime the status quo is upended, uncertainty reigns. No one yet knows how the volume-to-value-based shift will ultimately play out financially for hospital systems, payers and community practices. However, expectations from health care executives seem to indicate that a drop in profits is inevitable. In a recent Becker’s Hospital CFO article written by Ayla Ellison, a “majority of health care executives expect finances to suffer in move to value-based contracts.” The reporter cited a KPMG May 5, 2016, survey of 292 executive health care stakeholders. When asked what financial impact the transition to value-based contracts would have, 25 percent said they anticipated modest reductions in operating income; 21 percent expected a significant drop; and 6 percent foresaw a steep decline in revenue.

This pessimistic financial view may give some clue as to why employers are sharing a portion of that risk and why some physicians and their attorneys are apprehensive of the move to value-based medicine. “They do so because ‘they can,’” says Hursh. “And because doctors often sign the first thing put in front of them, employers see a way to shunt a portion of that risk onto doctors.” In many cases, Hursh says unreasonable amounts of risk are being funneled the physician way. “Some large hospital systems are even inserting an indemnification clause that appears to be broad enough to cover malpractice, fraud and abuse, and other areas that should be covered by insurance or by robust compliance plans.”

Physician recruitment professionals caught in the middle
This physician agreement tilt toward value may leave physician recruitment professionals in a precarious position—trying to negotiate the financial interests of the physicians needed with the rapidly rising financial risk perceived by health care systems and community practices. For physician recruitment professionals who have felt the push back from physicians over this move toward value-based compensation, or who expect this compensation shift in risk to become a sticking point, Hursh has these three recommendations:

1. Explain the risk. 

While physicians may not see the red flags of productivity and value-based contracts, their attorneys surely will. Providing clarity around the hospital/practice risk as well that of the physician may help solidify a contract that hangs in the balance. Physicians work hard, so they often feel productivity and value incentives are within reach. However, attorneys may advise their clients of the unknowns, such as finding out how many more physicians have or will be recruited that may compete for the same patients in the effort to achieve those incentive goals. 

2. Enlist help of a department head or another physician in the practice.

Hursh says, “Many times a recruiter can persuade another doctor to put himself or herself into the shoes of the physician being recruited and help out with contract concessions.”

3. Recognize ambiguity in value parameters. 

Sometimes the value parameters can be inappropriate for a given specialty. Hursh has provided an example from a recent negotiation: “A health system had been putting productivity requirements on all its physicians, but I convinced a physician in the system that productivity really wasn’t appropriate for my client,” who Hursh mentions was an emergency medicine physician.

What the future holds
In a June 2016 Physician’s Money Digest article titled “Why value-based care is about mindset, not just money,” the author shared that the goal in transitioning from a fee-for-service model to value-based care is to ultimately lower health care costs while improving quality and outcomes. One source for the article encourages those making this shift to move as fast as they can, noting that, “if you have 66% of contracts in fee-for-service and 34% in value-based care, you’ll drive yourself crazy.” 

Whether physicians will embrace this industry transition while shunning the impact it has upon their recruitment agreements is yet to be determined. Hursh indicates it could have unintended consequences to the pool of available doctors.    

In the end, one thing is certain — value-based care that provides a better patient experience is here to stay. Helping doctors understand that this is not just a passing trend will go a long way toward understanding the changes in physician recruitment agreements.