6 Common Complaints Physicians Have When Acquired by Hospitals

Robert C. Bohlmann, principal of MGMA Health Care Consulting Group, advises hospitals on integrating group practices. Here he lists six common complaints physicians have when their practices are acquired by a hospital.

1. Unfair compensation. To avoid bad feelings, new hospital-based physicians need to know from the get-go that their compensation is being figured differently than in private practice. Hospitals are limited as to how much they can pay by anti-kickback laws. The hospital needs to base payments on national benchmark data, such as those generated by MGMA. Also, physicians who are used to being paid for in-house imaging will not see imaging income in the hospital setting.

2. Look like money-losers. Practices that were breaking even when they were acquired by hospitals may suddenly be swimming in red ink after joining the hospital. According to the hospital's ledgers, these practices may lose $50,000-$100,000 per physician, per year because the hospital is deducting hospital-wide costs onto the cost side and removing ancillary income, such as imaging services, from the revenue side.

Mr. Bohlmann calls this "red-ink syndrome." Even though the group may be no less productive than before, "it creates a real rhubarb," he says, not just for physicians, but as for the hospital. He was working with a hospital board that was all set to dump its doctors until he prepared a report showing the physicians were actually very valuable to the hospital in such areas as the value of their admissions. The board then decided to keep the practices.

3. Not involved in decision-making. Physicians can get unhappy when they have no say over their working hours, patient load or support staff. Physicians should be included when such policy changes are being discussed so that they can point out potential problems. For example, the system cannot simultaneously expect more physician productivity and cut their support staff. "Hospital executives think they know everything about medical practices, but they don't," Mr. Bohlmann says. "It's a different animal from a hospital."

4. Falling patient demand.
Physicians get uneasy when appointments fall off, which can happen for various unanticipated reasons. For example, the hospital may decide to relocate a newly acquired practice but its patients don’t follow. Similarly, it recruited 25 family physicians but the service area can only support 18. Or the hospital failed to effectively market the practices.

5. Inadequate disclosure.
In the rush to sign them up, the hospital may forget to adequately inform physicians about the fine print of the agreement. For example, the physicians — not the hospital — may be on the hook for collecting the old practice's accounts receivable. Or the physicians may not be allowed to bring over anyone from their old staff.

6. No exit. If some physicians do not like the new arrangement, is there a way for them to politely part company without having to move 100 miles away due to a non-compete clause? Mr. Bohlmann says non-compete clauses were appropriate in the 1990s when hospitals bought the physicians' "goodwill," their patient lists, but hospitals today buy only the building and equipment from the practice, which is considerably less valuable than the goodwill. For this reason, he believes non-compete clauses should not be used and physicians should be allowed to walk away with few strings attached.

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