12 Tactics for Spine Surgeons to Avoid Hospital Employment

Written by Laura Dyrda | August 23, 2012 | Print  |
Spine surgeons, along with all specialists, are increasingly becoming employed by hospitals for a variety of reasons: starting salary is higher, set working hours and the ability to focus on the clinic instead of worry about the business. However, hospital employment may do more harm than good for surgeons in the long run.
"If physicians become hospital employees, it's going to be a detriment to their income streams. When you are an employee, you are a commodity and you become replaceable," says Khawar Siddique, MD, a California spine surgeon with Beverly Hills Spine Surgery. "The way surgeons protect their patients, income and revenue streams is by making sure they are in charge, and that can only happen when they are in private practice."

Even though hospital employment continues to grow, harkening back to the 1990s when hospitals snatched up physicians for HMOs, there is still an opportunity for spine surgeons to stay independent and prosper without becoming employed.

"The way to avoid hospital employment is to recognize there is still a great deal of opportunity for surgeons to be profitable," says Dr. Siddique. "Hospital employment isn't a requirement. The key to becoming profitable in this age is to think beyond what surgeons can do with their own two hands."

Here are 12 steps for spine surgeons to avoid hospital employment.

1. Consolidate into a large group of surgeons.
While it is still possible to maintain a single spine surgeon practice in some parts of the country, it's becoming increasingly difficult for most spine surgeons — as well as small groups of spine surgeons — to remain independent. Due to increased business expenses and declining reimbursement, small groups often see two choices: sell their practice to the local hospital or merge with a larger group in town.

"Being part of a large spine-focused or orthopedic group, like OSNA, or possibly a multispecialty group, gives you strength and puts you into a position to collect data and negotiate with hospitals," says William Stevens, MD, founder of the Center for Spinal Disorders and OSNA member in Phoenix. "As part of a 70 member group, we have a lot to offer the hospitals."

Spine surgeons or small groups can merge with other orthopedic- or spine-focused groups in their community, or become part of a larger multispecialty independent physician group. They can also expand to include specialists with a spine focus, such as interventional pain management or physical medicine and rehabilitation physicians.

2. Expand your group to include a junior partner.
Spine groups looking to remain viable in today's tough economic times can expand their group to include junior partners. "In California, if you hire a junior partner, he or she should be able to become profitable within one year if moderately busy," says Dr. Siddique. "If you bring in the surgeon as a junior partner and pay him a salary with a bonus structure, you can recoup your investments after that first year. If he stays on for a few more years, then you can make him a senior partner."

If you have a surgery center, the junior partner will also bring cases there. If the surgeon fits within the group and becomes a senior partner, he should also have the opportunity to invest in the surgery center and become a full partner.

"The junior surgeon will bring cases into the surgery center and increase ASC revenue, which is a source of income that keeps perpetuating itself," says Dr. Siddique. "However, you don't want to saturate the market, so do your due diligence. In spine, it's hard to saturate the market because there is always room for a good person who is personable and has strong surgical technique."

"Doctors cannot compete against each other with price," says Dr. Siddique. "It should not be a race to the bottom. They should not compete with each other by trying to cut their prices to attract patient volume from insurance companies."

3. Keep practice contracts flexible.
With today's healthcare environment changing so rapidly, it's important to keep any contracts your practice makes — with the hospital or otherwise — flexible. "Maintain as much flexibility with your practice as possible," says Dr. Stevens. "The smaller your practice, the more flexibility you need on long term deals, such as lease contracts. Any type of long term contracts should be evaluated carefully because you don't know where you will be over the next few years."

Structure long term contracts so it will be acceptable if you have to make a change, whether due to future hospital alignment or another unforeseen occurrence. Large groups of orthopedic and spine surgeons are less dependent on this flexibility because they have more negotiating power with other entities in healthcare.

"When a practice is acquired by a hospital group, there is often a loss of flexibility in terms of patient referrals and other practice functions," says Dr. Stevens. "In Phoenix, the primary care physicians are selling their practice to the hospital networks and are required to refer within the network, even if they aren't happy with the quality of care from those surgeons. In the end, it really comes down to providing good care and being able to document the quality, which can be used in negotiations with payors and hospitals for options other than direct employment."

4. Stay out-of-network with insurance companies.
When businesses are looking to improve their revenue, they either raise their prices or reduce their expenses. Most spine practices have already cut expenses to low levels, so it will make a bigger impact on the net revenue if surgeons increase their price. Remaining out-of-network for payor contracts will help surgeons negotiate an appropriate price that will allow them to keep their practice running and provide appropriate care for their patients.

"You can only reduce costs so much before your employees are disheartened, and there are only so many other costs you can cut," says Dr. Siddique. "Instead, increase your prices; this is something that surgeons are very poor at doing. They don't recognize their worth. Be out-of-network to set your own price, or if you must be in-network, know how to negotiate a good price."

In some markets, surgeons are competing against each other for patient volume from insurers by undercutting other surgeons on reimbursement levels. This creates a commoditization effect that isn't good for surgeons or their patients.

5. Invest in a surgery center.
Single-surgeon or small group practices depend on case volume to drive their business, but in today's market that revenue stream alone often runs dry. Surgeons can supplement their private practice income by investing in a surgery center, which doesn't necessarily have to include 10 or more surgeons to become profitable.

"Surgeons are dependent on how many cases they do, and if they aren't operating on many there is no revenue," says Dr. Siddique. "Surgeons have to break that thought and turn to ancillary income. The single most important thing that has helped Beverly Hills Spine Surgery is going into the ASC business."

Benefits of owning and operating a surgery center include the independence of running your practice and flexibility in taking care of patients. However, surgeons should be careful not to violate federal or state laws about physician ownership of surgery centers.

"The first thing you have to do is hire a good healthcare attorney who knows the surgery center business and understands how to structure it in your state so you don't violate any laws," says Dr. Siddique. "You can't do it by yourself, but you can have a profitable surgery center with just four surgeons who are committed to bringing cases. If you do it right, you can get a return on investment in a few years. Our surgery center was profitable from the first month and we had a return on investment in two years."

6. Offer hospitals services they want from employed physicians.
When hospitals employ spine surgeons, they often looking to capture market share; they also aim to improve the quality and efficiency of their spine service as well as cover on-call responsibilities. Spine surgeons can avoid hospital employment by entering into contracts with the hospital to provide those services without becoming an employee.

"In the short term, hospitals are looking for call coverage, stability of volume and incremental volume increase," says Michael Webb, MD, a neurosurgeon with NeuroTexas Institute in Austin. "In the long term they are looking to set up accountable care organizations and other bundled payment vehicles. They are looking to control referrals. The key is to find where you or your group can provide value in terms of what the hospital wants."

Going into those agreements, it will be important to have quality data available for hospital leaders to understand the value you'll add to their department. "The group should be stable enough to collect outcomes data and show how they can improve quality at the hospital," says Dr. Stevens.

7. Enter into partnership with the hospital.
Surgeon groups may also want to enter into deeper partnerships with hospitals than call coverage or payment agreements by contracting professional service agreements or co-management arrangements. These arrangements will allow surgeons to become more involved with the hospital while remaining independent and strengthening their revenue stream.

"I think you'll see more surgeons doing professional service agreements," says Dr. Webb. "In these types of arrangements, hospitals start a clinic and a physician or physician group contracts to provide services for the clinic. The two most common reimbursement arrangements are based on RVU or a percentage of collections."

Surgeons may also have an opportunity to roll call coverage into a medical directorship position or form a management company that will provide expertise in running the orthopedic or spine service line at a hospital.

"These are some of the more complicated relationships available with hospitals, and I think they are a good option for people who are relatively new to the practice, or even those who are established who want to prop up their fee-for-service income but still have the freedom to control their own practice," says Dr. Webb. "For co-management arrangements, the management company is compensated for reaching goals like patient satisfaction or lowering hospital implant cost, which can prop up income without being directly employed."

8. Partner with insurance companies to keep rates competitive.
Insurance companies are now looking to make the healthcare market more competitive in terms of pricing, and in some communities large physician groups are able to partner with them to keep costs low. "In states where there are favorable payors and workers compensation, partnering with payors instead of hospitals will help surgeons avoid employment," says Dr. Stevens. "Take advantage of the fact that payors are leery of hospitals being in the position to call all the shots."

For example, in Utah costs are high because hospitals have employed nearly all surgeons in the state. Since hospitals employ all the surgeons, they can demand a higher rate from payors than otherwise possible.

"When insurers look at their costs in places like Utah, they aren't happy with hospitals and large systems controlling everything in the market," says Dr. Stevens. "You can partner with insurance companies on contracts for reimbursement and providing care if they are concerned about hospitals having too much control. You can also work with them on an accountable care organization or bundled payments where the payment goes through the physician first."

Large orthopedic groups around the country are now exploring this option with payors, and it could become more common among spine surgeons as well. "With a large group of surgeons, such as OSNA, you are in a position to take advantage of these partnerships," says Dr. Stevens. "We are in the early phases of exploring these kinds of partnerships, but insurers are excited because they think we can do a good job of keeping the price down."

9. Examine partnership deals to ensure revenue is flowing in your direction.
When drawing up partnership contract with hospitals or payors, make sure the deal is structured to keep revenue coming into your practice. There should be complete transparency between all groups involved.

"Demanding transparency is the number one thing you need to do in a hospital contract," says Dr. Stevens. "Don't just sign a deal with the hospital, even if it's participating in an ACO as a non-employed provider. If you are being reimbursed through a bundled payment system, you may be at the mercy of the hospital and their revenue sharing/expense allocation formula—and that formula will be subject to change if it is not successful from the hospital's standpoint. It is impotent to understand all aspects of the relationship and demand efficiency from the hospital."

Surgeon groups should also demand participation in the efficiency and management of the partnership so they have stake in its success. "You don't want to be in the situation where you are happy with the payments for the first one or two years, and then they can just change it so you are unhappy during years three and four," says Dr. Stevens. "In the end, it comes down to maintaining the viability of your practice and taking care of their patients."

10. Become aware of hospital incentives and advocate for fair treatment.
Surgeon relationships with hospitals are sometimes strained by competing incentives. A surgeon's livelihood and reputation often depends on the quality of outcomes and patient satisfaction, but hospitals can maximize revenue by coding specific diagnoses or billing for complications.

"There is inaccurate data in the spine field because surgeons will perform spinal fusion for patients with several combined conditions, but hospitals will just code stenosis — even if there is deformity or spondylolisthesis as well," says Dr. Stevens. "Surgeons need to be aware of what the hospital is coding and whether it's the same as the physician documents. If it's only coded as a few issues, that doesn't reflect the full pathology and can skew data."

Quality reports are another area where surgeon and hospital incentives differ. "I had a negative quality score from an insurer because the hospital coded two durotomies and two cases of atelectasis as postoperative complications to maximize their reimbursement and it reflected negatively on me," says Dr. Stevens. "I had higher apparent rate of complications in my patients, compared to other surgeons, when the real difference was not my incidence of complications, but the aggressiveness of the hospital coding of complications for increase reimbursement."

To repair these differences, hospitals and surgeons need to work together to maximize income through quality and efficiency. "We need transparency on what the hospital is billing for and make sure they aren't being overly aggressive for comorbidities," says Dr. Stevens. "I've also have them code certain common comorbidities as a pulmonary complication with the patient, which gives the hospital more reimbursement but reflects poorly on me. I need to partner with the hospital so I don't get billed as having poor quality because they receive more money."

Being in a larger group can also help in this situation. "A larger group allows you to negotiate and demand that our quality measures are valid and real," says Dr. Stevens. "Those are the incentives hospitals have. We need to be aware of that and make sure they aren't unfairly coding for these incentives. A large group like OSNA can help you partner with the hospital to provide financial incentives to physicians who are able to save the hospital money, and at the same time help the hospital to collect genuinely meaningful quality data."

11. Joint venture with a hospital on ancillary services.
There may be the opportunity in the future to enter into a joint venture with the hospital on new ancillary services, such as an ambulatory surgery center or physical therapy services.

"If your group has a large volume of outpatient cases already, you can approach the hospital to see if they would like to work with you on an ASC joint venture," says Dr. Webb. "This is predicated on you having the volume to make the ASC work in the first place. The key is to approach the hospital with a sense of your ability to meet their needs."

While its important to accommodate for the hospital's needs where necessary, keep your own interests in mind as well. Find out where you can leverage your strength and don't be afraid to walk away from the deal if the hospital isn't willing to compromise.

"The more cohesive your group is, and the more flexible you are to move cases to other places, the more ability you will have in making these arrangements," says Dr. Webb. "You are always going to lose some control over your practice when you negotiate with hospitals, but the key is to negotiate to get something back. You shouldn't have to give anything up without receiving something in return."

12. Bring business sense to your side.
Like it or not, surgeons in private practice these days must have a strong business sense and make the right decisions to stay independent in today's healthcare environment. If you aren't comfortable making those decisions, take business courses or earn an MBA to gain confidence in your skills.

"For me, business was self-taught," says Dr. Siddique. "I made a few mistakes along the way, but I never made the same mistake twice. I also finished an MBA; but, some surgeons might be comfortable running a practice or ASC without formal training."

Some surgeons would rather focus on their clinical practice than running a business, but still wish to remain independent; these surgeons should consider hiring an office manager with an MBA who has experience in healthcare. There are also management companies that can run the practice or surgery center for the physicians.

More Articles on Spine Surgery:

How Does Spine Surgeon Employment Compare to 10 Years Ago?

6 Things to Know About the Spine Market

21 Spine Devices Receive FDA 510(k) Clearance in July


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