Although negotiations are expected to last through the end of the year to finalize such details as compensation, recruiting, and a group mission statement, the medical staff at Sacred Heart considers the merger a “done deal” and has thrown its support behind the effort. “Community outpatient docs have been clamoring for our services, and we have been having to hand out numbers and ask them to wait in line, so to speak,” Dr. Alexander says.
Dr. Alexander says he’s learned some lessons through the extensive negotiation process:
- Stay positive. In any business venture, absolutely nothing is impossible, even dodging a noncompete clause.
- Release your preconceptions. Conspiracy theories might abound, but most hospital administrators have the best of intentions. As highly regulated organizations, hospitals might simply be following their own bylaws and fulfilling responsibilities to stakeholders. Seek out at least one administrator whom you can trust, and with whom you can communicate effectively. A mutual understanding of intentions and objectives makes the process more successful for all concerned.
- Look beyond politics. Your trust and respect for administrators and fellow physicians will go a long way toward overcoming obstacles.
- Stick to your plan. Adhere to your goal of remaining independent, if that is important to you. “Our group resisted being funneled into becoming employed by a very large national hospitalist chain,” Dr. Alexander says, “and I would encourage physicians in other parts of the country to stick to their commitments as well.”
- Trust the negotiation process. Even if all goes well, what you’re shooting for at the beginning might not be exactly what you get after negotiations are over. This does not mean you’ve failed, or that hospital administration tricked you or failed to deliver on promises. It simply means you have created a negotiated settlement; both sides have come to a new appreciation for the other’s requirements and have made necessary and respectful accommodations.
Based in Traverse City, Hospitalists of Northwest Michigan (HNM) services four community hospitals and continues to witness solid growth. Since 2000, the group has grown from nine to nearly 40 providers, and from 2005 to 2008, patient encounters doubled. “In these hard economic times, hospitals are inviting us in because we provide value to the hospitals through leadership, increased hospital revenues, and improved recruiting and retention of specialists,” says Troy W. Ahlstrom, MD, president of HNM. “We continue to see healthy growth in patient volume as we align patient care goals with the needs of the hospitals and surrounding communities we serve.”
HNM, which established a service at the regional medical center and then assumed management of HM programs at three other rural hospitals, soon will add a fifth service to its ledger. HNM also began a pediatric program at the regional referral center, and the group is exploring the possibility of providing a network of pediatric care throughout the region.
Having grown up in the region, David Friar, MD, CEO of HNM, not only has a better understanding of the needs of rural hospitals, but also a personal investment in his group’s success. “These are our communities. We don’t view the hospitals as just a place to make a profit, but a place where our neighbors work and our families get their care,” he says.
Drs. Ahlstrom and Friar offer the following advice for achieving success in these economic times:
- Optimize receipts. Concern over compliance audits leads many hospitals to sacrifice group receipts by encouraging undercoding. “We’ve found hospitals do a poor job of negotiating the provider portion of third-party payer contracts and frequently lose provider charges because they focus on the much larger facility fees,” says Dr. Ahlstrom. The group’s receipts increased more than 30% when they began using an outside billing firm and adopted productivity incentives to encourage providers to practice better documentation and charge capture. Improving documentation also supports a hospital’s ability to accurately code its patients, which allows a hospital to bill for a more profitable diagnosis-related group (DRG), and improve its case-mix index. With these changes, Hospitalists of Northwest Michigan has increased provider pay and grown their practice while improving the hospitals’ profitability.
- Encourage frugality. The cost-plus model is popular, but it doesn’t incentivize programs to contain costs. In contrast, the fixed-price model encourages hospitalists to find cheaper ways to provide good care. “Because the money we save goes to us, we’ve all found creative ways to provide quality care for a third less money than similar cost-plus programs,” Dr. Ahlstrom says.
- Align incentives. Hospitals live or die on thin margins, Dr. Ahlstrom says. His group trains its employees to ask: What can I do to make the hospital stronger? “What’s good for the hospital is good for us, so we work with the hospitals, not for the hospitals,” Dr. Friar says.