Choosing the Right Hospital Partner

By Randy Bauman
March 25, 2022

All hospitals are not created equal when it comes to being physician-friendly and having a commitment to long-term success with practice acquisition and physician employment strategy. Hospitals that lack experience should be looked at with a healthy degree of skepticism.

 

QUESTIONS TO ASK

While hospitals learned a lot from employing physicians in the 1990s, some didn’t embody the lessons. Running a hospital department is different than running a physician practice. Make sure the hospital you choose has committed or is willing to commit to the necessary investment in physician practice management infra¬structure and expertise.

The hospital should take a healthy, proactive approach to practice acquisition. Ask about its reasons for buying practices. The answers you are looking for include the following:

  • Long-term strategy to grow or maintain market share;

  • Response to competitive threats;

  • Ability to better serve patients;

  • Strategic preparation for new payment and integrated delivery models;

  • Increased leverage in negotiation with third-party payors; and

  • Desire to help medical staff members survive and thrive.

Answers that should send up red flags might include the following:

  • Competitors buying practices; and

  • Ability to cut your overhead.

Ask a lot of questions about the hospital’s practice management commitment, and be leery if you don’t get specific answers:

  1. How many physicians does the hospital currently employ?

  2. How many practices does it plan to acquire?

  3. Have they had any physicians leave hospital employment? Who? How many? Why?

  4. What practice management expertise does the hospital currently have?

  5. What practice management positions does the hospital anticipate adding in the future and/or what kind of background is it looking for to fill those positions?

  6. How does it do, or plan to do, billing?

  7. Does the hospital use provider-based, charging a separate facility fee to patients for office visits?

  8. Will billing be a centralized function, or will each practice keep its existing billing system?

  9. Does it currently use or have plans for an EHR system?

  10. Who will actually negotiate managed care contracts?

  11. What is the hospital’s business plan for practice acquisition and management?

  12. How does my practice fit into that plan?

Talk to those physicians who have already gone through the acquisition process and ask:

  1. How was it handled?

  2. Are they happy?

  3. Has the hospital been willing to work with them to resolve problems and issues?

  4. Are they aware of unhappy physicians leaving hospital employment?

Don’t be afraid to ask questions specific to your situation:

  1. Will you have a say in the hiring and termination of staff?

  2. How will staff work rules be enforced?

  3. Will you have input into staff evaluations, raises, and bonuses?

  4. Can your office be moved or consolidated with another office without your approval?

While some details will have to be worked out in the future, and things will evolve as the number of physicians the hospital employs grows, getting “We’ll figure that out later” as the answer to most of your questions should be a red flag as to how well the hospital has thought through its strategy.

Consider your past relationship with the hospital:

  1. Is the hospital part of a larger system that has the financial resources necessary to ensure long-term stability?

  2. Is administration stable and trusted or is there a lot of turnover?

  3. Do you look up to members of the management team as good leaders and role models?

  4. Who will be your liaison?

  5. Are the individuals in charge experienced and competent, and are they honest and forthright in their business dealings?

Another consideration is how you would feel about answering to hospital administration. If you have had conflicts with administration in the past, you’ll have to decide if you can put those behind you and work in close partnership moving forward.

Remember, too, that even if you have a rosy relationship with the hospital CEO and others, turnover at the executive level in hospitals tends to be fairly active. There is no guarantee that the people you deal with today will be in their positions a few years from now. Given that possibility, make sure all points of your agreement are in writing. What he or she said way back when matters little if a whole new team takes over the executive suite.

Ask yourself what the hospital has to offer that will improve the quality of your professional and/or personal life. Then consider if what it is offering is enough for you to give up your autonomy. An attractive buyout price, a solid compensation and benefits package, fewer administrative hassles, and more time for direct patient care might align quite well with your long-term career values and goals.

Understanding a hospital’s motivation and strategy, along with its commitment to practice management infrastructure and foresight in evolving as new payment models emerge, is key in choosing the right hospital partner. It is not the hospital with the best offer that is likely to sustain you should you decide to sell—rather, it is the hospital with the commitment to practice management infrastructure, a solid business plan, and the successful execution of that plan.

 

 

 

Excerpted from Time to Sell: Guide to Selling a Physician Practice – Value, Options, Alternatives, 3rd Edition, by Randy Bauman.

 

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Topics:

Physician Leadership and Ambulatory Care: Small and Rural Hospitals
The Physician’s Compact