CCMS Medicine Spring 2017 - 18

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Is Hospital Employment
The Best Option?
BY VASILIOS J. KALOGREDIS, ESQUIRE

I

n today's ever changing health care environment, I have seen
many physicians struggling over the direction they should
be pursuing as they map out the next several years of their
professional careers.
Many doctors have already gone the route of becoming
employees of hospitals or other larger institutions. All of the
regulatory, reimbursement, and other market-based changes in
the health care world are causing many of my clients to critically
evaluate what the next best move would be for them. For many,
receipts are down and expenses are up. The sophisticated IT
needed can put a real strain on the budget of smaller practices.
In some cases, a knee jerk reaction has taken place and
physicians have decided to go the hospital employment route.
In some circumstances, that move was made without critically
evaluating in a rational and full basis whether it truly was the right
move for that particular doctor. Hospitals are often motivated
to go this route so that they will be more in control of things by
having the employed doctors as opposed to other collaborations.
Even forgetting all of the legal aspects of such a move, one
needs to look at what it would mean to the doctor and the doctor's
practice activities. An employed physician would have less control
over practice operations and management. This move, if taken,
causes the doctor to no longer be the owner/decision maker and
to become an employee with a "boss." This can be a difficult
transition for many physicians. In some circumstances, we are able
to create a situation where the physician will have an important
administrative role. However, this is not the norm. It could be a
very difficult adjustment in many circumstances.

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When I talk to physicians, one of the reasons often given for
going the hospital employment route is "security." But, what does
security mean? Working for a large institution is not necessarily
more secure than other options.
Back in the 1990s, hospitals were aggressively looking to buy
practices, often times with more than one bidder aggressively
going after the more attractive practices. That often ended up
with very good purchase prices and favorable employment
arrangements. Many of the hospital deals I see today do not
entail large purchase prices and/or generous long term guaranteed
compensation arrangements. Some do. But the percentages of
those that do are less than in the past. Some of this is a result of the
doctor approaching the Institution, hat in hand, about a sale and
subsequent employment arrangement.
Obviously, each deal is different. But as a general rule, I am
seeing lesser purchase price valuations and more incentive laden
compensation arrangements in the deals that are out there today. It
is a matter of supply and demand and who has the leverage.
I am often engaged to advise as to the careful structuring of
things from a regulatory standpoint so that the arrangement does
not fly in the face of Anti-kickback and Stark Issues. This includes
looking at what is "fair market value" for the purchase and the
compensation aspects.
One has to look carefully at for how long any guaranteed
compensation arrangement would be. In some of the arrangements
I see, there may be a guarantee for a couple of years, with the latter
years being linked to a more performance-based paradigm. If so,
is one's remuneration any more secure than if one remained in
private practice?
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