Contracting 101 The Business of Medicine

1. Contracting 101 The Business of Medicine Staci Larsen Smith Associate Vice President HCA Physician Services 2/12/09

2. Overview Physician Practice Today Planning Practice Setting Interviewing Investigating the Practice The Offer Resources

3. Physician Practice Today

4. The Physician Mindset We became physicians to serve patients only and no one else. We don’t care about the financial health of hospitals, corporations or managed care providers. Our rewards come from working hard, mastering our specialty and impressing colleagues, not by participation in bureaucracies. We hate politics, committees, meetings and anything that takes us away from the O.R., the nursing floor, and our office where our joy and our incomes occur. We want to work hard, get paid, and have a good call schedule.

5. Physician Pressures Malpractice up another 20% on average in 2006 Managed care payor consolidation Uncertainty over Medicare Rising office expenses More informed and demanding patients Compliance concerns, HIPAA, etc. Convenience clinics

6. Trends • 2006 total Medicare expenditures at $408 billion • Future expenditures expected to outpace both workers’ earnings and the overall economy • By 2019 the Hospital Insurance Trust Fund is expected to be completely exhausted by 2019 • The CMS Proposed Medicare Rule was issued in April • 1200 pages • Would cut nearly $25 billion in payments over 5 years • The AHA believes this proposed rule does not put patients first

7. Trends (cont.) • AMA has been fighting cuts to physician reimbursement • AMA believes the SGR formula (Sustained Growth Rate) is fatally flawed • SGR formula called for a 4% cut in physician payment in 2007, but Congress intervened • AMA believes that payments today are basically the same as in 2001 • SGR also does not account for increase in practice costs and increase in “office procedures” • Mandatory Technology for physicians?

8. Stark II, Phase III • New Rules now in effect (January 1, 2008) • Can no longer make a profit on professional interpretive fees • Called “anti-markup” rule • CMS wants to make it difficult for physicians to make money on ancillaries • Exception is if the ancillary equipment is in your office • Source – Nashville Medical News December 2007

9. The physician “surplus” never happened. • 35% of U.S. physicians are over the age of 55. • Baby boomers are starting to retire and demand everything (more, better, faster, cheaper). • U.S. life expectance is rising every year. • There are 25,000 new physician graduates per year, but the U.S. population is growing at a faster pace. Shortage of 200,000 by 2020. A Coming Physician Shortage?

10. According to the AMA in 1/07, the average age of physicians and medical students is 49. • 51% of physicians in training are female and 85% will start families at some point. • The new generation of physicians have unprecedented lifestyle demands (call/pto). • 17 “crisis” states for malpractice will drive more physicians to seek employment. Other Considerations

11. Planning

12. Taking Stock • Where do you want to live? • What kind of practice do you want? • Is the amount of your loan repayment an issue? • What family ties are involved? • What about your spouse’s career? • Have you considered your hobbies and other interests?

13. America’s Medical Liability Crisis: A National View

14. Finding a Position • Physician Recruiters • InHouse Recruiters vs. Agency Recruiters • Specialty Board • Locum Tenens • Medical Journals • Internet • Visiting Local Medical Offices • Networking • Hospital CEOs/CMOs

15. Practice Setting

16. Solo Practice Source: AMA

17. Small Group Practice Source: AMA

18. Large Group Practice Source: AMA

19. Employment Source: AMA

20. Hospitalist Source: AMA

21. Interviewing

22. Pick a format and be consistent • Have a short CV • Include a cover letter • Include your present and permanent address, phone, pager, and e-mail address • No typos! Presenting Yourself

23. Writing a Great Cover Letter • One page, 3-4 paragraphs • Brevity • Personalization • Passion • Write directly, avoid generalities • Highlight special expertise • Request confidentiality • Get some to review, critique your letter

24. CV Outline • Identification • Education • Postgraduate • Experience • Licenses and Certification • Professional Affiliations • Publications • Presentations

25. The CV gets you the interview,the interview gets you hired.

26. Have no interruptions or distractions • Stay calm and listen carefully • Pause before answering any questions • Have your CV and schedule in front of you • Don’t appear overeager or desperate Success Over the Phone

27. The Site Visit • Do your homework • Arrive 15 minutes early • Bring extra copies of your CV • Have a firm handshake • Practice good eye contact • Have your list with you • What not to wear

28. Traveling Tips • Focus on less than ten practice opportunities and then narrow the field from there • Spend two full days at each location, depending on the distance • On the first visit, go alone. On the second visit, include your spouse and family. • Remember, there is a good fit out there for everyone. If it just doesn’t feel right, move on to another opportunity.

29. While You Are There • Prepare a two-minute speech about yourself and stay on message • Feel free to ask questions about anything • Jot down the names of those you interact with and write them a “thank you” letter • Show courtesy and respect to everyone you encounter

30. Investigating the Practice

31. Research the practice or hospital • Be ready to discuss your goals and interests • Be ready to sell yourself • Act like this is the only interview that matters • Prepare your list of questions

32. Speak positively of others • Be punctual • Schedule strategically

33. Physician Due Diligence • How long has the practice been in existence? • Does the group have enough patients to support a new physician? • How many new patients a year does the practice attract? How many does it lose? • Does the group have a marketing plan? • What will the group do to send patients my way? • How many managed care contracts does the group have? Do the payments cover the costs of treating patients?

34. Financial Due Diligence Balance sheet, P & L, cash flow statement Overhead-to-revenue ratio Physician productivity Debt/loans Payor mix Capital reserves Managed care contracts Accounts receivable Audit history Malpractice claims

35. Talking to Partners Start with the oldest and youngest partners and work your way in toward the middle. Talk to all of the physicians, if possible. Probe for their views, both personal and professional. You are looking for compatibility while you are assessing the culture.

36. Joining a Partnership or Group • Determine who owns the group and their corporate structure (PA, PC, LLC, etc.) • Determine how ownership is obtained • Determine the time frame and $ amount • Decreasing role of sweat equity • Determine who really “calls the shots”

37. What a PartnershipAgreement Should Include • Buy-in, buy-out and liquidation provisions, including retention of the location, equipment and records of the partnership • Call coverage arrangements • Division of management duties • Illness, disability and LOA policy • Income distribution • Mechanisms for settling disputes • Ownership and valuation of assets, including AR • Physician’s liability for lawsuits against the practice • Purchasing policies with spending limits • Vacation policies

38. Value of a Group Consider paying for: • Accounts Receivable • Furniture, Fixtures, Equipment (FFE) • Supplies Don’t pay for: • Charts • Goodwill • Trained Staff

39. Apply for medical licensure • Inform the DEA of your new address • Request and complete an application for credentials and privileges at your local hospital • Request and complete applications for provider numbers • Apply for malpractice insurance • Order office stationery and script pads • Find/order your original Social Security card • Remember to do the 100+ other things to successfully start your practice When You Sign

40. Your Background Check • Social Security trace and validation • State and Federal court records • Credit history • Primary source verification • Licensure • Terrorism watch list • DEA, Medicare, Medicaid • Malpractice

41. Types of Contracts

42. Contract Relationships Recruiting Agreement (Revenue Guarantee) Based on Community Need Study Start-up Solo/Existing Group Private Practice with Medical Staff Privileges Can Include Marketing Relocation Student Loan Help Legal/Accounting Assistance Income Expenses (malpractice, rent, EMR license, staff, transcription services, dues)

43. Contract Relationships Employment by Hospital Organization FMV May mirror private practice (PCE) May be guaranteed Solo/Group to Grow/Existing Group Rights/Responsibilities of employee

44. Contract Relationships Professional Services Agreement Special Expertise or Service Must be FMV Duties must be logged and performed

45. Other Contracts Group Employment Contract/Partnership Agreement Managed Care Academic/Research Contract with State/Learning Institution Supplier/Vendor Contracts EMR, Equipment, Supplies,

46. The Offer

47. Definition of a Contract An important and legally binding agreement between a physician and another party that defines the working relationship with mutually agreed upon duties, responsibilities and rights.

48. What a Contract Isn’t • A handshake • A letter of intent • A promise • An understanding • What someone said, thought, meant, or hoped for

49. Never say these words:“I’m just a doctor. I don’t know anything about business.”

50. Simple Steps for Contracting Read it. Understand it. Get at least two opinions.