As physician employment becomes a more attractive, indeed compelling option, hospitals face a tough question: How can they offset the financial risk associated with maintaining or growing their employed physician network? Health Strategies & Solutions, Inc. has some ideas:

• Carefully select employed physicians and structure employment contracts with explicit language regarding expectations and productivity incentives.
• Provide regular feedback and data to employed physicians on productivity, quality measures, revenue generation, expense levels, overall operations, and other measures of practice performance.
• Establish guidelines for the per-physician operating loss or subsidy that will be tolerated.
• Structure employment relationships for a limited term (one to three years) so that each party can assess their appropriateness.
• Assign management of the physician practices to experienced professionals who understand the practice operating environment.
• Give the employed physician network and other formal physician-hospital relationships the high-priority attention they deserve; for example, assign oversight of the network to a member of the senior management team.
• Avoid excessive allocation of overhead expenses to physician practices.
• Manage larger administrative functions like billing and collections, allowing physicians to handle day-to-day operations of their practice.
• Continuously evaluate employment relationships to determine if changes in reimbursement, the regulatory environment, or competitor initiatives warrant a change in the structure of terms of the relationship.

Adapted from Strategies & Solutions, February 2009. www.hss-inc.com . Used with permission.

Publication Date: Thursday, May 14, 2009