Empowering Practices for Integration

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Sponsored by an educational grant from Verto Education

Due primarily to sharp reimbursement cuts, independent cardiovascular practices are increasingly integrating with hospitals and health systems for stablization and security. In fact, 60 percent of cardiovascular practices reported that they participated in merger talks with hospitals and other practices, based on the American College of Cardiology’s (ACC) Cardiovascular Practice Census, issued in October. Of those who had merger talks, two-thirds had already had integrated with a hospital, or planned to do so within the next year.

However, many of the practices making plans to integrate are unaware of the myriad issues to be negotiated, let alone what matters need to be included in any transaction documents. “Due to the recent expansion of these deals, many hospitals and physician groups are less prepared than they should be,” explains William T. “Mike” Carlson, Jr., Esq., founder and CEO of Verto Education ( www.vertoeducation.com), which has created five online educational video modules specifically tailored for these parties. “These physician-hospital integration contracts could be analogous to a three-legged stool: practice valuation, physician compensation and service line governance.”

According to Carlson, the hospitals are just as keen as physicians to form a lasting partnership and true integrated relationship. “The two parties’ interests can be aligned if both parties understand the motivations behind the other parties’ interests and concerns,” he added.      

The five video modules seek to explicate for both the physician practices and the hospitals how practice integration can best be undertaken:

  1. Introductory Module: Seeks to address common, initial fears. For example, physicians often ask: What will it mean to become an employee? How do I maintain professional autonomy in day-to-day operations? What happens after the initial employment contract is complete?
  2. Valuation Module: Seeks to explain three aspects: 1) The methodologies used to place value on a practice; 2) Weighs who should conduct the valuation—either an outside firm or the hospital; 3) Provides physicians with a summary of what to expect from the valuation.
  3. Physician Compensation Module: Discusses the factors for establishing compensation; how the compensation will be set; and the tiers of compensation. For example, quality goals are usually included among the tiers of physician compensation. Longer term contracts also take into account reimbursement changes. The module not only explains how physicians will earn their money from the hospital, but also how that pool of money will be distributed to the individual physicians.
  4. Governance Module: Carlson says this is the “most important” area, as governance will dictate who has authority over which clinical and business areas; which decisions will be made collectively by the hospital and physicians; and which decisions will be made solely by one of the parties. This governance module also covers outpatient and inpatient cardiovascular services. “The ideal contract encourages collaboration and aligns incentives between both parties,” he explains.
  5. Process Module: This 45-minute module seeks to walk both parties through each step in the process, including empowering the physicians and other stakeholders to understand that negotiations can be altered at any point in the process.

This course, created by Carlson and Cathie Biga, CEO of Cardiovascular Management of Illinois and executive director of the Adventist Heart and Vascular Institute, is meant to prepare cardiologists, practice executives and hospital administrators for integration negotiations, as well as to provide insight into the motivating factors for both parties. Biga and Carlson have negotiated more than 125 physician-hospital integration transactions, and their experience is evident throughout this series.