By Stephen C. Fitzer
Bexar County Medical Society
Executive Director
Many physicians in Bexar County are credentialed or privileged at one or more
hospitals. Some physician specialties require a close working relationship with hospitals to enable them to carry out their patient care. Because hospital operators understand this relationship, they seek to promote physicians’ use of their hospitals, at least as much as the laws will allow.
STARK laws, which govern self-referral by physicians, have established tight rules for physicians and hospitals working together. For example, a hospital cannot financially assist a physician to set up a new private practice and at the same time require that the physician refer business exclusively to that one hospital.
There is more flexibility granted to hospitals and physicians, however, in medically underserved areas. Laws also prohibit physicians from working for non-physicians, except in special cases such as through the use of a 501a corporation.
In Bexar County, some hospital affiliated entities use 501a, charitable corporations to hire physicians directly. Other hospitals recruit physicians by helping physicians get set up to practice in areas where it would be convenient to both the hospital and the physician. In the first case, the physician becomes an employee, and in the other the physician either starts up a solo practice or joins with other physicians in a new or existing practice.
When a physician acts as an employee of a charitable 501a corporation, it does not mean the physician cannot charge for services or even make a good living at it. The laws have been interpreted to allow physicians to be gainfully employed, albeit with a not-for-profit entity.
In my June 2007 article in this magazine, the pros and cons of a physician working as an employee were outlined. Working with a hospital and a charitable 501a corporation may have additional, unique attributes relative to working with a for-profit corporation.
Hospitals that help physicians get into practice offer a number of benefits and safeguards to reduce the risk of starting up a new practice. One hospital helps mostly new-to-the-area physicians find office space, employee staff, establish themselves with vendors and helps with all the other tasks involved in getting a new practice started.
As mentioned above, the hospital is interested in having physicians of certain specialties locate close to the hospital, hoping the physician will become credentialed at their hospital and use the hospital as the primary venue for medical procedures that require hospital facilities.
The hospital also may offer a physician some revenue or collections guarantees to help the physician through what can be a cash-starved first year. While the guarantees help with the cash flow, the guarantees are not gifts. They must be repaid according to the schedule agreed upon between the physician and the hospital, and are offset against actual collections. This sort of arrangement can be with a solo practice or with a group practice.
Still, other hospitals offer income guarantees to physicians to locate close to their hospitals. These income guarantees can be calculated in a variety of ways, but will generally be some form of guaranteed take-home pay after all expenses. With any of these agreements, once the physician accepts the money from the hospital, the physician must live up to the commitment made. Should the physician decide to leave the area or practice elsewhere, the money advanced must be repaid with interest.
Hospitals are looking to help physicians with many specialties, but especially specialists in pediatrics, obstetrics/gynecology, internal medicine and family practice. Hospitals recruit physicians through a variety of ways, including the use of recruiting firms and referrals. Not surprisingly, only a small portion of physicians recruited by hospitals are local physicians. Most of them come from outside the area. With tort reform in Texas, it has become an attractive new venue for physicians.
What causes physicians to enter into agreements with hospitals? Financial assistance is certainly key. But other motivations include wanting to own their own business, wanting to establish a close relationship with a hospital, obtaining mentoring from other physicians in the hospital group and having someone hold their hand as they get into business.
It is an alternative to be considered along with setting up a new practice, joining an ongoing practice, or working as an employee for another physician or 501a entity.
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