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Hospital — Physician Relationship

Hospital — Physician Relationship. Factors Causing Tumult and Turmoit Challenge of Competition Symbiotic Increasing Regulatory Complexity. Purpose of Presentation. Recognize Strategy and Tactics of Each Side Identify Collaborative Solutions Failing That — Identify Competitive Responses.

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Hospital — Physician Relationship

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  1. Hospital — Physician Relationship • Factors Causing Tumult and Turmoit • Challenge of Competition • Symbiotic • Increasing Regulatory Complexity

  2. Purpose of Presentation • Recognize Strategy and Tactics of Each Side • Identify Collaborative Solutions • Failing That — Identify Competitive Responses

  3. HistoricallyCottage Industry Characterized by High Utilization and Profits High Margins HOSPITALS PHYSICIANS Health Care “Boss” Focused on Care Full Beds Unlimited Resources Limited Paperwork Long Stays Little Regulatory Managed Care Interference High Income/ Community Status Doctors’ Workshop

  4. Tightening Vise • Rising Costs • Employer Rebellion • Best Care / Worst Care / Highest Cost • Governmental Response

  5. Impact • Hospitals — Eliminated Beds; Shorten Length of Stay • Physicians — Taking Managed Care • Med School Applicants Declined • Focus on Outpatient Care • Both — Competing for Limited $$

  6. Current Considerations HOSPITALS MUST PHYSICIANS MUST Respond to Compliance / Reimbursement Pressure Fight Declining Compensation/Status Focus on Developing IT Deal with Managed Care Hassle Assure Staff Loyalty Contemplate Redistribution of Power/Income Develop Strategies for Integration Find Some Friends

  7. Hospital Actions • Medical Director / Staff Leadership Agreements • Coverage Agreements • Management Agreements • Exclusive Provider Agreements • Employment Agreements • Independent Contractor Agreements • Recruiting Incentives • Gain-Sharing Agreements • Form PHOs

  8. Physician Reaction • ASCs • Specialty Hospitals • Diagnostic Facilities • Rehab Facilities • In-Office Ancillaries • Inpatient Procedures • Ceased Medical Staff Volunteerism • IPAs and Group Mergers

  9. Ohio Health Example • Orthopedic Hospital Created • System — Duty to Protect / Preserve Charitable Mission • Fiduciary Duty of Trustees • Profitable Services Offset Charity Care • Physicians “Skimming” Profitable Procedures • Ensure Privileging Supported Mission • Went Public

  10. New Reality PHYSICIANS ARE HOSPITALS ARE • Frantically / Creatively Seeking $$ • Searching for Security / Control • Looking for Leverage • Requiring Disclosure of Financial Interests • Disqualifying Doctors from Leadership • Restricting Staff Membership / Voting • Recruiting Competing Doctors • Declining Assistance to Competing Groups • Refusing to Deal with Competitors • Entering Exclusive Contracts

  11. Legal Parameters Supporting Competitive Efforts • Community Service Obligations — 501(c)(3) • Fiduciary Duty • Conflict of Interest Policy • Corporate Authority of Board to Govern

  12. Legal Parameters Limiting Competitive Efforts • Anti-Trust • Illegal tying arrangements • Exclusive dealing • Group boycotts • Attempted monopolization • Monopolistic leveraging • Private Cause of Action • State Unfair Competition Laws

  13. Legal Parameters — Limiting Competitive Efforts • Medical Staff Bylaws • State law requirements • HCQIA • JCAHO • Medical Staff Bylaws • Vs. Right to Make Management Decisions

  14. Legal Parameters — Limiting Competitive Efforts • Contracts • Covenant Not to Compete • Bylaws • Corporate • Medical • Stark II • Anti-Kickback Statute

  15. Managing the Competitive Environment • Collaboration vs. Competition • Still a Symbiotic Relationship • Remember the Mission • Strategy First • Escalating Tactics

  16. Community Awareness Campaign • Explain Corporate and Tax Structure • Discuss the Mission • Work on Relationships

  17. Collaboration • Join the “Flotilla” • Set Common Goals • Respect Physicians’ Expertise • Motivate by Vision / Alignment of Goals • Shared Vision and Goals • Respect Independent Goals and Action • Direction Determined Issue by Issue • Partnership When Goals / Visions Align

  18. Collaborative Tools • Joint Ventures • Exclusive Contracts • Employment • Independent Contractor • Medical Director / Staff Leadership Positions • Management Agreements • Coverage Agreements • Recruiting Assistance • Malpractice Subsidies

  19. Confrontational Options • Tighten Conflict of Interest Policies • Recruit Doctors to Compete • Enter Exclusive Managed Care Contracts • Leverage Patient Steerage • Refuse to Contract or Require Additional Terms • Engage in “Economic Credentialing” • Amend Bylaws • Close Department / Exclusive Contracts • Limit Privileges • Land Use Restrictions

  20. Build an Ark • Refuse to Deal with Competitors • Decline Assistance to Competitors • Invite “Friends” on Board • Shut the Door

  21. Evaluating the Appropriate Response • Designate a Planning / Review Body • Board Members • Community Leaders • Key Loyal Physicians • Administrators

  22. Key Points of Analysis • Existing Providers in Market • Needs Assessment • Nature of Competition • ID Friends — Secure Them • Analyze Impact of Competition • ID Physicians’ Motivations

  23. Solicit Input • Physicians with Competing Interests • Medical Leadership • Community Leaders

  24. Board’s Decision • Form a Flotilla • Build an Ark • Go to War

  25. Jeffrey O. Ellis, J.D. Lathrop & Gage L.C. 10851 Mastin Boulevard Overland Park Kansas 66210-2007 913.451.5100 jellis@lathropgage.com

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