This case study shows how a physician contract management system can help hospitals uncover Stark issues and smooth the contract negotiation process.
Background
A community hospital in the Northeast was struggling to manage its contractual relationships with employed and independent physicians. Hospital leadership did not have a systematic approach to creating or managing physician deals, and as a result, faced the following problems:
- Contract terms were highly inconsistent across deals, with several executives engaged in physician deal making
- Contracts were signed without a full understanding of the deal’s strategic importance.
- Varying term lengths created surprises and constant pressure on contract renewal deadlines, leading to last-minute, haphazard renegotiations.
- The hospital was constantly reacting to existing or potential deals, limiting their ability to proactively seek or plan for needed alignments.
- Executive leadership feared that physician payments were not consistent with contract parameters.
HSG worked with the client to identify and assemble all existing physician contracts by accessing their contract database software, reviewing payment data, and collecting information from senior executives. The review included several contract types:
- Employment contracts
- Medical directorships
- Call coverage agreements
- Co-management agreements
- Professional services agreements
Next, we summarized and catalogued relevant terms for each contract and compared these parameters to market standards to determine contract appropriateness.
Then, we created a contract action timeline based on key notification and/or renegotiation deadlines.
Finally, we worked with the client to create a physician transaction committee to discuss strategy for upcoming negotiations.
Results
As a result of the contract review process, our client gained a firm understanding of their entire universe of physician relationships, enabling the organization to:
- Take a strategic approach to developing and maintaining relationships with independent physicians;
- Plan negotiation strategies through the physician transaction committee, so the executive team speaks with a single voice;
- Address employed physician contracts in a timely manner, increasing physician satisfaction and eliminating the need to push through last-minute renewals or negotiate temporary extensions; and
- Address potential compliance issues uncovered during the contract review process.
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