Steven M. Harris

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

An increasing number of hospitalists are pursuing part-time schedules to cater to lifestyle demands and personal desires. According to a 2010 survey conducted by the American Medical Group Management Association and Cejka Search, 21% of physicians in the U.S. are working part time, compared with only 13% in 2005.

Among those part-time physicians, the fastest-growing segments are men approaching retirement and women in the early to middle stages of their careers. Senior physicians who are tired of the commitment that comes with full-time employment increasingly are opting for part-time employment as a transition into retirement. Physicians with young children are seeking part-time employment to be more active in child-rearing.

The medical community generally has welcomed the opportunity to incorporate part-time physicians into hospital settings as a way to maintain female physicians, senior physicians, and physicians in specialties experiencing shortages. Physicians who are retained on a part-time basis should be cognizant of the following areas of the physician’s employment or independent contractor agreement:

• Independent contractor or employee status;
• Compensation;
• Benefits;
• Professional liability (malpractice) insurance; and
• Restrictive covenants.

Independent Contractor vs. Employee

Oftentimes, physicians assume that just because he or she is working part time, he or she is an independent contractor. That is an inaccurate assumption. The amount of time a physician works is not the determining factor as to whether someone is an employee or an independent contractor of the practice or hospital. Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws.

Generally, labor and employment laws provide protections for employees, but these protections do not extend to independent contractors. With regard to taxes, if a hospitalist is an employee, the employer is required to withhold income, Social Security, and Medicare taxes, and pay unemployment tax on wages paid to the hospitalist. Conversely, if a hospitalist is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the hospitalist; rather, the individual hospitalist will be responsible for making those payments to the IRS and state tax authorities. It is imperative that the contract clearly indicates whether the hospitalist is an employee or an independent contractor, as well as the corresponding responsibilities of the parties.

Compensation and Benefits

Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always as straightforward when it comes to part-timers. There are two general models that practices and hospitals use to determine compensation for hospitalists working part time. First, the physician may be paid a percentage of a full-time physician’s salary, based on the number of hours worked. Second, the physician may receive a per diem rate or an hourly rate. As with full-time physicians, there are various ways to formulate a part-time physician’s compensation, and the method used should be explicitly outlined in the physician’s employment or independent contractor agreement.

Benefit plans and arrangements (such as health, dental, vision, retirement plan, pension plan, disability coverage, life insurance, etc.) frequently are provided to employees and infrequently provided to independent contractors. Whether a physician who is working part time will receive benefits will vary from employer to employer. A threshold issue, however, is whether a part-time worker is even eligible to receive certain benefits. Many health, dental, and vision plans require employees to work a minimum of 30 hours a week on a regular basis, thus excluding part-time employees who work fewer hours. For retirement and pension plans, employees typically must work a minimum of 1,000 hours per year to be eligible to participate. Even if a hospitalist’s employment agreement provides that the hospitalist may receive benefits from the employer, the agreement may also provide that such a provision is subject to the terms and conditions of the particular benefit plans or arrangements.

Professional Liability (Malpractice) Insurance

While some practices or hospitals pay for a part-time physician’s malpractice insurance premiums, many shift some or all of these costs to the physician. Many insurance providers offer malpractice plans for physicians practicing part time, with reduced premiums and reduced coverage.

When negotiating a compensation package, payment for malpractice insurance should be considered. A physician also must be aware of what is excluded from coverage. For example, if a physician works part time with Hospital A and part time with Hospital B, and Hospital A provides malpractice coverage for the physician, it cannot be assumed that such coverage will cover the physician’s work with Hospital B. In this case, the physician may need a separate policy for work performed through Hospital B.

Restrictive Covenants

Although a physician might only be employed on a part-time basis, the employer might nevertheless want to protect itself by including restrictive covenants (i.e. noncompetition and nonsolicitation clauses) in the physician’s employment agreement. A part-time physician must be careful that the restrictive covenants do not jeopardize their other career objectives. For example, in the example described above with the physician working part time for both Hospital A and Hospital B, a noncompetition clause in the physician’s employment agreement with Hospital A could prohibit the physician from working at another hospital, including Hospital B.

Retaining part-time hospitalists is an increasingly attractive option for physician practices and hospitals, and part-time work is an increasingly attractive option for physicians. The items described above are just a few of the provisions that are unique to the part-time physician relationship that should be reflected in the physician’s employment or independent contractor agreement.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

An increasing number of hospitalists are pursuing part-time schedules to cater to lifestyle demands and personal desires. According to a 2010 survey conducted by the American Medical Group Management Association and Cejka Search, 21% of physicians in the U.S. are working part time, compared with only 13% in 2005.

Among those part-time physicians, the fastest-growing segments are men approaching retirement and women in the early to middle stages of their careers. Senior physicians who are tired of the commitment that comes with full-time employment increasingly are opting for part-time employment as a transition into retirement. Physicians with young children are seeking part-time employment to be more active in child-rearing.

The medical community generally has welcomed the opportunity to incorporate part-time physicians into hospital settings as a way to maintain female physicians, senior physicians, and physicians in specialties experiencing shortages. Physicians who are retained on a part-time basis should be cognizant of the following areas of the physician’s employment or independent contractor agreement:

• Independent contractor or employee status;
• Compensation;
• Benefits;
• Professional liability (malpractice) insurance; and
• Restrictive covenants.

Independent Contractor vs. Employee

Oftentimes, physicians assume that just because he or she is working part time, he or she is an independent contractor. That is an inaccurate assumption. The amount of time a physician works is not the determining factor as to whether someone is an employee or an independent contractor of the practice or hospital. Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws.

Generally, labor and employment laws provide protections for employees, but these protections do not extend to independent contractors. With regard to taxes, if a hospitalist is an employee, the employer is required to withhold income, Social Security, and Medicare taxes, and pay unemployment tax on wages paid to the hospitalist. Conversely, if a hospitalist is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the hospitalist; rather, the individual hospitalist will be responsible for making those payments to the IRS and state tax authorities. It is imperative that the contract clearly indicates whether the hospitalist is an employee or an independent contractor, as well as the corresponding responsibilities of the parties.

Compensation and Benefits

Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always as straightforward when it comes to part-timers. There are two general models that practices and hospitals use to determine compensation for hospitalists working part time. First, the physician may be paid a percentage of a full-time physician’s salary, based on the number of hours worked. Second, the physician may receive a per diem rate or an hourly rate. As with full-time physicians, there are various ways to formulate a part-time physician’s compensation, and the method used should be explicitly outlined in the physician’s employment or independent contractor agreement.

Benefit plans and arrangements (such as health, dental, vision, retirement plan, pension plan, disability coverage, life insurance, etc.) frequently are provided to employees and infrequently provided to independent contractors. Whether a physician who is working part time will receive benefits will vary from employer to employer. A threshold issue, however, is whether a part-time worker is even eligible to receive certain benefits. Many health, dental, and vision plans require employees to work a minimum of 30 hours a week on a regular basis, thus excluding part-time employees who work fewer hours. For retirement and pension plans, employees typically must work a minimum of 1,000 hours per year to be eligible to participate. Even if a hospitalist’s employment agreement provides that the hospitalist may receive benefits from the employer, the agreement may also provide that such a provision is subject to the terms and conditions of the particular benefit plans or arrangements.

Professional Liability (Malpractice) Insurance

While some practices or hospitals pay for a part-time physician’s malpractice insurance premiums, many shift some or all of these costs to the physician. Many insurance providers offer malpractice plans for physicians practicing part time, with reduced premiums and reduced coverage.

When negotiating a compensation package, payment for malpractice insurance should be considered. A physician also must be aware of what is excluded from coverage. For example, if a physician works part time with Hospital A and part time with Hospital B, and Hospital A provides malpractice coverage for the physician, it cannot be assumed that such coverage will cover the physician’s work with Hospital B. In this case, the physician may need a separate policy for work performed through Hospital B.

Restrictive Covenants

Although a physician might only be employed on a part-time basis, the employer might nevertheless want to protect itself by including restrictive covenants (i.e. noncompetition and nonsolicitation clauses) in the physician’s employment agreement. A part-time physician must be careful that the restrictive covenants do not jeopardize their other career objectives. For example, in the example described above with the physician working part time for both Hospital A and Hospital B, a noncompetition clause in the physician’s employment agreement with Hospital A could prohibit the physician from working at another hospital, including Hospital B.

Retaining part-time hospitalists is an increasingly attractive option for physician practices and hospitals, and part-time work is an increasingly attractive option for physicians. The items described above are just a few of the provisions that are unique to the part-time physician relationship that should be reflected in the physician’s employment or independent contractor agreement.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

An increasing number of hospitalists are pursuing part-time schedules to cater to lifestyle demands and personal desires. According to a 2010 survey conducted by the American Medical Group Management Association and Cejka Search, 21% of physicians in the U.S. are working part time, compared with only 13% in 2005.

Among those part-time physicians, the fastest-growing segments are men approaching retirement and women in the early to middle stages of their careers. Senior physicians who are tired of the commitment that comes with full-time employment increasingly are opting for part-time employment as a transition into retirement. Physicians with young children are seeking part-time employment to be more active in child-rearing.

The medical community generally has welcomed the opportunity to incorporate part-time physicians into hospital settings as a way to maintain female physicians, senior physicians, and physicians in specialties experiencing shortages. Physicians who are retained on a part-time basis should be cognizant of the following areas of the physician’s employment or independent contractor agreement:

• Independent contractor or employee status;
• Compensation;
• Benefits;
• Professional liability (malpractice) insurance; and
• Restrictive covenants.

Independent Contractor vs. Employee

Oftentimes, physicians assume that just because he or she is working part time, he or she is an independent contractor. That is an inaccurate assumption. The amount of time a physician works is not the determining factor as to whether someone is an employee or an independent contractor of the practice or hospital. Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws.

Generally, labor and employment laws provide protections for employees, but these protections do not extend to independent contractors. With regard to taxes, if a hospitalist is an employee, the employer is required to withhold income, Social Security, and Medicare taxes, and pay unemployment tax on wages paid to the hospitalist. Conversely, if a hospitalist is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the hospitalist; rather, the individual hospitalist will be responsible for making those payments to the IRS and state tax authorities. It is imperative that the contract clearly indicates whether the hospitalist is an employee or an independent contractor, as well as the corresponding responsibilities of the parties.

Compensation and Benefits

Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always as straightforward when it comes to part-timers. There are two general models that practices and hospitals use to determine compensation for hospitalists working part time. First, the physician may be paid a percentage of a full-time physician’s salary, based on the number of hours worked. Second, the physician may receive a per diem rate or an hourly rate. As with full-time physicians, there are various ways to formulate a part-time physician’s compensation, and the method used should be explicitly outlined in the physician’s employment or independent contractor agreement.

Benefit plans and arrangements (such as health, dental, vision, retirement plan, pension plan, disability coverage, life insurance, etc.) frequently are provided to employees and infrequently provided to independent contractors. Whether a physician who is working part time will receive benefits will vary from employer to employer. A threshold issue, however, is whether a part-time worker is even eligible to receive certain benefits. Many health, dental, and vision plans require employees to work a minimum of 30 hours a week on a regular basis, thus excluding part-time employees who work fewer hours. For retirement and pension plans, employees typically must work a minimum of 1,000 hours per year to be eligible to participate. Even if a hospitalist’s employment agreement provides that the hospitalist may receive benefits from the employer, the agreement may also provide that such a provision is subject to the terms and conditions of the particular benefit plans or arrangements.

Professional Liability (Malpractice) Insurance

While some practices or hospitals pay for a part-time physician’s malpractice insurance premiums, many shift some or all of these costs to the physician. Many insurance providers offer malpractice plans for physicians practicing part time, with reduced premiums and reduced coverage.

When negotiating a compensation package, payment for malpractice insurance should be considered. A physician also must be aware of what is excluded from coverage. For example, if a physician works part time with Hospital A and part time with Hospital B, and Hospital A provides malpractice coverage for the physician, it cannot be assumed that such coverage will cover the physician’s work with Hospital B. In this case, the physician may need a separate policy for work performed through Hospital B.

Restrictive Covenants

Although a physician might only be employed on a part-time basis, the employer might nevertheless want to protect itself by including restrictive covenants (i.e. noncompetition and nonsolicitation clauses) in the physician’s employment agreement. A part-time physician must be careful that the restrictive covenants do not jeopardize their other career objectives. For example, in the example described above with the physician working part time for both Hospital A and Hospital B, a noncompetition clause in the physician’s employment agreement with Hospital A could prohibit the physician from working at another hospital, including Hospital B.

Retaining part-time hospitalists is an increasingly attractive option for physician practices and hospitals, and part-time work is an increasingly attractive option for physicians. The items described above are just a few of the provisions that are unique to the part-time physician relationship that should be reflected in the physician’s employment or independent contractor agreement.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Physicians often have medical interests other than clinical practice. A restrictive employment agreement could quash those endeavors. Physician employment agreements play an integral role in establishing the legal, financial, and operational structure of the relationship between employer and physician/employee.

One clause of particular interest to many physicians is the clause defining what a physician can and cannot do outside of providing medical services on behalf of their employer—meaning, can the physician engage in such outside activities as moonlighting, volunteering, or serving as an expert witness? Moreover, if income is generated from these outside activities, who does that income belong to—the physician or the employer?

These questions should be clearly answered in the employment agreement. And if the answers in the employment agreement do not mirror the physician’s wishes, then these terms should be negotiated with the employer and memorialized in the employment agreement.

Consult Your Contract

The first question is whether the physician is even permitted under their employment agreement to participate in activities or perform services outside of employment. Some employers prohibit engagement in outside activities and services altogether, while other employers permit certain activities that do not interfere with the physician’s day-to-day responsibilities. Physicians should be aware of requirements that give the employer the right to approve or reject outside activities. If the physician wants to be able to engage in moonlighting, expert witness consultations and testimony, speaking opportunities, volunteer efforts, teaching, research, or publishing, the physician’s desired activities should be specifically identified in the employment agreement as permitted activities.

For example: Dr. A was joining a medical practice and was presented with the group’s template employment agreement. The draft agreement precluded Dr. A from participating in any medically related outside activities. In the past, Dr. A had served as a volunteer doctor for the local marathon, a medical expert witness, and was a frequent paid speaker at conferences. For Dr. A, a prohibition on outside medical activities did not align with his interests. With minimal discussion, the practice permitted Dr. A to identify the outside activities that he could conduct without violating his employment agreement:

If a physician is permitted to engage in outside activities or services, the second question is whether income generated from such activities belongs to the physician or the employer. This often is a topic of negotiation. Physician and employer frequently do not see eye to eye on this issue. Physicians, on the one hand, often view the income generated from permitted outside activities to be separate and apart from his or her services on behalf of the employer, and thus are outside the reach of the practice. This position is strengthened if the activity occurs on the physician’s own time and outside of the employer’s hours of operation. Employers, on the other hand, often view income from outside activities as part of the employment relationship with the physician. Some employers are of the belief that the physician would not have had the opportunity to participate in the outside activity but for the physician’s employment with the particular employer.

Dr. A’s employer felt that it already was conceding by allowing Dr. A to engage in outside activities and insisted that any payment received by him for these services should be remitted to the practice. Dr. A agreed to this and negotiated for the outside activity monies to be included in his collection amounts, which was a factor in calculating Dr. A’s compensation:

The last question is whether outside activities are covered by the physician’s malpractice insurance policy. If the employer provides the policy for the benefit of the physician, the employer—and the malpractice insurance carrier—may exclude activities performed by the physician outside of his or her employment with that employer. This often is an issue for physicians who want to moonlight, as moonlighting for a third party frequently is excluded from coverage. It is important that the physician consult the malpractice insurance carrier to confirm whether certain activities are covered under the policy. It may be the case that a separate policy is required to insure the physician’s outside activities, even those activities that are unpaid.

Contract clauses describing what the physician can and cannot do outside of the employment relationship are of key importance. These clauses should mirror the individual physician’s medically related and extracurricular interests, and the financial benefits of these activities—if any—should be addressed in the employment agreement. Don’t forget to check with the insurance carrier to ensure that the activity is covered by the policy, as even volunteering medical services could expose a physician. It is best to address these issues at the onset of the employer-employee relationship. That way, all parties are on the same page from the beginning.

Steven Harris is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Physicians often have medical interests other than clinical practice. A restrictive employment agreement could quash those endeavors. Physician employment agreements play an integral role in establishing the legal, financial, and operational structure of the relationship between employer and physician/employee.

One clause of particular interest to many physicians is the clause defining what a physician can and cannot do outside of providing medical services on behalf of their employer—meaning, can the physician engage in such outside activities as moonlighting, volunteering, or serving as an expert witness? Moreover, if income is generated from these outside activities, who does that income belong to—the physician or the employer?

These questions should be clearly answered in the employment agreement. And if the answers in the employment agreement do not mirror the physician’s wishes, then these terms should be negotiated with the employer and memorialized in the employment agreement.

Consult Your Contract

The first question is whether the physician is even permitted under their employment agreement to participate in activities or perform services outside of employment. Some employers prohibit engagement in outside activities and services altogether, while other employers permit certain activities that do not interfere with the physician’s day-to-day responsibilities. Physicians should be aware of requirements that give the employer the right to approve or reject outside activities. If the physician wants to be able to engage in moonlighting, expert witness consultations and testimony, speaking opportunities, volunteer efforts, teaching, research, or publishing, the physician’s desired activities should be specifically identified in the employment agreement as permitted activities.

For example: Dr. A was joining a medical practice and was presented with the group’s template employment agreement. The draft agreement precluded Dr. A from participating in any medically related outside activities. In the past, Dr. A had served as a volunteer doctor for the local marathon, a medical expert witness, and was a frequent paid speaker at conferences. For Dr. A, a prohibition on outside medical activities did not align with his interests. With minimal discussion, the practice permitted Dr. A to identify the outside activities that he could conduct without violating his employment agreement:

If a physician is permitted to engage in outside activities or services, the second question is whether income generated from such activities belongs to the physician or the employer. This often is a topic of negotiation. Physician and employer frequently do not see eye to eye on this issue. Physicians, on the one hand, often view the income generated from permitted outside activities to be separate and apart from his or her services on behalf of the employer, and thus are outside the reach of the practice. This position is strengthened if the activity occurs on the physician’s own time and outside of the employer’s hours of operation. Employers, on the other hand, often view income from outside activities as part of the employment relationship with the physician. Some employers are of the belief that the physician would not have had the opportunity to participate in the outside activity but for the physician’s employment with the particular employer.

Dr. A’s employer felt that it already was conceding by allowing Dr. A to engage in outside activities and insisted that any payment received by him for these services should be remitted to the practice. Dr. A agreed to this and negotiated for the outside activity monies to be included in his collection amounts, which was a factor in calculating Dr. A’s compensation:

The last question is whether outside activities are covered by the physician’s malpractice insurance policy. If the employer provides the policy for the benefit of the physician, the employer—and the malpractice insurance carrier—may exclude activities performed by the physician outside of his or her employment with that employer. This often is an issue for physicians who want to moonlight, as moonlighting for a third party frequently is excluded from coverage. It is important that the physician consult the malpractice insurance carrier to confirm whether certain activities are covered under the policy. It may be the case that a separate policy is required to insure the physician’s outside activities, even those activities that are unpaid.

Contract clauses describing what the physician can and cannot do outside of the employment relationship are of key importance. These clauses should mirror the individual physician’s medically related and extracurricular interests, and the financial benefits of these activities—if any—should be addressed in the employment agreement. Don’t forget to check with the insurance carrier to ensure that the activity is covered by the policy, as even volunteering medical services could expose a physician. It is best to address these issues at the onset of the employer-employee relationship. That way, all parties are on the same page from the beginning.

Steven Harris is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Physicians often have medical interests other than clinical practice. A restrictive employment agreement could quash those endeavors. Physician employment agreements play an integral role in establishing the legal, financial, and operational structure of the relationship between employer and physician/employee.

One clause of particular interest to many physicians is the clause defining what a physician can and cannot do outside of providing medical services on behalf of their employer—meaning, can the physician engage in such outside activities as moonlighting, volunteering, or serving as an expert witness? Moreover, if income is generated from these outside activities, who does that income belong to—the physician or the employer?

These questions should be clearly answered in the employment agreement. And if the answers in the employment agreement do not mirror the physician’s wishes, then these terms should be negotiated with the employer and memorialized in the employment agreement.

Consult Your Contract

The first question is whether the physician is even permitted under their employment agreement to participate in activities or perform services outside of employment. Some employers prohibit engagement in outside activities and services altogether, while other employers permit certain activities that do not interfere with the physician’s day-to-day responsibilities. Physicians should be aware of requirements that give the employer the right to approve or reject outside activities. If the physician wants to be able to engage in moonlighting, expert witness consultations and testimony, speaking opportunities, volunteer efforts, teaching, research, or publishing, the physician’s desired activities should be specifically identified in the employment agreement as permitted activities.

For example: Dr. A was joining a medical practice and was presented with the group’s template employment agreement. The draft agreement precluded Dr. A from participating in any medically related outside activities. In the past, Dr. A had served as a volunteer doctor for the local marathon, a medical expert witness, and was a frequent paid speaker at conferences. For Dr. A, a prohibition on outside medical activities did not align with his interests. With minimal discussion, the practice permitted Dr. A to identify the outside activities that he could conduct without violating his employment agreement:

If a physician is permitted to engage in outside activities or services, the second question is whether income generated from such activities belongs to the physician or the employer. This often is a topic of negotiation. Physician and employer frequently do not see eye to eye on this issue. Physicians, on the one hand, often view the income generated from permitted outside activities to be separate and apart from his or her services on behalf of the employer, and thus are outside the reach of the practice. This position is strengthened if the activity occurs on the physician’s own time and outside of the employer’s hours of operation. Employers, on the other hand, often view income from outside activities as part of the employment relationship with the physician. Some employers are of the belief that the physician would not have had the opportunity to participate in the outside activity but for the physician’s employment with the particular employer.

Dr. A’s employer felt that it already was conceding by allowing Dr. A to engage in outside activities and insisted that any payment received by him for these services should be remitted to the practice. Dr. A agreed to this and negotiated for the outside activity monies to be included in his collection amounts, which was a factor in calculating Dr. A’s compensation:

The last question is whether outside activities are covered by the physician’s malpractice insurance policy. If the employer provides the policy for the benefit of the physician, the employer—and the malpractice insurance carrier—may exclude activities performed by the physician outside of his or her employment with that employer. This often is an issue for physicians who want to moonlight, as moonlighting for a third party frequently is excluded from coverage. It is important that the physician consult the malpractice insurance carrier to confirm whether certain activities are covered under the policy. It may be the case that a separate policy is required to insure the physician’s outside activities, even those activities that are unpaid.

Contract clauses describing what the physician can and cannot do outside of the employment relationship are of key importance. These clauses should mirror the individual physician’s medically related and extracurricular interests, and the financial benefits of these activities—if any—should be addressed in the employment agreement. Don’t forget to check with the insurance carrier to ensure that the activity is covered by the policy, as even volunteering medical services could expose a physician. It is best to address these issues at the onset of the employer-employee relationship. That way, all parties are on the same page from the beginning.

Steven Harris is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

A hospitalist was recently offered a lucrative position in his community and was concerned that his previous employment agreement would prohibit him from accepting the new job opportunity. His former employment contract contained a noncompetition clause that made him and his prospective employer rightfully concerned. Upon a comprehensive review of his former employment contract, the noncompetition provision was not as restrictive as he and his prospective employer had previously thought. As it turned out, in his case, and in many others, the noncompetition clause was penetrable, and the physician accepted the new employment offer knowing he was not in violation of his previous contract.

What Is a Noncompetition Clause?

A noncompetition clause, also known as a covenant not to compete or a restrictive covenant, is a provision in a contract that precludes one party from engaging in competition with another party by working 1) in a particular field, 2) within a specific geographic area, and 3) for a stated period of time. A well-written noncompetition provision will prevent a physician from practicing within a certain geographical area surrounding the employer or the employer’s hospital relationships and for a prescribed period of time after the termination of the physician’s employment.

Often, the physician will be permitted to practice within the parameters of the restricted geographical area or time period if they (or the prospective employer) “buy out” of the clause. This is an especially good option when the reasonableness of the noncompetition is not black and white, and both parties want to avoid the expense of litigating the enforceability of the noncompetition clause. Otherwise, in the event the physician breaches the noncompetition clause, the former employer will usually first seek injunctive relief that prohibits the physician’s new employment, then follow with a request for monetary damages arising from the physician’s breach.

In states where noncompetition clauses for physicians are enforceable, the provision must: 1) protect the employer’s legitimate business interest, 2) be specific in geographical scope, and 3) have a narrowly tailored durational scope. Each of these factors is described below. If the language in the clause is vague or does not clearly describe the exact terms of the restrictions on practice, the clause might be unenforceable or open to greater interpretation than either party anticipated.

Do Employers Have a Legitimate Business Interest to Protect?

In order for a noncompetition clause to be enforceable, it must protect the employer’s legitimate business interest. Some examples of a legitimate business interest in the HM context are the employer’s goodwill and the retention of the employer’s clients (hospitals and medical practices). Moreover, since noncompetition clauses are not looked upon with favor by courts because they operate as a restraint of trade, the language needs to be narrowly tailored in order to protect the employer’s legitimate interests.

Is Geographical Scope Reasonable?

Noncompetition clauses must also specify the restricted geographical area where the physician is prohibited from practicing. However, whether a geographical scope is overly broad will not only depend on state law, but also the location of the employer and the surrounding community.

Typically, contracts will provide a radius in miles surrounding the employer’s location or locations as the restricted territory. But whether a geographic limitation is “reasonable” is a relative term. A five-mile radius in an urban area like New York City might be home to millions of people, whereas a five-mile radius in a suburb of New York might only be home to a few thousand people. For hospitalists, the geographic restriction might prohibit the physician from practicing at or for the employer’s clients (e.g. hospitals).

Although the following might seem obviously overly broad to some, a review of contracts with the following geographic restrictions should be considered red flags:

• Prohibition to practice anywhere in the U.S.;
• Prohibition to practice anywhere in a specific state;
• Prohibition to practice in a territory comprised of excessive miles from the employer’s location; and
• Prohibition to practice in certain counties.

Please note that exclusion to practice in certain counties might be overly broad in some situations but might be acceptable in others. For example, a hospitalist sold his ownership stake in his practice, and part of the deal required him to agree not to practice in Los Angeles County. This particular county restriction would be difficult, if not impossible, to enforce because Los Angeles County includes more than 80 cities and covers more than 4,000 square miles.

Is Durational Scope Reasonable?

A noncompetition clause should identify the length of time in which the physician is prohibited from practicing within the restricted geographic area. Whether the durational scope is reasonable will vary from state to state. As a general rule of thumb, if the restricted time frame is two years or less after termination of the contract, the time restriction will likely be considered “reasonable.” However, state laws vary on whether time restraints in excess of two years are enforceable.

A common pitfall with time restrictions is excessiveness based on the state’s laws and the specific circumstances of the physician and the employer. In negotiating the restricted length of time in a noncompetition clause, it is more common to have a longer time restriction when a physician is selling an ownership interest in a practice than for a physician entering into an employment relationship.

Prospective Employers: What You Need to Know

Great care must be taken when hiring a physician. States recognize the legal theory of interference with a contract. If an employer is recruiting a hospitalist who is subject to an employment agreement with a noncompetition clause, the prospective employer must be very careful in the recruiting process. It is recommended that the employment agreement include a representation by the physician-employee that he or she is not subject to any other agreement that would prohibit the physician from entering into the new employment relationship.

If a prospective employer is aware of an existing employment contract that contains practice restrictions on a recruited physician, the prospective employer could be held responsible for damages if a dispute arises between the parties.

It’s All in the Words

Although it might seem like semantics, a few words can change your future. Before you put pen to paper, be sure to have any contract containing a noncompetition clause reviewed by a lawyer who is well-versed in your state’s laws. If you have already signed an agreement with a noncompetition clause and you are considering your next career move, a lawyer can shed some light on a seemingly impenetrable clause.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

A hospitalist was recently offered a lucrative position in his community and was concerned that his previous employment agreement would prohibit him from accepting the new job opportunity. His former employment contract contained a noncompetition clause that made him and his prospective employer rightfully concerned. Upon a comprehensive review of his former employment contract, the noncompetition provision was not as restrictive as he and his prospective employer had previously thought. As it turned out, in his case, and in many others, the noncompetition clause was penetrable, and the physician accepted the new employment offer knowing he was not in violation of his previous contract.

What Is a Noncompetition Clause?

A noncompetition clause, also known as a covenant not to compete or a restrictive covenant, is a provision in a contract that precludes one party from engaging in competition with another party by working 1) in a particular field, 2) within a specific geographic area, and 3) for a stated period of time. A well-written noncompetition provision will prevent a physician from practicing within a certain geographical area surrounding the employer or the employer’s hospital relationships and for a prescribed period of time after the termination of the physician’s employment.

Often, the physician will be permitted to practice within the parameters of the restricted geographical area or time period if they (or the prospective employer) “buy out” of the clause. This is an especially good option when the reasonableness of the noncompetition is not black and white, and both parties want to avoid the expense of litigating the enforceability of the noncompetition clause. Otherwise, in the event the physician breaches the noncompetition clause, the former employer will usually first seek injunctive relief that prohibits the physician’s new employment, then follow with a request for monetary damages arising from the physician’s breach.

In states where noncompetition clauses for physicians are enforceable, the provision must: 1) protect the employer’s legitimate business interest, 2) be specific in geographical scope, and 3) have a narrowly tailored durational scope. Each of these factors is described below. If the language in the clause is vague or does not clearly describe the exact terms of the restrictions on practice, the clause might be unenforceable or open to greater interpretation than either party anticipated.

Do Employers Have a Legitimate Business Interest to Protect?

In order for a noncompetition clause to be enforceable, it must protect the employer’s legitimate business interest. Some examples of a legitimate business interest in the HM context are the employer’s goodwill and the retention of the employer’s clients (hospitals and medical practices). Moreover, since noncompetition clauses are not looked upon with favor by courts because they operate as a restraint of trade, the language needs to be narrowly tailored in order to protect the employer’s legitimate interests.

Is Geographical Scope Reasonable?

Noncompetition clauses must also specify the restricted geographical area where the physician is prohibited from practicing. However, whether a geographical scope is overly broad will not only depend on state law, but also the location of the employer and the surrounding community.

Typically, contracts will provide a radius in miles surrounding the employer’s location or locations as the restricted territory. But whether a geographic limitation is “reasonable” is a relative term. A five-mile radius in an urban area like New York City might be home to millions of people, whereas a five-mile radius in a suburb of New York might only be home to a few thousand people. For hospitalists, the geographic restriction might prohibit the physician from practicing at or for the employer’s clients (e.g. hospitals).

Although the following might seem obviously overly broad to some, a review of contracts with the following geographic restrictions should be considered red flags:

• Prohibition to practice anywhere in the U.S.;
• Prohibition to practice anywhere in a specific state;
• Prohibition to practice in a territory comprised of excessive miles from the employer’s location; and
• Prohibition to practice in certain counties.

Please note that exclusion to practice in certain counties might be overly broad in some situations but might be acceptable in others. For example, a hospitalist sold his ownership stake in his practice, and part of the deal required him to agree not to practice in Los Angeles County. This particular county restriction would be difficult, if not impossible, to enforce because Los Angeles County includes more than 80 cities and covers more than 4,000 square miles.

Is Durational Scope Reasonable?

A noncompetition clause should identify the length of time in which the physician is prohibited from practicing within the restricted geographic area. Whether the durational scope is reasonable will vary from state to state. As a general rule of thumb, if the restricted time frame is two years or less after termination of the contract, the time restriction will likely be considered “reasonable.” However, state laws vary on whether time restraints in excess of two years are enforceable.

A common pitfall with time restrictions is excessiveness based on the state’s laws and the specific circumstances of the physician and the employer. In negotiating the restricted length of time in a noncompetition clause, it is more common to have a longer time restriction when a physician is selling an ownership interest in a practice than for a physician entering into an employment relationship.

Prospective Employers: What You Need to Know

Great care must be taken when hiring a physician. States recognize the legal theory of interference with a contract. If an employer is recruiting a hospitalist who is subject to an employment agreement with a noncompetition clause, the prospective employer must be very careful in the recruiting process. It is recommended that the employment agreement include a representation by the physician-employee that he or she is not subject to any other agreement that would prohibit the physician from entering into the new employment relationship.

If a prospective employer is aware of an existing employment contract that contains practice restrictions on a recruited physician, the prospective employer could be held responsible for damages if a dispute arises between the parties.

It’s All in the Words

Although it might seem like semantics, a few words can change your future. Before you put pen to paper, be sure to have any contract containing a noncompetition clause reviewed by a lawyer who is well-versed in your state’s laws. If you have already signed an agreement with a noncompetition clause and you are considering your next career move, a lawyer can shed some light on a seemingly impenetrable clause.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

A hospitalist was recently offered a lucrative position in his community and was concerned that his previous employment agreement would prohibit him from accepting the new job opportunity. His former employment contract contained a noncompetition clause that made him and his prospective employer rightfully concerned. Upon a comprehensive review of his former employment contract, the noncompetition provision was not as restrictive as he and his prospective employer had previously thought. As it turned out, in his case, and in many others, the noncompetition clause was penetrable, and the physician accepted the new employment offer knowing he was not in violation of his previous contract.

What Is a Noncompetition Clause?

A noncompetition clause, also known as a covenant not to compete or a restrictive covenant, is a provision in a contract that precludes one party from engaging in competition with another party by working 1) in a particular field, 2) within a specific geographic area, and 3) for a stated period of time. A well-written noncompetition provision will prevent a physician from practicing within a certain geographical area surrounding the employer or the employer’s hospital relationships and for a prescribed period of time after the termination of the physician’s employment.

Often, the physician will be permitted to practice within the parameters of the restricted geographical area or time period if they (or the prospective employer) “buy out” of the clause. This is an especially good option when the reasonableness of the noncompetition is not black and white, and both parties want to avoid the expense of litigating the enforceability of the noncompetition clause. Otherwise, in the event the physician breaches the noncompetition clause, the former employer will usually first seek injunctive relief that prohibits the physician’s new employment, then follow with a request for monetary damages arising from the physician’s breach.

In states where noncompetition clauses for physicians are enforceable, the provision must: 1) protect the employer’s legitimate business interest, 2) be specific in geographical scope, and 3) have a narrowly tailored durational scope. Each of these factors is described below. If the language in the clause is vague or does not clearly describe the exact terms of the restrictions on practice, the clause might be unenforceable or open to greater interpretation than either party anticipated.

Do Employers Have a Legitimate Business Interest to Protect?

In order for a noncompetition clause to be enforceable, it must protect the employer’s legitimate business interest. Some examples of a legitimate business interest in the HM context are the employer’s goodwill and the retention of the employer’s clients (hospitals and medical practices). Moreover, since noncompetition clauses are not looked upon with favor by courts because they operate as a restraint of trade, the language needs to be narrowly tailored in order to protect the employer’s legitimate interests.

Is Geographical Scope Reasonable?

Noncompetition clauses must also specify the restricted geographical area where the physician is prohibited from practicing. However, whether a geographical scope is overly broad will not only depend on state law, but also the location of the employer and the surrounding community.

Typically, contracts will provide a radius in miles surrounding the employer’s location or locations as the restricted territory. But whether a geographic limitation is “reasonable” is a relative term. A five-mile radius in an urban area like New York City might be home to millions of people, whereas a five-mile radius in a suburb of New York might only be home to a few thousand people. For hospitalists, the geographic restriction might prohibit the physician from practicing at or for the employer’s clients (e.g. hospitals).

Although the following might seem obviously overly broad to some, a review of contracts with the following geographic restrictions should be considered red flags:

• Prohibition to practice anywhere in the U.S.;
• Prohibition to practice anywhere in a specific state;
• Prohibition to practice in a territory comprised of excessive miles from the employer’s location; and
• Prohibition to practice in certain counties.

Please note that exclusion to practice in certain counties might be overly broad in some situations but might be acceptable in others. For example, a hospitalist sold his ownership stake in his practice, and part of the deal required him to agree not to practice in Los Angeles County. This particular county restriction would be difficult, if not impossible, to enforce because Los Angeles County includes more than 80 cities and covers more than 4,000 square miles.

Is Durational Scope Reasonable?

A noncompetition clause should identify the length of time in which the physician is prohibited from practicing within the restricted geographic area. Whether the durational scope is reasonable will vary from state to state. As a general rule of thumb, if the restricted time frame is two years or less after termination of the contract, the time restriction will likely be considered “reasonable.” However, state laws vary on whether time restraints in excess of two years are enforceable.

A common pitfall with time restrictions is excessiveness based on the state’s laws and the specific circumstances of the physician and the employer. In negotiating the restricted length of time in a noncompetition clause, it is more common to have a longer time restriction when a physician is selling an ownership interest in a practice than for a physician entering into an employment relationship.

Prospective Employers: What You Need to Know

Great care must be taken when hiring a physician. States recognize the legal theory of interference with a contract. If an employer is recruiting a hospitalist who is subject to an employment agreement with a noncompetition clause, the prospective employer must be very careful in the recruiting process. It is recommended that the employment agreement include a representation by the physician-employee that he or she is not subject to any other agreement that would prohibit the physician from entering into the new employment relationship.

If a prospective employer is aware of an existing employment contract that contains practice restrictions on a recruited physician, the prospective employer could be held responsible for damages if a dispute arises between the parties.

It’s All in the Words

Although it might seem like semantics, a few words can change your future. Before you put pen to paper, be sure to have any contract containing a noncompetition clause reviewed by a lawyer who is well-versed in your state’s laws. If you have already signed an agreement with a noncompetition clause and you are considering your next career move, a lawyer can shed some light on a seemingly impenetrable clause.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Does your employer provide your medical malpractice insurance coverage? Are you looking for new employment? Are you in the market to purchase a professional malpractice insurance policy? Are you planning to retire soon?

If you answered “yes” to any of these questions, you likely will confront the concept of “tail” insurance at some point in your medical career.

Now is the time to dust off your employment agreement and professional liability insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employer. This means paying special attention to whether your professional liability insurance policy provides for claims-made or occurrence-based coverage, and, if it’s the former, who is responsible for purchasing tail coverage.

When Do I Need Tail Coverage?

Tail insurance issues frequently arise when a physician leaves his or her place of employment, whether due to switching jobs, retirement, or a buyout of a physician’s ownership interest. If the physician is leaving an employer that has claims-made professional liability insurance, the physician’s insurance coverage might not be seamless. Instead, tail or similar coverage is required.

Claims-made coverage protects a physician for professional negligence, as long as a two-part test is met: First, the physician must have the claims-made coverage in place when the negligent act occurs (with employer No. 1); second, the physician must be covered by the same carrier when he or she is notified of the claim while employed by employer No. 2. If either test is not satisfied, the current claims-made insurance policy will not provide coverage to the physician in the event a lawsuit is filed for an act of negligence that took place while employed by employer No. 1. Alternatively, some employers offer “nose” coverage from its insurance carrier, which will cover negligent acts that might have occurred during your current job. The vast majority of professional liability insurance policies written for medical practice groups are for claims-made coverage.

If, however, an employer has occurrence-based professional liability insurance, the departing physician’s insurance coverage is seamless and no tail insurance is required.

Example A

Here is a common example of what happens when a physician leaves an employer with claims-made professional liability coverage:

An employer maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave his or her current employer and accepts employment by a new employer, which maintains claims-made coverage with XYZ Insurance Co.

Within a few months of the physician’s new employment, a medical malpractice lawsuit is filed by a patient for medical treatment the patient received when the physician was employed by the former employer. By leaving the former employer, the departing physician automatically fails the two-part test for claims-made coverage, as the second prong is not satisfied. Therefore, even though the physician has liability coverage through the new employer, this insurance policy will not cover the lawsuit described above.

Unless the physician has tail insurance (or nose coverage) to cover lawsuits related to the former employment, a gap in liability coverage will exist. If claims-made insurance is the benefit you have received in your employment agreement, it is imperative that you understand that tail coverage is necessary when you leave.

However, if a physician leaves and a) is subsequently employed within the same state and b) stays insured by the same insurance carrier, then the insurance carrier will provide continuous coverage and no tail insurance policy is needed.

Who Pays the Premium?

If the physician will need tail coverage, the next critical question is, Who pays for such coverage? Even though tail coverage comes into effect when a physician leaves an employer, tail coverage should be addressed before the physician informs the employer of their departure; an even better approach would be while the employment agreement is negotiated. Payment of tail coverage should be defined in the physician’s employment agreement.

In terms of payment for the coverage, there are several options. First, the cost of tail coverage can be attributed 100% to either physician or employer. In specialties for which recruitment of new physicians is challenging (i.e. HM), employers are more likely to pay a substantial portion, if not all, of the cost as a benefit or inducement.

Second, the physician can connect the payment of tail coverage to the manner in which employment is terminated. For example, if the physician terminates the agreement for cause or if the employer terminates the physician’s employment without cause, the employer could be required to pay for the tail insurance. Alternatively, if the physician terminates the agreement without cause or if the employer terminates the physician’s employment with cause, the physician could be required to pay for the tail coverage. Frequently, physician employment agreements require physicians to pay for tail coverage if the physician violates a restrictive covenant (e.g. non-competition).

A third option is to split the cost of tail insurance between the former employer and the physician based on a percentage, or to include a vesting schedule, for example, such that the former employer pays one-third of the coverage if employment ends in the second year, two-thirds of the coverage if employment ends in the third year, and 100% of the coverage if employment ends in the fourth year or later.

Whatever arrangement the parties agree upon should be included in the physician’s employment agreement in order to prevent an expensive surprise.

Review Your Policy

Now that you have an understanding of claims-made coverage, occurrence-based coverage and tail insurance, it’s time to review your insurance policy. When reviewing your current policy, look for answers to the following important questions:

• Is your policy claims-made or occurrence-based?
• Does your insurance policy only cover professional negligence claims? Does your policy also cover claims of unprofessional conduct reported to state medical licensing boards? Does your policy also cover medical staff bylaw disputes and state licensing matters?
• How is loss defined? “Pure loss” is coverage for the amount awarded to the plaintiff; “ultimate net loss” covers what pure loss covers, plus attorneys’ fees and costs.
• What procedures do you need to follow in order to properly notify the insurance carrier of a claim? Are you precluded from full coverage if you fail to properly report?
• What does the “duty to defend” provision cover? Will you be reimbursed for lost wages for your time in court? What services will be provided as part of your defense?
• What does the “consent to settle” provision say? If a settlement is negotiated between the plaintiff (patient) and the insurance company and the physician does not consent to the settlement, is the physician responsible for the ongoing defense costs and the amount of any verdict in excess of the recommended settlement amount?

It is important to both understand your insurance policy and what your employment agreement says about the policy. If you will be responsible for purchasing a tail policy at the end of your current employment, you should be well aware—and financially prepared—for this post-employment responsibility. Make sure your tail is not left exposed.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Does your employer provide your medical malpractice insurance coverage? Are you looking for new employment? Are you in the market to purchase a professional malpractice insurance policy? Are you planning to retire soon?

If you answered “yes” to any of these questions, you likely will confront the concept of “tail” insurance at some point in your medical career.

Now is the time to dust off your employment agreement and professional liability insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employer. This means paying special attention to whether your professional liability insurance policy provides for claims-made or occurrence-based coverage, and, if it’s the former, who is responsible for purchasing tail coverage.

When Do I Need Tail Coverage?

Tail insurance issues frequently arise when a physician leaves his or her place of employment, whether due to switching jobs, retirement, or a buyout of a physician’s ownership interest. If the physician is leaving an employer that has claims-made professional liability insurance, the physician’s insurance coverage might not be seamless. Instead, tail or similar coverage is required.

Claims-made coverage protects a physician for professional negligence, as long as a two-part test is met: First, the physician must have the claims-made coverage in place when the negligent act occurs (with employer No. 1); second, the physician must be covered by the same carrier when he or she is notified of the claim while employed by employer No. 2. If either test is not satisfied, the current claims-made insurance policy will not provide coverage to the physician in the event a lawsuit is filed for an act of negligence that took place while employed by employer No. 1. Alternatively, some employers offer “nose” coverage from its insurance carrier, which will cover negligent acts that might have occurred during your current job. The vast majority of professional liability insurance policies written for medical practice groups are for claims-made coverage.

If, however, an employer has occurrence-based professional liability insurance, the departing physician’s insurance coverage is seamless and no tail insurance is required.

Example A

Here is a common example of what happens when a physician leaves an employer with claims-made professional liability coverage:

An employer maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave his or her current employer and accepts employment by a new employer, which maintains claims-made coverage with XYZ Insurance Co.

Within a few months of the physician’s new employment, a medical malpractice lawsuit is filed by a patient for medical treatment the patient received when the physician was employed by the former employer. By leaving the former employer, the departing physician automatically fails the two-part test for claims-made coverage, as the second prong is not satisfied. Therefore, even though the physician has liability coverage through the new employer, this insurance policy will not cover the lawsuit described above.

Unless the physician has tail insurance (or nose coverage) to cover lawsuits related to the former employment, a gap in liability coverage will exist. If claims-made insurance is the benefit you have received in your employment agreement, it is imperative that you understand that tail coverage is necessary when you leave.

However, if a physician leaves and a) is subsequently employed within the same state and b) stays insured by the same insurance carrier, then the insurance carrier will provide continuous coverage and no tail insurance policy is needed.

Who Pays the Premium?

If the physician will need tail coverage, the next critical question is, Who pays for such coverage? Even though tail coverage comes into effect when a physician leaves an employer, tail coverage should be addressed before the physician informs the employer of their departure; an even better approach would be while the employment agreement is negotiated. Payment of tail coverage should be defined in the physician’s employment agreement.

In terms of payment for the coverage, there are several options. First, the cost of tail coverage can be attributed 100% to either physician or employer. In specialties for which recruitment of new physicians is challenging (i.e. HM), employers are more likely to pay a substantial portion, if not all, of the cost as a benefit or inducement.

Second, the physician can connect the payment of tail coverage to the manner in which employment is terminated. For example, if the physician terminates the agreement for cause or if the employer terminates the physician’s employment without cause, the employer could be required to pay for the tail insurance. Alternatively, if the physician terminates the agreement without cause or if the employer terminates the physician’s employment with cause, the physician could be required to pay for the tail coverage. Frequently, physician employment agreements require physicians to pay for tail coverage if the physician violates a restrictive covenant (e.g. non-competition).

A third option is to split the cost of tail insurance between the former employer and the physician based on a percentage, or to include a vesting schedule, for example, such that the former employer pays one-third of the coverage if employment ends in the second year, two-thirds of the coverage if employment ends in the third year, and 100% of the coverage if employment ends in the fourth year or later.

Whatever arrangement the parties agree upon should be included in the physician’s employment agreement in order to prevent an expensive surprise.

Review Your Policy

Now that you have an understanding of claims-made coverage, occurrence-based coverage and tail insurance, it’s time to review your insurance policy. When reviewing your current policy, look for answers to the following important questions:

• Is your policy claims-made or occurrence-based?
• Does your insurance policy only cover professional negligence claims? Does your policy also cover claims of unprofessional conduct reported to state medical licensing boards? Does your policy also cover medical staff bylaw disputes and state licensing matters?
• How is loss defined? “Pure loss” is coverage for the amount awarded to the plaintiff; “ultimate net loss” covers what pure loss covers, plus attorneys’ fees and costs.
• What procedures do you need to follow in order to properly notify the insurance carrier of a claim? Are you precluded from full coverage if you fail to properly report?
• What does the “duty to defend” provision cover? Will you be reimbursed for lost wages for your time in court? What services will be provided as part of your defense?
• What does the “consent to settle” provision say? If a settlement is negotiated between the plaintiff (patient) and the insurance company and the physician does not consent to the settlement, is the physician responsible for the ongoing defense costs and the amount of any verdict in excess of the recommended settlement amount?

It is important to both understand your insurance policy and what your employment agreement says about the policy. If you will be responsible for purchasing a tail policy at the end of your current employment, you should be well aware—and financially prepared—for this post-employment responsibility. Make sure your tail is not left exposed.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Does your employer provide your medical malpractice insurance coverage? Are you looking for new employment? Are you in the market to purchase a professional malpractice insurance policy? Are you planning to retire soon?

If you answered “yes” to any of these questions, you likely will confront the concept of “tail” insurance at some point in your medical career.

Now is the time to dust off your employment agreement and professional liability insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employer. This means paying special attention to whether your professional liability insurance policy provides for claims-made or occurrence-based coverage, and, if it’s the former, who is responsible for purchasing tail coverage.

When Do I Need Tail Coverage?

Tail insurance issues frequently arise when a physician leaves his or her place of employment, whether due to switching jobs, retirement, or a buyout of a physician’s ownership interest. If the physician is leaving an employer that has claims-made professional liability insurance, the physician’s insurance coverage might not be seamless. Instead, tail or similar coverage is required.

Claims-made coverage protects a physician for professional negligence, as long as a two-part test is met: First, the physician must have the claims-made coverage in place when the negligent act occurs (with employer No. 1); second, the physician must be covered by the same carrier when he or she is notified of the claim while employed by employer No. 2. If either test is not satisfied, the current claims-made insurance policy will not provide coverage to the physician in the event a lawsuit is filed for an act of negligence that took place while employed by employer No. 1. Alternatively, some employers offer “nose” coverage from its insurance carrier, which will cover negligent acts that might have occurred during your current job. The vast majority of professional liability insurance policies written for medical practice groups are for claims-made coverage.

If, however, an employer has occurrence-based professional liability insurance, the departing physician’s insurance coverage is seamless and no tail insurance is required.

Example A

Here is a common example of what happens when a physician leaves an employer with claims-made professional liability coverage:

An employer maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave his or her current employer and accepts employment by a new employer, which maintains claims-made coverage with XYZ Insurance Co.

Within a few months of the physician’s new employment, a medical malpractice lawsuit is filed by a patient for medical treatment the patient received when the physician was employed by the former employer. By leaving the former employer, the departing physician automatically fails the two-part test for claims-made coverage, as the second prong is not satisfied. Therefore, even though the physician has liability coverage through the new employer, this insurance policy will not cover the lawsuit described above.

Unless the physician has tail insurance (or nose coverage) to cover lawsuits related to the former employment, a gap in liability coverage will exist. If claims-made insurance is the benefit you have received in your employment agreement, it is imperative that you understand that tail coverage is necessary when you leave.

However, if a physician leaves and a) is subsequently employed within the same state and b) stays insured by the same insurance carrier, then the insurance carrier will provide continuous coverage and no tail insurance policy is needed.

Who Pays the Premium?

If the physician will need tail coverage, the next critical question is, Who pays for such coverage? Even though tail coverage comes into effect when a physician leaves an employer, tail coverage should be addressed before the physician informs the employer of their departure; an even better approach would be while the employment agreement is negotiated. Payment of tail coverage should be defined in the physician’s employment agreement.

In terms of payment for the coverage, there are several options. First, the cost of tail coverage can be attributed 100% to either physician or employer. In specialties for which recruitment of new physicians is challenging (i.e. HM), employers are more likely to pay a substantial portion, if not all, of the cost as a benefit or inducement.

Second, the physician can connect the payment of tail coverage to the manner in which employment is terminated. For example, if the physician terminates the agreement for cause or if the employer terminates the physician’s employment without cause, the employer could be required to pay for the tail insurance. Alternatively, if the physician terminates the agreement without cause or if the employer terminates the physician’s employment with cause, the physician could be required to pay for the tail coverage. Frequently, physician employment agreements require physicians to pay for tail coverage if the physician violates a restrictive covenant (e.g. non-competition).

A third option is to split the cost of tail insurance between the former employer and the physician based on a percentage, or to include a vesting schedule, for example, such that the former employer pays one-third of the coverage if employment ends in the second year, two-thirds of the coverage if employment ends in the third year, and 100% of the coverage if employment ends in the fourth year or later.

Whatever arrangement the parties agree upon should be included in the physician’s employment agreement in order to prevent an expensive surprise.

Review Your Policy

Now that you have an understanding of claims-made coverage, occurrence-based coverage and tail insurance, it’s time to review your insurance policy. When reviewing your current policy, look for answers to the following important questions:

• Is your policy claims-made or occurrence-based?
• Does your insurance policy only cover professional negligence claims? Does your policy also cover claims of unprofessional conduct reported to state medical licensing boards? Does your policy also cover medical staff bylaw disputes and state licensing matters?
• How is loss defined? “Pure loss” is coverage for the amount awarded to the plaintiff; “ultimate net loss” covers what pure loss covers, plus attorneys’ fees and costs.
• What procedures do you need to follow in order to properly notify the insurance carrier of a claim? Are you precluded from full coverage if you fail to properly report?
• What does the “duty to defend” provision cover? Will you be reimbursed for lost wages for your time in court? What services will be provided as part of your defense?
• What does the “consent to settle” provision say? If a settlement is negotiated between the plaintiff (patient) and the insurance company and the physician does not consent to the settlement, is the physician responsible for the ongoing defense costs and the amount of any verdict in excess of the recommended settlement amount?

It is important to both understand your insurance policy and what your employment agreement says about the policy. If you will be responsible for purchasing a tail policy at the end of your current employment, you should be well aware—and financially prepared—for this post-employment responsibility. Make sure your tail is not left exposed.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Ellis Knight, MD, MBA, FHM, senior vice president for physician and clinical integration at Palmetto Health in Columbia, S.C., recalls conducting root cause analyses after every serious adverse event when he was vice president for medical affairs at a large teaching hospital. “For every one of them—it was just like a broken record—every one of them, the nursing staff or the physicians involved would start the recount by saying, ‘It was a very, very busy day; we had a very high census,’” Dr. Knight says. “When that happens, when you get those, what I call tsunami waves of patients coming into a unit or being admitted at one time, it can really wreak havoc and it can make even the best clinicians get rushed, take shortcuts, and make mistakes.”

Researchers have long studied the consequences of temporary and longer-term workload imbalances for other healthcare providers; a recent in-depth study of one hospital found that the risk of inpatient patient mortality increased during shifts with below-target nurse staffing or higher patient turnover.¹

Few studies, however, have specifically examined the repercussions of a patient census that is either too high or too low for a hospitalist service. At many facilities, that census can be influenced by an increasing threshold for hospitalization, meaning that the average inpatient is becoming sicker and more complicated, requiring more time during a hospitalist’s daily rounds. HM providers might report having better or worse electronic health records, support staff, and other ancillary services; different schedules; and mixes of clinical, administrative, and teaching responsibilities.

Even then, David M. Mitchell, MD, PhD, a hospitalist at Sibley Memorial Hospital in Washington, D.C., and a member of the SHM Performance Standards Committee, cautions that the ability of a doctor to churn through a higher patient count in no way ensures quality. “You don’t want to confuse efficiency with sloppiness,” he says.

In the absence of clear precedents and solid guidelines, hospitalist groups are struggling to come up with their own formulas for ensuring that workloads balance high productivity with sustainable quality—no easy feat. Nonetheless, first-hand accounts and survey data suggest that more providers are identifying common warning signs and devising tailored solutions to help the rapidly maturing field stay on track.

Henry Michtalik, MD, MPH, assistant professor of medicine at Johns Hopkins University School of Medicine, led one of the only surveys that has directly asked hospitalists how they perceive their own workloads. The survey, conducted through an online community of hospitalists and first presented at HM11, revealed several intriguing findings.²

On average, hospitalists reported seeing about 15 patients per shift or day, not including nights, weekends, or holidays. Apart from a few outliers, the range extended from the low teens to the mid-20s, Dr. Michtalik says. According to the survey, 40% of physicians said that more than once a month, their typical inpatient census exceeded the level that they deemed safe and appropriate for specific work settings; 36.1% of physicians reported that was true more than once per week.

Providers often reported that their average workload contributed to incomplete discussions with patients and families, the ordering of unnecessary tests or procedures, a delay in admissions or discharges, worsened patient satisfaction, poorer handoffs, and other problems. “We might be in a situation where we’re focusing on increasing the number of patients being seen or having high census numbers, which could be, paradoxically, actually increasing the costs of healthcare,” Dr. Michtalik says.

For a recent survey posted on the-hospitalist.org, 51% of respondents picked 11 to 15 as the most appropriate patient census for a full-time hospitalist, while another 35% selected 16 to 20. Far fewer deemed it appropriate to see either more than 20 patients a day or 10 or less, suggesting that hospitalists recognize the need for equilibrium.

A “Resounding” Success Story

David Yu, MD, MBA, SFHM, FACP, medical director of the adult inpatient medicine service at Presbyterian Medical Group in Albuquerque, N.M., says there’s no “magic number” for an ideal daily patient census, and cautions against fixating on national averages and metrics.

“For example, seeing 15 patients in an inner-city hospital—like we are, where the patients are ill and they have really incredibly high levels of social and medical issues like placement—versus seeing 15 patients in an affluent suburban hospital, it’s comparing apples and oranges,” he says.

When Dr. Yu became medical director in January 2010, he says, “we were in crisis,” with the rounding team’s average patient census ranging from 18 to 20 per day. Some hospitalists weren’t seeing their last patients until 4 or 5 p.m., losing the opportunity for timely discussions with specialists to help reduce their patients’ length of stay. By neglecting to send patients home when appropriate, Dr. Yu says, the hospital was losing thousands of dollars in revenue through the failure to open up beds for new admissions. “That’s the classic example of dropping a dollar to pick up a quarter,” he says.

Dr. Yu and his team launched a comprehensive quality-improvement (QI) project that incorporated unit-based rounding centered on the hospital’s geography, and hired more full-time equivalents. As a result, the service now employs 46 FTEs, making it one of the largest nonacademic HM programs in the country. Meanwhile, the average daily census has dropped to a more manageable 11 to 13 patients, plus a few admissions.

We have clinicians who report that they don’t even get a lunch break. That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.

—Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing, Rush University Medical Center, nurse practitioner, Mercy Hospital and Medical Center, Chicago

Most significantly, average length of stay has decreased from 4.9 to 4.6 days with increased patient satisfaction and no significant change in the readmission rate, even as the hospital has added $2.5 million to the contribution margin (the revenue minus the variable costs). “So we took the focus on productivity and just elevated it higher to overall organizational finance,” Dr. Yu says. “We answered the age-old question: Is it better and financially more productive for the organization to lower the average starting census and to pay for the extra physician? And the answer is a resounding yes for us.”

The Flip Side

Adam Singer, MD, CEO of North Hollywood, Calif.-based IPC: The Hospitalist Company, points out that an overly low census can prove just as problematic, contributing to revenue and efficiency concerns. A hospitalist’s core ability to drive a delivery system, he says, requires sufficient exposure to a facility’s range of patients and contact with enough other staff members to propel a process of positive change.

“If you only have a few patients and your rounds are done in an hour, how engaged are you?” he asks.

Dr. Singer says his company’s more than 2,000 HM providers see roughly 15 to 18 patients on any given day. Even so, he says, the appropriate census for each practice can vary widely based on its structure, patient population, and the quality and experience of individual providers.

To ensure the numbers remain in the right range, Dr. Singer says, the company provides “complete transparency across the medical group, so that every doctor in the group sees exactly how many people everybody else is seeing.” If one doctor is seeing six patients and another is seeing 20, the group can self-regulate its census.

IPC also closely monitors a core series of clinical measures to ensure quality, ranging from ACE inhibitor use to length of stay and readmission rates. If one of the clinical measures starts to degrade, Dr. Singer says, the company can spot the problem and provide counseling or staffing assistance to right the ship. Hiring more doctors might be the most effective solution, but if a facility cannot afford more FTEs and quality is diminishing, he suggests collaborating with local primary-care physicians or even a less-busy hospitalist group to help share the load.

Safe Patients, Satisfied Providers

Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing at Rush University Medical Center in Chicago and a nurse practitioner at Mercy Hospital and Medical Center, says each institution needs to do a self-assessment based on clinician feedback. Is the workload manageable? Can the providers take breaks? What do their satisfaction surveys suggest? What are the turnover and burnout rates?

“We have clinicians who report that they don’t even get a lunch break,” Kleinpell says. “That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.”

We took the focus on productivity and just elevated it higher to overall organizational finance. We answered the age-old question: Is it better and financially more productive for the organization to lower he average starting census and to pay for the extra physician? And the answer is a resounding yes for us.

—David Yu, MD, MBA, SFHM, FACP, medical director, adult inpatient medicine service, Presbyterian Medical Group, Albuquerque, N.M.

Dr. Mitchell has seen overwhelmed hospitalists defer the care of patients they could normally handle to specialists, which leads to higher costs. Ultimately, Dr. Mitchell says, group leaders, administrators, and staff can all help set the right tone. “In the group I’m with now, there’s positive peer pressure to do the right thing, to be efficient, to communicate,” he says, “and if someone doesn’t do it, then it kind of stands out.”

Truly overwhelmed hospitalists can’t continue working well at an unsustainable pace. “It’s an extremely tricky situation, and I think for me it comes down to working with doctors that I trust and working with an administration that trusts us to say, ‘This is what’s best for patient care,’” Dr. Mitchell says. “And you need to prove that by getting the patient feedback and staff feedback that says, ‘Hey these guys are doing a good job.’”

Dr. Yu says many medical directors see the administration’s chief financial officer as an adversary when they should be working together. That kind of collaboration means coming up with strategies, metrics, and models that a financial department can relate to.

“You can’t just complain,” he says. “If your hospital is losing money, your program is going to shut down. But if you provide bad care, the hospital is going to do badly. Both sides have very legitimate points, and one of the jobs of a good medical director is to bridge those two worlds.”

Once the administration is on board, though, each facility must devise the right remedy for a chronically frenetic workload. John Nelson, MD, MHM, FACP, medical director of the hospitalist practice at Overlake Hospital Medical Center in Bellevue, Wash., says facilities can relieve overworked doctors by relieving them of tasks that other staff members could easily do.

“There are places I go where the hospitalists are doing things like arranging follow-up appointments themselves. That’s just nuts,” says Dr. Nelson, a co-founder and past president of SHM, practice management consultant, and columnist for The Hospitalist. “Or the hospitalists themselves are tasked with printing out a copy of their discharge summary and faxing it themselves.”

Other solutions depend on the makeup of clinical teams. “Do you have the ability to integrate nurse practitioners or physician assistants into the team?” Kleinpell asks. “Because certainly they can help maximize the hospitalist’s efficiency by seeing patients who maybe are less severely ill, or new admissions.”

Calling upon other providers to do patient histories, physical exams, or discharges, she says, also removes some of the burden.

Geographical rounding at one facility where he still occasionally practices, Dr. Knight says, “has made all the difference in the world” in improved efficiency. Responsibilities can be subdivided based on more than geography, too. At Palmetto, a team of nurse practitioners does all of the day-to-day management of stroke patients, helping to provide more standardized, reliable care.

A more evolved strategy, Dr. Singer says, is to develop hospitalist-only floors, which allow providers to see a higher volume of patients very effectively. Yet another technique is to assign a case manager to a specific provider instead of by disease or floor. That way, Dr. Singer says, a hospitalist facing a high patient census can round with the same case manager and much more effectively direct management resources.

Like other hospitalists, Dr. Nelson says hard caps should be considered “only in the most dire circumstances or only when all other options have been exhausted.” Sending patients away during peak times, he says, does nothing to address unusually slow days. Apart from the economic consequences, instituting a cap also can fuel the perception that an HM group isn’t pulling its own weight and raises questions about who else will have to take the group’s patients.

There may not be any one-size-fits-all solution, but observers say they are seeing a growing maturity and sophistication in how hospitals are dealing with patient censuses. At first, facilities may view volume and production as the most important considerations.

“Over time, they realize that’s a self-defeating way to operate because it does lead to more errors, it leads to more complications, it leads to longer length of stay,” says Dr. Knight. Eventually, he adds, most organizations come around to the realization that a more modest number of patients, perhaps 15 to 20 per day, may be more realistic for achieving quality and efficiency.

“Common sense tells you that if you’re running around trying to see 40 patients a day, you can’t just pay attention to the things you need to provide high-quality and efficient care,” Dr. Knight says. “You’re just running around and putting out fires.”

Bryn Nelson is a freelance medical writer in Seattle.

for additional resources visit the free SHM Practice Management Online Resource at www.hospitalmedicine.org/pmi

References

1. Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11): 037-1045.
2. Michtalik H, Pronovost P, Driscoll B, Paskavitz M, Brotman D. Impact of workload on patient safety and quality of care: a survey of an online community of hospitalists. J Hosp Med. 2011;6(4):S50.

Ellis Knight, MD, MBA, FHM, senior vice president for physician and clinical integration at Palmetto Health in Columbia, S.C., recalls conducting root cause analyses after every serious adverse event when he was vice president for medical affairs at a large teaching hospital. “For every one of them—it was just like a broken record—every one of them, the nursing staff or the physicians involved would start the recount by saying, ‘It was a very, very busy day; we had a very high census,’” Dr. Knight says. “When that happens, when you get those, what I call tsunami waves of patients coming into a unit or being admitted at one time, it can really wreak havoc and it can make even the best clinicians get rushed, take shortcuts, and make mistakes.”

Researchers have long studied the consequences of temporary and longer-term workload imbalances for other healthcare providers; a recent in-depth study of one hospital found that the risk of inpatient patient mortality increased during shifts with below-target nurse staffing or higher patient turnover.¹

Few studies, however, have specifically examined the repercussions of a patient census that is either too high or too low for a hospitalist service. At many facilities, that census can be influenced by an increasing threshold for hospitalization, meaning that the average inpatient is becoming sicker and more complicated, requiring more time during a hospitalist’s daily rounds. HM providers might report having better or worse electronic health records, support staff, and other ancillary services; different schedules; and mixes of clinical, administrative, and teaching responsibilities.

Even then, David M. Mitchell, MD, PhD, a hospitalist at Sibley Memorial Hospital in Washington, D.C., and a member of the SHM Performance Standards Committee, cautions that the ability of a doctor to churn through a higher patient count in no way ensures quality. “You don’t want to confuse efficiency with sloppiness,” he says.

In the absence of clear precedents and solid guidelines, hospitalist groups are struggling to come up with their own formulas for ensuring that workloads balance high productivity with sustainable quality—no easy feat. Nonetheless, first-hand accounts and survey data suggest that more providers are identifying common warning signs and devising tailored solutions to help the rapidly maturing field stay on track.

Henry Michtalik, MD, MPH, assistant professor of medicine at Johns Hopkins University School of Medicine, led one of the only surveys that has directly asked hospitalists how they perceive their own workloads. The survey, conducted through an online community of hospitalists and first presented at HM11, revealed several intriguing findings.²

On average, hospitalists reported seeing about 15 patients per shift or day, not including nights, weekends, or holidays. Apart from a few outliers, the range extended from the low teens to the mid-20s, Dr. Michtalik says. According to the survey, 40% of physicians said that more than once a month, their typical inpatient census exceeded the level that they deemed safe and appropriate for specific work settings; 36.1% of physicians reported that was true more than once per week.

Providers often reported that their average workload contributed to incomplete discussions with patients and families, the ordering of unnecessary tests or procedures, a delay in admissions or discharges, worsened patient satisfaction, poorer handoffs, and other problems. “We might be in a situation where we’re focusing on increasing the number of patients being seen or having high census numbers, which could be, paradoxically, actually increasing the costs of healthcare,” Dr. Michtalik says.

For a recent survey posted on the-hospitalist.org, 51% of respondents picked 11 to 15 as the most appropriate patient census for a full-time hospitalist, while another 35% selected 16 to 20. Far fewer deemed it appropriate to see either more than 20 patients a day or 10 or less, suggesting that hospitalists recognize the need for equilibrium.

A “Resounding” Success Story

David Yu, MD, MBA, SFHM, FACP, medical director of the adult inpatient medicine service at Presbyterian Medical Group in Albuquerque, N.M., says there’s no “magic number” for an ideal daily patient census, and cautions against fixating on national averages and metrics.

“For example, seeing 15 patients in an inner-city hospital—like we are, where the patients are ill and they have really incredibly high levels of social and medical issues like placement—versus seeing 15 patients in an affluent suburban hospital, it’s comparing apples and oranges,” he says.

When Dr. Yu became medical director in January 2010, he says, “we were in crisis,” with the rounding team’s average patient census ranging from 18 to 20 per day. Some hospitalists weren’t seeing their last patients until 4 or 5 p.m., losing the opportunity for timely discussions with specialists to help reduce their patients’ length of stay. By neglecting to send patients home when appropriate, Dr. Yu says, the hospital was losing thousands of dollars in revenue through the failure to open up beds for new admissions. “That’s the classic example of dropping a dollar to pick up a quarter,” he says.

Dr. Yu and his team launched a comprehensive quality-improvement (QI) project that incorporated unit-based rounding centered on the hospital’s geography, and hired more full-time equivalents. As a result, the service now employs 46 FTEs, making it one of the largest nonacademic HM programs in the country. Meanwhile, the average daily census has dropped to a more manageable 11 to 13 patients, plus a few admissions.

We have clinicians who report that they don’t even get a lunch break. That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.

—Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing, Rush University Medical Center, nurse practitioner, Mercy Hospital and Medical Center, Chicago

Most significantly, average length of stay has decreased from 4.9 to 4.6 days with increased patient satisfaction and no significant change in the readmission rate, even as the hospital has added $2.5 million to the contribution margin (the revenue minus the variable costs). “So we took the focus on productivity and just elevated it higher to overall organizational finance,” Dr. Yu says. “We answered the age-old question: Is it better and financially more productive for the organization to lower the average starting census and to pay for the extra physician? And the answer is a resounding yes for us.”

The Flip Side

Adam Singer, MD, CEO of North Hollywood, Calif.-based IPC: The Hospitalist Company, points out that an overly low census can prove just as problematic, contributing to revenue and efficiency concerns. A hospitalist’s core ability to drive a delivery system, he says, requires sufficient exposure to a facility’s range of patients and contact with enough other staff members to propel a process of positive change.

“If you only have a few patients and your rounds are done in an hour, how engaged are you?” he asks.

Dr. Singer says his company’s more than 2,000 HM providers see roughly 15 to 18 patients on any given day. Even so, he says, the appropriate census for each practice can vary widely based on its structure, patient population, and the quality and experience of individual providers.

To ensure the numbers remain in the right range, Dr. Singer says, the company provides “complete transparency across the medical group, so that every doctor in the group sees exactly how many people everybody else is seeing.” If one doctor is seeing six patients and another is seeing 20, the group can self-regulate its census.

IPC also closely monitors a core series of clinical measures to ensure quality, ranging from ACE inhibitor use to length of stay and readmission rates. If one of the clinical measures starts to degrade, Dr. Singer says, the company can spot the problem and provide counseling or staffing assistance to right the ship. Hiring more doctors might be the most effective solution, but if a facility cannot afford more FTEs and quality is diminishing, he suggests collaborating with local primary-care physicians or even a less-busy hospitalist group to help share the load.

Safe Patients, Satisfied Providers

Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing at Rush University Medical Center in Chicago and a nurse practitioner at Mercy Hospital and Medical Center, says each institution needs to do a self-assessment based on clinician feedback. Is the workload manageable? Can the providers take breaks? What do their satisfaction surveys suggest? What are the turnover and burnout rates?

“We have clinicians who report that they don’t even get a lunch break,” Kleinpell says. “That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.”

We took the focus on productivity and just elevated it higher to overall organizational finance. We answered the age-old question: Is it better and financially more productive for the organization to lower he average starting census and to pay for the extra physician? And the answer is a resounding yes for us.

—David Yu, MD, MBA, SFHM, FACP, medical director, adult inpatient medicine service, Presbyterian Medical Group, Albuquerque, N.M.

Dr. Mitchell has seen overwhelmed hospitalists defer the care of patients they could normally handle to specialists, which leads to higher costs. Ultimately, Dr. Mitchell says, group leaders, administrators, and staff can all help set the right tone. “In the group I’m with now, there’s positive peer pressure to do the right thing, to be efficient, to communicate,” he says, “and if someone doesn’t do it, then it kind of stands out.”

Truly overwhelmed hospitalists can’t continue working well at an unsustainable pace. “It’s an extremely tricky situation, and I think for me it comes down to working with doctors that I trust and working with an administration that trusts us to say, ‘This is what’s best for patient care,’” Dr. Mitchell says. “And you need to prove that by getting the patient feedback and staff feedback that says, ‘Hey these guys are doing a good job.’”

Dr. Yu says many medical directors see the administration’s chief financial officer as an adversary when they should be working together. That kind of collaboration means coming up with strategies, metrics, and models that a financial department can relate to.

“You can’t just complain,” he says. “If your hospital is losing money, your program is going to shut down. But if you provide bad care, the hospital is going to do badly. Both sides have very legitimate points, and one of the jobs of a good medical director is to bridge those two worlds.”

Once the administration is on board, though, each facility must devise the right remedy for a chronically frenetic workload. John Nelson, MD, MHM, FACP, medical director of the hospitalist practice at Overlake Hospital Medical Center in Bellevue, Wash., says facilities can relieve overworked doctors by relieving them of tasks that other staff members could easily do.

“There are places I go where the hospitalists are doing things like arranging follow-up appointments themselves. That’s just nuts,” says Dr. Nelson, a co-founder and past president of SHM, practice management consultant, and columnist for The Hospitalist. “Or the hospitalists themselves are tasked with printing out a copy of their discharge summary and faxing it themselves.”

Other solutions depend on the makeup of clinical teams. “Do you have the ability to integrate nurse practitioners or physician assistants into the team?” Kleinpell asks. “Because certainly they can help maximize the hospitalist’s efficiency by seeing patients who maybe are less severely ill, or new admissions.”

Calling upon other providers to do patient histories, physical exams, or discharges, she says, also removes some of the burden.

Geographical rounding at one facility where he still occasionally practices, Dr. Knight says, “has made all the difference in the world” in improved efficiency. Responsibilities can be subdivided based on more than geography, too. At Palmetto, a team of nurse practitioners does all of the day-to-day management of stroke patients, helping to provide more standardized, reliable care.

A more evolved strategy, Dr. Singer says, is to develop hospitalist-only floors, which allow providers to see a higher volume of patients very effectively. Yet another technique is to assign a case manager to a specific provider instead of by disease or floor. That way, Dr. Singer says, a hospitalist facing a high patient census can round with the same case manager and much more effectively direct management resources.

Like other hospitalists, Dr. Nelson says hard caps should be considered “only in the most dire circumstances or only when all other options have been exhausted.” Sending patients away during peak times, he says, does nothing to address unusually slow days. Apart from the economic consequences, instituting a cap also can fuel the perception that an HM group isn’t pulling its own weight and raises questions about who else will have to take the group’s patients.

There may not be any one-size-fits-all solution, but observers say they are seeing a growing maturity and sophistication in how hospitals are dealing with patient censuses. At first, facilities may view volume and production as the most important considerations.

“Over time, they realize that’s a self-defeating way to operate because it does lead to more errors, it leads to more complications, it leads to longer length of stay,” says Dr. Knight. Eventually, he adds, most organizations come around to the realization that a more modest number of patients, perhaps 15 to 20 per day, may be more realistic for achieving quality and efficiency.

“Common sense tells you that if you’re running around trying to see 40 patients a day, you can’t just pay attention to the things you need to provide high-quality and efficient care,” Dr. Knight says. “You’re just running around and putting out fires.”

Bryn Nelson is a freelance medical writer in Seattle.

for additional resources visit the free SHM Practice Management Online Resource at www.hospitalmedicine.org/pmi

References

1. Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11): 037-1045.
2. Michtalik H, Pronovost P, Driscoll B, Paskavitz M, Brotman D. Impact of workload on patient safety and quality of care: a survey of an online community of hospitalists. J Hosp Med. 2011;6(4):S50.

Ellis Knight, MD, MBA, FHM, senior vice president for physician and clinical integration at Palmetto Health in Columbia, S.C., recalls conducting root cause analyses after every serious adverse event when he was vice president for medical affairs at a large teaching hospital. “For every one of them—it was just like a broken record—every one of them, the nursing staff or the physicians involved would start the recount by saying, ‘It was a very, very busy day; we had a very high census,’” Dr. Knight says. “When that happens, when you get those, what I call tsunami waves of patients coming into a unit or being admitted at one time, it can really wreak havoc and it can make even the best clinicians get rushed, take shortcuts, and make mistakes.”

Researchers have long studied the consequences of temporary and longer-term workload imbalances for other healthcare providers; a recent in-depth study of one hospital found that the risk of inpatient patient mortality increased during shifts with below-target nurse staffing or higher patient turnover.¹

Few studies, however, have specifically examined the repercussions of a patient census that is either too high or too low for a hospitalist service. At many facilities, that census can be influenced by an increasing threshold for hospitalization, meaning that the average inpatient is becoming sicker and more complicated, requiring more time during a hospitalist’s daily rounds. HM providers might report having better or worse electronic health records, support staff, and other ancillary services; different schedules; and mixes of clinical, administrative, and teaching responsibilities.

Even then, David M. Mitchell, MD, PhD, a hospitalist at Sibley Memorial Hospital in Washington, D.C., and a member of the SHM Performance Standards Committee, cautions that the ability of a doctor to churn through a higher patient count in no way ensures quality. “You don’t want to confuse efficiency with sloppiness,” he says.

In the absence of clear precedents and solid guidelines, hospitalist groups are struggling to come up with their own formulas for ensuring that workloads balance high productivity with sustainable quality—no easy feat. Nonetheless, first-hand accounts and survey data suggest that more providers are identifying common warning signs and devising tailored solutions to help the rapidly maturing field stay on track.

Henry Michtalik, MD, MPH, assistant professor of medicine at Johns Hopkins University School of Medicine, led one of the only surveys that has directly asked hospitalists how they perceive their own workloads. The survey, conducted through an online community of hospitalists and first presented at HM11, revealed several intriguing findings.²

On average, hospitalists reported seeing about 15 patients per shift or day, not including nights, weekends, or holidays. Apart from a few outliers, the range extended from the low teens to the mid-20s, Dr. Michtalik says. According to the survey, 40% of physicians said that more than once a month, their typical inpatient census exceeded the level that they deemed safe and appropriate for specific work settings; 36.1% of physicians reported that was true more than once per week.

Providers often reported that their average workload contributed to incomplete discussions with patients and families, the ordering of unnecessary tests or procedures, a delay in admissions or discharges, worsened patient satisfaction, poorer handoffs, and other problems. “We might be in a situation where we’re focusing on increasing the number of patients being seen or having high census numbers, which could be, paradoxically, actually increasing the costs of healthcare,” Dr. Michtalik says.

For a recent survey posted on the-hospitalist.org, 51% of respondents picked 11 to 15 as the most appropriate patient census for a full-time hospitalist, while another 35% selected 16 to 20. Far fewer deemed it appropriate to see either more than 20 patients a day or 10 or less, suggesting that hospitalists recognize the need for equilibrium.

A “Resounding” Success Story

David Yu, MD, MBA, SFHM, FACP, medical director of the adult inpatient medicine service at Presbyterian Medical Group in Albuquerque, N.M., says there’s no “magic number” for an ideal daily patient census, and cautions against fixating on national averages and metrics.

“For example, seeing 15 patients in an inner-city hospital—like we are, where the patients are ill and they have really incredibly high levels of social and medical issues like placement—versus seeing 15 patients in an affluent suburban hospital, it’s comparing apples and oranges,” he says.

When Dr. Yu became medical director in January 2010, he says, “we were in crisis,” with the rounding team’s average patient census ranging from 18 to 20 per day. Some hospitalists weren’t seeing their last patients until 4 or 5 p.m., losing the opportunity for timely discussions with specialists to help reduce their patients’ length of stay. By neglecting to send patients home when appropriate, Dr. Yu says, the hospital was losing thousands of dollars in revenue through the failure to open up beds for new admissions. “That’s the classic example of dropping a dollar to pick up a quarter,” he says.

Dr. Yu and his team launched a comprehensive quality-improvement (QI) project that incorporated unit-based rounding centered on the hospital’s geography, and hired more full-time equivalents. As a result, the service now employs 46 FTEs, making it one of the largest nonacademic HM programs in the country. Meanwhile, the average daily census has dropped to a more manageable 11 to 13 patients, plus a few admissions.

We have clinicians who report that they don’t even get a lunch break. That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.

—Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing, Rush University Medical Center, nurse practitioner, Mercy Hospital and Medical Center, Chicago

Most significantly, average length of stay has decreased from 4.9 to 4.6 days with increased patient satisfaction and no significant change in the readmission rate, even as the hospital has added $2.5 million to the contribution margin (the revenue minus the variable costs). “So we took the focus on productivity and just elevated it higher to overall organizational finance,” Dr. Yu says. “We answered the age-old question: Is it better and financially more productive for the organization to lower the average starting census and to pay for the extra physician? And the answer is a resounding yes for us.”

The Flip Side

Adam Singer, MD, CEO of North Hollywood, Calif.-based IPC: The Hospitalist Company, points out that an overly low census can prove just as problematic, contributing to revenue and efficiency concerns. A hospitalist’s core ability to drive a delivery system, he says, requires sufficient exposure to a facility’s range of patients and contact with enough other staff members to propel a process of positive change.

“If you only have a few patients and your rounds are done in an hour, how engaged are you?” he asks.

Dr. Singer says his company’s more than 2,000 HM providers see roughly 15 to 18 patients on any given day. Even so, he says, the appropriate census for each practice can vary widely based on its structure, patient population, and the quality and experience of individual providers.

To ensure the numbers remain in the right range, Dr. Singer says, the company provides “complete transparency across the medical group, so that every doctor in the group sees exactly how many people everybody else is seeing.” If one doctor is seeing six patients and another is seeing 20, the group can self-regulate its census.

IPC also closely monitors a core series of clinical measures to ensure quality, ranging from ACE inhibitor use to length of stay and readmission rates. If one of the clinical measures starts to degrade, Dr. Singer says, the company can spot the problem and provide counseling or staffing assistance to right the ship. Hiring more doctors might be the most effective solution, but if a facility cannot afford more FTEs and quality is diminishing, he suggests collaborating with local primary-care physicians or even a less-busy hospitalist group to help share the load.

Safe Patients, Satisfied Providers

Ruth M. Kleinpell, PhD, RN, FAAN, FCCM, professor of nursing at Rush University Medical Center in Chicago and a nurse practitioner at Mercy Hospital and Medical Center, says each institution needs to do a self-assessment based on clinician feedback. Is the workload manageable? Can the providers take breaks? What do their satisfaction surveys suggest? What are the turnover and burnout rates?

“We have clinicians who report that they don’t even get a lunch break,” Kleinpell says. “That’s not safe, and that’s not lending itself to a work environment that’s satisfying for the practitioners.”

We took the focus on productivity and just elevated it higher to overall organizational finance. We answered the age-old question: Is it better and financially more productive for the organization to lower he average starting census and to pay for the extra physician? And the answer is a resounding yes for us.

—David Yu, MD, MBA, SFHM, FACP, medical director, adult inpatient medicine service, Presbyterian Medical Group, Albuquerque, N.M.

Dr. Mitchell has seen overwhelmed hospitalists defer the care of patients they could normally handle to specialists, which leads to higher costs. Ultimately, Dr. Mitchell says, group leaders, administrators, and staff can all help set the right tone. “In the group I’m with now, there’s positive peer pressure to do the right thing, to be efficient, to communicate,” he says, “and if someone doesn’t do it, then it kind of stands out.”

Truly overwhelmed hospitalists can’t continue working well at an unsustainable pace. “It’s an extremely tricky situation, and I think for me it comes down to working with doctors that I trust and working with an administration that trusts us to say, ‘This is what’s best for patient care,’” Dr. Mitchell says. “And you need to prove that by getting the patient feedback and staff feedback that says, ‘Hey these guys are doing a good job.’”

Dr. Yu says many medical directors see the administration’s chief financial officer as an adversary when they should be working together. That kind of collaboration means coming up with strategies, metrics, and models that a financial department can relate to.

“You can’t just complain,” he says. “If your hospital is losing money, your program is going to shut down. But if you provide bad care, the hospital is going to do badly. Both sides have very legitimate points, and one of the jobs of a good medical director is to bridge those two worlds.”

Once the administration is on board, though, each facility must devise the right remedy for a chronically frenetic workload. John Nelson, MD, MHM, FACP, medical director of the hospitalist practice at Overlake Hospital Medical Center in Bellevue, Wash., says facilities can relieve overworked doctors by relieving them of tasks that other staff members could easily do.

“There are places I go where the hospitalists are doing things like arranging follow-up appointments themselves. That’s just nuts,” says Dr. Nelson, a co-founder and past president of SHM, practice management consultant, and columnist for The Hospitalist. “Or the hospitalists themselves are tasked with printing out a copy of their discharge summary and faxing it themselves.”

Other solutions depend on the makeup of clinical teams. “Do you have the ability to integrate nurse practitioners or physician assistants into the team?” Kleinpell asks. “Because certainly they can help maximize the hospitalist’s efficiency by seeing patients who maybe are less severely ill, or new admissions.”

Calling upon other providers to do patient histories, physical exams, or discharges, she says, also removes some of the burden.

Geographical rounding at one facility where he still occasionally practices, Dr. Knight says, “has made all the difference in the world” in improved efficiency. Responsibilities can be subdivided based on more than geography, too. At Palmetto, a team of nurse practitioners does all of the day-to-day management of stroke patients, helping to provide more standardized, reliable care.

A more evolved strategy, Dr. Singer says, is to develop hospitalist-only floors, which allow providers to see a higher volume of patients very effectively. Yet another technique is to assign a case manager to a specific provider instead of by disease or floor. That way, Dr. Singer says, a hospitalist facing a high patient census can round with the same case manager and much more effectively direct management resources.

Like other hospitalists, Dr. Nelson says hard caps should be considered “only in the most dire circumstances or only when all other options have been exhausted.” Sending patients away during peak times, he says, does nothing to address unusually slow days. Apart from the economic consequences, instituting a cap also can fuel the perception that an HM group isn’t pulling its own weight and raises questions about who else will have to take the group’s patients.

There may not be any one-size-fits-all solution, but observers say they are seeing a growing maturity and sophistication in how hospitals are dealing with patient censuses. At first, facilities may view volume and production as the most important considerations.

“Over time, they realize that’s a self-defeating way to operate because it does lead to more errors, it leads to more complications, it leads to longer length of stay,” says Dr. Knight. Eventually, he adds, most organizations come around to the realization that a more modest number of patients, perhaps 15 to 20 per day, may be more realistic for achieving quality and efficiency.

“Common sense tells you that if you’re running around trying to see 40 patients a day, you can’t just pay attention to the things you need to provide high-quality and efficient care,” Dr. Knight says. “You’re just running around and putting out fires.”

Bryn Nelson is a freelance medical writer in Seattle.

for additional resources visit the free SHM Practice Management Online Resource at www.hospitalmedicine.org/pmi

References

1. Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11): 037-1045.
2. Michtalik H, Pronovost P, Driscoll B, Paskavitz M, Brotman D. Impact of workload on patient safety and quality of care: a survey of an online community of hospitalists. J Hosp Med. 2011;6(4):S50.

Clinical question: Is decreased nursing staffing and increased patient turnover across various inpatient adult hospital units associated with higher patient mortality?

Background: Studies that have shown an association between lower nurse staffing and higher inpatient mortality have been limited by methodological issues. These limitations include the use of hospital-level administrative data that do not fully capture actual staffing levels and the lack of control for expected nursing requirements for patients.

Study design: Retrospective observational study.

Setting: Forty-three hospital units on both medical and surgical services at a single institution.

Synopsis: The authors examined whether patients who were cared for during shifts that had nursing staffing that was eight hours or more below the staffing target had a higher-than-expected mortality compared with predicted mortality, based on risk-adjusted DRG-related mortality. They also assessed if increased patient turnover during a patient-care shift was associated with a higher-than-expected mortality.

The authors analyzed mortality outcomes of 197,961 patients who were cared for across 176,696 staffed unit-shifts. The risk of death increased with the number of shifts a patient was cared for when the nursing staffing was eight hours below target, with a hazard ratio per below-target shift of 1.02 (95% CI: 1.01 to 1.03). There was also an association between a higher mortality and a greater number of high-turnover shifts, with a hazard ratio of 1.04 (95% CI 1.02 to 1.03).

Bottom line: Patients cared for during shifts with below-target levels of nurse staffing and during shifts with increased patient turnover had an increased mortality.

Citation: Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11):1037-1045.

For more physician reviews of HM-related literature, visit our website.

Clinical question: Is decreased nursing staffing and increased patient turnover across various inpatient adult hospital units associated with higher patient mortality?

Background: Studies that have shown an association between lower nurse staffing and higher inpatient mortality have been limited by methodological issues. These limitations include the use of hospital-level administrative data that do not fully capture actual staffing levels and the lack of control for expected nursing requirements for patients.

Study design: Retrospective observational study.

Setting: Forty-three hospital units on both medical and surgical services at a single institution.

Synopsis: The authors examined whether patients who were cared for during shifts that had nursing staffing that was eight hours or more below the staffing target had a higher-than-expected mortality compared with predicted mortality, based on risk-adjusted DRG-related mortality. They also assessed if increased patient turnover during a patient-care shift was associated with a higher-than-expected mortality.

The authors analyzed mortality outcomes of 197,961 patients who were cared for across 176,696 staffed unit-shifts. The risk of death increased with the number of shifts a patient was cared for when the nursing staffing was eight hours below target, with a hazard ratio per below-target shift of 1.02 (95% CI: 1.01 to 1.03). There was also an association between a higher mortality and a greater number of high-turnover shifts, with a hazard ratio of 1.04 (95% CI 1.02 to 1.03).

Bottom line: Patients cared for during shifts with below-target levels of nurse staffing and during shifts with increased patient turnover had an increased mortality.

Citation: Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11):1037-1045.

For more physician reviews of HM-related literature, visit our website.

Clinical question: Is decreased nursing staffing and increased patient turnover across various inpatient adult hospital units associated with higher patient mortality?

Background: Studies that have shown an association between lower nurse staffing and higher inpatient mortality have been limited by methodological issues. These limitations include the use of hospital-level administrative data that do not fully capture actual staffing levels and the lack of control for expected nursing requirements for patients.

Study design: Retrospective observational study.

Setting: Forty-three hospital units on both medical and surgical services at a single institution.

Synopsis: The authors examined whether patients who were cared for during shifts that had nursing staffing that was eight hours or more below the staffing target had a higher-than-expected mortality compared with predicted mortality, based on risk-adjusted DRG-related mortality. They also assessed if increased patient turnover during a patient-care shift was associated with a higher-than-expected mortality.

The authors analyzed mortality outcomes of 197,961 patients who were cared for across 176,696 staffed unit-shifts. The risk of death increased with the number of shifts a patient was cared for when the nursing staffing was eight hours below target, with a hazard ratio per below-target shift of 1.02 (95% CI: 1.01 to 1.03). There was also an association between a higher mortality and a greater number of high-turnover shifts, with a hazard ratio of 1.04 (95% CI 1.02 to 1.03).

Bottom line: Patients cared for during shifts with below-target levels of nurse staffing and during shifts with increased patient turnover had an increased mortality.

Citation: Needleman J, Buerhaus P, Pankratz S, Leibson CL, Stevens SR, Harris M. Nurse staffing and inpatient hospital mortality. N Engl J Med. 2011;364(11):1037-1045.

For more physician reviews of HM-related literature, visit our website.