Practice Options and Business Models

Several options exist for practice of orthopaedic surgery today. Some may be more appealing or more easily entered than others. Hospitals and surgery centers provide platforms for physicians to practice, and availability of specialty surgeons and subspecialty surgeons fosters patient utilization of these facilities. It is important to understand the interconnectedness of providers with their locations of care delivery. Some models directly share financial and operational responsibilities and revenue, while others are connected more indirectly. Many models can be successful; however, clear articulation of the definition of success and the terms of engagement are imperative to a lasting relationship. Objective deliverables including performance metrics and mutual accountability are key. Practice initiation opportunities are shown in Table 6.1. Readers are encouraged to refer to the table while reading ahead.

ACADEMIC

Regarding practice initiation options, academic positions have traditionally been housed within university hospital settings and using the framework of a faculty practice plan. A dean’s tax is rendered to support the affiliation with the university and to provide access to residents, fellows, and medical students, as well as to proffer academic credentials and related amenities of a university medical community. This dean’s tax may be a quarterly or annual assessment, which may be mediated as a flat rate or as a percentage of revenues. More recently, due to declining reimbursements for clinical services, and due to pressures to improve care delivery while minimizing overhead, faculty practice plans have struggled to remain viable. Many have now been coalesced into large academic physician groups, with combinations of physician and administrative leadership. Others have transitioned to hospital employee models, where the university hospital essentially employs the surgeons. With either method, the economies of scale inherent in shared business and risk afford more revenue generation to surgeons, although variations in individual talent, abilities, and related marketing may be underappreciated. Compensation within academic settings is primarily based on clinical productivity. Academic incentives may be offered, ranging from salary adjustments to revenue enhancements for teaching or administrative responsibilities or awarded research grants.

HOSPITAL EMPLOYEE

The largest and most rapid growing employment option over the past 15 years has been a hospital employee model. This business model is applicable today to many hospital systems, with its success based on the benefits of shared resources and risks as noted above. Compensation is based on clinical productivity. Local or system benchmarks
may be in place to determine base salary expectations, while Medical Group Management Association (MGMA) benchmarks are commonly used to define productivity. Although based on relatively small numbers of physicians, MGMA metrics have both academic and nonacademic counterparts, broadening their utility. Ramifications of the hospital employee model extend to different regulations regarding antikickback issues and Internal Revenue Service (IRS) guidelines, especially since most institutions are considered not-for-profit. Hybrid models include hospital employee status compensation, supplemented with other means of reimbursement, ranging from call pay to other earnings from auxiliary activities within other institutions. Those physicians who provide unique and/or high demand services may benefit from these opportunities. Another type of hybrid model would include a multispecialty group employer who negotiates for the group to provide services within various hospital system settings. Large groups of surgeons feeling disadvantaged by hospital system bureaucracy and/or supplementation of less productive, less lucrative clinical service lines (especially primary care), may attain a substantial increase in financial compensation by moving away from hospital employment.

TABLE 6.1 Practice Initiation Opportunities

	Setting	Employer	Business Model	Compensation Plan	Academic Affiliation
Academic	University hospital, clinics, and surgery centers	University hospital system	Faculty practice plan; dean’s tax	Clinical productivity plus academic incentive	Local university
Academic hybrid	University hospital, clinics, and surgery centers	University hospital system	Hospital employee or multispecialty academic physician group	Clinical productivity plus academic incentive	Local university
Hospital employee	Local hospital system, including clinic and surgery centers	Local hospital system	Hospital employee	Clinical productivity, possible academic or administrative incentives	Local university or none
Hybrid model	Local hospital system, including clinic and surgery centers; may include multiple systems	Hospital system/s and/or multispecialty group	Hospital employee or multispecialty group	Clinical productivity, possible administrative incentives	Local university or none
Private practice corporation	Local hospital system, including clinic and surgery centers; may include multiple systems	Solo or group practice	Private practice	Clinical productivity, possible administrative incentives	None; may develop own fellowship program
Private management corporation	Hospital systems, including clinic and surgery centers; possibly multiple disparate geographical locations	Private management corporation	Multispecialty corporation	Clinical productivity	None