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Can Joint Venture Projects Enhance Physician-Hospital Relationships?

BY ANN HALPREN

Relationships between doctors and hospitals can be amiable or antagonistic. Many experts believe an era of increased cooperation is becoming more likely. One of the closest relationships is shared ownership in a business entity — a joint venture.

There is little question that roles of doctors and hospitals are shifting and changing. Not too many years ago, joint ventures would have been unlikely if not impossible. Today they are becoming common.

What will the future hold? Thalia Baker, CMPE, healthcare adviser for the accounting firm L. Paul Kassouf & Co, P.C., believes a serious look at the long-term roles of doctors and hospitals may offer a key to the answer. “Right now everybody’s fighting over the most profitable services. If physicians owned or had ownership in hospitals, we wouldn’t be fighting over where the MRI sits.” She says physicians are trying to move the services they use all the time to someplace where they have ownership.

“Down the road we need to decide the long-term role of a hospital versus the long-term role of the physician,” says Baker. “Regardless of what we do, the physician is still the driver of all healthcare. The physician writes the orders, consults on patients, performs surgeries, delivers babies. The hospitals are a facility they use.”

In spite of their basic differences, more and more hospitals and physicians are finding innovative ways of working together, sharing both the risks and the rewards. Although surgery centers are the most common type of joint ventures, anything is possible.” “A group of physicians can partner with any clinical service that has an outpatient component,” explains Jay Weatherly of Salient Health Ventures. He cites imaging centers, pain centers and cardiac cath labs as examples.

When there is a concerted effort to bring the parties together, trust is built. “In a business, professional, clinical excellence type of project, there needs to be enough trust that you are not going to enter this relationship to hurt me,” says Steve Nyquist, also of Salient Health Ventures.

Joint ventures must grow from a sense of trust. Each party must believe the other does not intend any harm or negative outcome. “There also needs to be an even sharing of risk and reward,” says Nyquist. “That’s what a collaborative joint venture is all about. It’s a healthy, even-handed sharing for the benefit of the project which ultimately will benefit a community.”

Weatherly and Nyquist usually advise physicians who are considering participating in joint ventures to consider doing it with their hospitals, even though the two sides bring different perspectives to the table.

“Hospitals are jumping on joint ventures, especially in bigger cities,” says Baker. “I think the hospitals are doing it primarily to keep the doctors from taking those services out. If they don’t offer a joint venture, the doctors are going to do it without them.”

“It’s not bad for a physician to get more involved in certain patient care activities and the ownership of them,” says Gary Griffin of Gadsden-based Gary Griffin & Associates. “I work with several physician groups and hospitals. They both have advantages to bring to the table.” He says when both parties bring advantages the result is a better enterprise. “Both sides have to give to make a good deal.”

Hospitals may be in a better position to generate the kind of funding needed for a project. “Physicians sometimes have a problem raising capital,” says Griffin. He explains that when physicians undertake a project, each physician involved must personally guarantee repayment of loaned funds for the venture to continue.

Deciding about signing a personal guarantee makes each physician evaluate the merits of the project very carefully. “Sometimes projects break down at that point, trying to get a group of doctors to sign guarantees,” says Griffin. “It is a personal guarantee, not a practice guarantee. Each physician in the group must sign because the bank wants to be sure it’ll get paid.”

Working with a hospital is not the only way physicians can participate in joint ventures. Companies that encourage physicians to work independently of the hospital have sprung up in the past few years. These companies generally encourage doctors to set themselves up to work as hospital competitors rather than collaborators. “That’s the root of why they are competing for market share,” says Nyquist.

Griffin says physician groups sometimes refuse to work with a hospital and they bring in an outside firm to provide the management for a venture. “The physicians can get taken by the percentage of revenue or expenses that they pay in the contract. A hospital would nowhere near do that or would have negotiated so poorly.”

How does everyone involved get a fair deal? Working with an objective outside facilitator often can help. “It brings a neutralizing effect, providing an objective way that they can say their piece,” says Nyquist. “No side feels like the other is dominating or manipulating.”

“Use a third party to facilitate who doesn’t have an ax to grind, who doesn’t have something to sell to either side,” recommends Griffin. “That’s a very effective tool.”

Weatherly says consultants can serve as catalysts for positive relationships between physicians and hospitals. If there is any merit in doing something together, consultants at least put the idea out for discussion. “On many occasions we uncover the need because we’re being contacted and asked to help,” says Weatherly. The idea for a venture can be generated by a physician, a hospital or an outside facilitator.

“There may be a lot of proprietary companies pushing physicians away from hospitals,” says Weatherly. “We identify the merits of working with the hospital, then help establish a pathway for doing that.”

Nyquist believes physicians should look at all the options before initiating any project — including working with a hospital. When considering any project, consider more than just reimbursement. Compliance matters and legal matters also can be critical.

“For hospitals, we encourage that they be willing to listen to their physicians and embrace them as partners rather than seeing them as competitors or as hindrances in running their hospitals,” says Nyquist. “They need to hear the doctors and respond to them, not just have meetings.”

This article taken from the November 2005 issue of the Birmingham Medical News.

© 2005 Salient Health Services, Inc. All rights reserved.