Controversy over employment status roils emergency providers

Emergency physicians are divided over the question of becoming salaried employees or staying independent. Managed care is said to be fueling the debate, but clashes between interest groups reveal that there are no easy answers to the employment riddle

[Editor's note: This article is the second in a two-part series on hospitals and emergency physicians.]

Buried amid the mountain of statistics on how managed care is altering the health care landscape is a small but significant fact about physicians: Practitioners are losing their entrepreneurial zeal. Many are abandoning their relative independence for security and an easier lifestyle. And, for related reasons, they are changing, in large numbers, to salaried employees.

The fact isn't lost among a growing segment of emergency physicians. The number of practitioners in emergency medicine who are opting for salaried employment either with large practice management firms, medical groups, or hospitals is growing. And, it seems the federal government's Medicare program and industry forces are speeding the process along.

"Physicians are getting tired of the run-around we're getting from health plans, Medicare, staffing firms, and the whole medical bureaucracy," says Robert Weber, MD, director of emergency services at the Cleveland Clinic-Florida in Fort Lauderdale. After 11 years of working under various practice arrangements, Weber decided to cash it in to become a salaried physician with the Cleveland Clinic, a satellite organization of the famed Cleveland Clinic in Ohio.

He says he enjoys the income security and benefits that accrue with being a salaried employee, but he also values no longer seeing his compensation under his previous independent-contractor status whittled away by staffing-firms "that take these huge management fees off the top for just getting you the job." Weber is referring to the administrative fees that can reach as high as 20-30% of a physician's income and is normally retained by physician contracting firms for placing providers in hospital assignments.

Management fees take center of debate

In emergency medicine, contract management fees are at the center of a boiling debate over the way physicians should be paid and their working relationships with hospitals and staffing companies. But, should emergency practitioners opt for security and benefits and possibly lose the freedom and flexibility of remaining independent contractors?

Emergency physicians are divided over that question. Many are rebelling against the present system of giving up a large portion of their earned income as contractors to companies that are little more than medical corporations, says Bob McNamara, MD, medical director of the emergency medicine residency program at Allegheny University of the Health Sciences in Philadelphia, PA.

"These entities are making profits and getting larger at our expense," says McNamara, who is president of the American Academy of Emergency Medicine (AAEM), based in Milwaukee, WI.

But oddly, hospital based emergency providers aren't exactly moving in droves to become salaried, although a large number are technically employed in group practices. Though many hospitals and physician groups nationwide are joining forces as partners or being purchased or merged into integrated systems, emergency clinicians apparently have little desire to gain employee status within those organizations.

An analysis of hospital data from the American Hospital Association in Chicago shows that out of some 5000 domestic hospitals nationwide, only 940 reported employing physicians, including emergency specialists, full-time with full salary and benefits.

In Florida, for example, where Weber works, only Cleveland Clinic and one other hospital, Jackson Memorial Hospital in Miami, employ their emergency physicians full-time, according to the Florida chapter of the American College of Emergency Physicians (ACEP) in Orlando. Florida has 226 licensed private-sector hospitals.

Teaching institutions, military and government hospitals, and staff-model health maintenance organizations are still where most salaried emergency physicians are drawn to work. But when you set aside those facilities and discount institutions that report their contracted medical staff as full-time equivalent personnel, the number of facilities is quite small, says Wei Wei Li, an AHA statistician.

Survey results debunk critics' beliefs

Yet, a recent workforce survey conducted by the national office of ACEP in Dallas, TX, showed that the number of physicians employed at hospitals and the number of independent contractors are roughly equal. Nearly half of hospitals (49%) reported staffing their EDs with independent contractors, while 44% stated that their physicians were salaried employees.

A further breakdown showed that emergency physicians at only 23% of facilities worked directly for the hospital (which supports the AHA data), 40% worked for a medical group, and 24% worked for a contracting firm. If the ACEP results are correct, the findings dispel a common notion held by critics of contract staffing, such as McNamara, that staffing firms such as Sterling Healthcare Group based in Miami and EmCare based in Dallas are dominating emergency medicine.

However, a second allegation often put by McNamara and the AAEM that large staffing firms are ruining the profession is a much more difficult issue, according to Todd B. Taylor, MD, an emergency physician at Good Samaritan Regional Medical Center in Phoenix, AZ.

"In all likelihood, the truth lies somewhere between the two extremes, but there's room for both views," says Taylor, who adds that there are no private, non-teaching hospitals in Arizona that directly employ salaried physicians. Most are staffed by medical group physicians under contract or by staffing firms.

Whether there truly is room for both views is currently being tested in California, where a lawsuit is raging involving a group of emergency physicians and a large regional not-for-profit hospital chain. The suit, filed last March, challenges the creation of a for-profit subsidiary by Catholic Healthcare West (CHW), which is based in San Francisco and operates 39 hospitals in three states. The subsidiary is San Francisco-based Emergency Physicians Medical Group (EPMG), which was purchased earlier this year by CHW.

Physicians presently working at most of CHW's hospitals fear that they may have to join the for-profit subsidiary to continue working at those facilities or they may lose their jobs. Affiliated Catholic Healthcare Physicians, based in Los Angeles, filed the suit questioning the legality of the subsidiary under California law.

The plaintiffs allege that by being forced into working for EPMG to preserve their employment, they may also be forced into participating in an "illegal scheme" to generate payments in the form of management fees from treating patients at CHW hospitals that would be passed on to EPMG and CHW. Those payments, according to the suit, are in effect an illegal, unearned compensation under the state's corporate medical practice law. The law, which also exists in several other states, is designed to prevent undue influence by a corporate entity in the physician/patient relationship.

Some physicians find better conditions

By press time, an EPMG official did not return phone calls to The Managed Care Emergency Department, but in published statements, Kevin Fickenscher, MD, EPMG's medical director, noted that physicians would not be required to join the medical group without wanting to and that the fees collected from the clinicians would go to cover the cost of new practice guidelines and outcomes research. The case was filed in the California State Supreme Court in Sacramento.

There are places, however, in which physicians, hospitals, and medical groups can amicably co-exist. The University of Pittsburgh Medical Center (UPMC), a large, multi-hospital teaching institution in Pennsylvania, for example, operates an emergency medicine subsidiary. Most of the 80 non-faculty physicians at Emergency Resource Management (ERM) are on salary at the subsidiary, but they contract for their services at several local hospitals, many of which are affiliated with the university and operate residency programs.

Meanwhile, UPMC Presbyterian, the university's flagship hospital, employs its own 18 full-time emergency physicians on faculty. In 1997, the hospital had some 35,000 ED visits. Although bound to each other by common ownership, the two organizations don't clash because they keep their clinicians from mingling at each of the work sites, says Jack Allison, MD, ERM's executive vice president and chief medical officer. The only exceptions are when faculty members are loaned to the practice group for contract work.

Why is this model successful? "The arrangement allows the physicians to practice in a relatively open environment. They have considerable freedom, but also find themselves in a structured academic environment," Allison says.

Whether emergency physicians admit that a trend is in the offing, salaried employment, either with a medical group or a hospital, is increasing, says John F. Paulk, regional director of recruitment with Merritt Hawkins & Associates, an Irving, TX-based physicians recruitment and compensation research firm.

Physicians want security over autonomy

"Managed care has a lot to do with it," says Paulk. "Physicians want to feel more secure, and they want to belong to large organizations. The desire for autonomy that most of them had a few decades ago is a thing of the past."

By banding together in large numbers, either with hospitals or in large practices, physicians also feel they have greater bargaining power with health plans and can thus better protect their reimbursements from contract erosion, Paulk adds. The federal government has been accelerating the process by asking physicians to better define their relationships with other entities.

Last year, Medicare officials alerted group practices that they would no longer be allowed to accept reimbursements for their member physicians unless the clinicians were salaried employees or part owners of the practice. Otherwise, physicians are required to reassign their benefits to a hospital or outside billing entities such as a third-party administrator.

The so-called reassignment-of-benefits rule, which the Health Care Financing Administration in Baltimore noted has been in the books for years but has received lax enforcement until now, fueled a controversy in emergency medicine and has been favorably seen by critics as the death knell for independent contracting. But, most providers doubt this.

Most, such as Weber of Cleveland Clinic-Florida, believe these restrictions are just more evidence of the forces driving physicians away from independent practice toward job security. "There's something to be said about getting a paycheck every two weeks," Weber says.