I'm going to talk about what it's like to be employed by a hospital. So just as a little bit of background, I started in a practice with this group I am with, still in 1982, and in 2012, our practice was acquired by a hospital. So that's 30 some years of experience, and I was the managing partner for a while. So I had to pay attention to the way the practice actually runs, rather than just doing neurosurgery. Just as by matter of background reference, this is from the American Medical News, which is now out of print, because they couldn't get enough advertising to support it. But this shows the change in the percentage of independent practicing physicians from their account from 2000 to 2013, and you see in the middle, percent of independent or physicians who claim they're independent went from 57% to 39%, with an absolute fall in 100,000 in the independent physicians over here, and an absolute rise in a little over 100,000 over here. So it's been a trend for a long time. Now, remember, when you are asked on a survey, are you employed, it doesn't necessarily mean are you employed by a hospital. It just means, are you employed? And you can be employed by a lot of different types of corporations or organizations. Recruiting, Merit Hawkins has published this in one of their reports, and I think Judy finds the same thing, that the number of requests from hospitals for recruiting has steadily risen over the 10-year span up here, from 70% to 75%. Now, so how many neurosurgeons are employed by hospitals? The answer is, I don't know. And I don't know anybody that really knows, but if you look at this AMA practice survey from 2012, whereas surgeons here in 2012, 35% were employed in some form by a hospital, only about 7% of subspecialties were. So it was a small number, it is a small number, but it's a growing number. And it's growing because you are making it grow more than I am making it grow, those of you who are beginning practice and looking at places to go. Why do hospitals employ doctors, and particularly neurosurgeons? What's the motive? Well, a big, and this is an article in Health Affairs from 2008 looking at competition between doctors and hospitals, hospital-to-hospital competition drives much of this. I've seen this in the state of Kentucky. One hospital starts to acquire it, the next one gets nervous. I've got to have mine or I'm not going to have any doctors. So they all start acquiring their stable of employed doctors. Back in the 90s, when it looked like we would have health care reform with the Clintons, hospitals went through a period of acquiring a lot of practices, particularly primary care, some specialties, and then unwound that because they were losing money on all these practices. Well, we're doing it again, and they think they can do it better this time by paying a little more rationally, I believe. But it's hospital-to-hospital competition is driving much of the reason that they're looking for you and recruiting you. One of the things they want to do, neurosurgeons now expect to get paid for call. Some hospitals don't want to agree to it or don't want to pay $10,000 a night for you to be on call. They'd rather just hire their own neurosurgeon and just leave you somewhere else, and you can do your own spine practice by yourself if you can find it, because that guy's going to be competing with you if you're in the private practice. So they want to ensure they have consultants and call, fill it, get rid of the uncooperative, pay some uncooperative MDs. One of the strategies you talked about, ancillary service or income, ASCs, that's a surgery center, outpatient surgery center. If you, as a practice, own one, you get the facility free. That's a lot of money for you, but it competes with a hospital. The hospital employs you. They don't have to compete against you or the cardiologist or everybody else who can think of a competing outpatient service or even hospital, branded service line, some other things. But those are the important, those first three are the important reasons that hospitals want to hire doctors in this decade. What's the hospital perspective on the cost? Well, this is an article from the New England Journal of Medicine back in 2011. They claim that hospitals will lose between $150,000 and $250,000 per year per physician for at least the first three years. Now, this primarily applies to a primary care physician's practice. Primary care physicians run an office and it's expensive and that's part of the loss, but they're paid a lot less than you. The neurosurgeon collects a big salary and that's what makes the neurosurgeon's loss that much higher. And I can tell you in our practice, and I will tell you in a little while, this is far underestimating the loss that the hospital absorbs in order to hire us, or me, and keep me on their staff. But why do they do it? Because they can make it up in facility fees. I use their hospital only, not because they said I have to, but because it's convenient. I don't use somebody else's surgery center. I don't use somebody else's scanner. They get all these other fees, imaging fees, facility fees, and they get all the cases. So they make up the money. In a private practice, the equivalent is you investing in a surgery center or in an MRI scanner and you getting that back in your office. Well, the hospital, the deal's the same thing. It just flows through a different accounting service and then back into you, if you understand what I mean. They're paying you extra, more than your own professional services, because you're loading cases, volumes of cases, into their imaging centers and into their facilities. And they're getting facility fees, which, as you know, are five, six, seven times what the professional fee is, a lot more. They have some market power because they have less competition, can charge higher prices, but, and I think as Judy said, you might expect, and this was from this article, expect salary reductions, guarantees anyway, with a lower base and higher incentives after you are employed. This is our practice in Lexington, Kentucky, neurosurgery. One third of our expenses are paid by the hospital. In other words, the amount of revenue that we bring in with all our professional fees in practice pays for only two thirds of what we pay out to all our practice, all our employees, and to ourselves. So that's about the level of subsidy that it takes to keep at least a neurosurgeon. And this is not very high. In our hospital, I happen to know that CT surgeons are subsidized over 50% so they can keep those cases rolling through the hospital. About whether, a number of different ways to be employed, but they're basically three. Either directly employed, that's more like a hospitalist. More likely it's like our practice where it is an affiliated entity of some kind, an LLC, a subsidiary of the hospital. So we are neurosurgical associates that belong to Baptist Physicians Lexington, which is a subsidiary of Baptist Hospital System. But they own the contract, they control the contracts. If you have a corporate practice of medicine statute like California, and you can't directly employ doctors, you just create a different kind of structure called a foundation and it does the same thing. What are you paid? Well, I don't know. This is one, some January 13. It's somewhere around $600,000, $700,000 is sort of the median here in this survey, but it depends on the survey. And the NERV survey, the last I saw was, I think it was 2011 or so, and it varied tremendously by region and they tremendously, between the 25th and the 90th percentile. So big, big variation. Those were private practices, mostly not hospital practices. So who's employed? Well, there are some like me who decided, for various reasons that I'll tell you, that it was going to be better to be employed than to stay in a private group. But under employed physicians, 30% on this survey were under 40. Of the self-employed group, or those employed by a group that is an independent group, only 12% were under 40. So younger physicians tend to be congregating in hospital employment. So where do they work? If you're employed, remember, not everybody who's employed is employed by a hospital. According to this survey, about 50% were. About 20% of those were actually employed by private groups, probably in process of becoming partners or some form of ownership later on. So how's it working out? If you're employed by a hospital, well, what do they like? They like the financial security, and they like the fact that they don't have to take care of the office. That's basically it. You don't have to take any financial risk. You've got a good salary. It's guaranteed because it's backed by the hospital. What don't they like about it? Well, they basically don't like that they have less autonomy, and they're dealing with a corporate culture. You don't make your own decisions. Somebody else makes it for you. And the person who makes it for you generally is not a familiar friend. I mean, the bigger the organization, the farther away the decision maker is. I'm in Lexington now. Everybody who makes decisions about me is in Louisville. That's only 70 miles away, but I don't know anybody in Louisville. Those places are about as separate as Russia and China. They just, they're apart. So I don't know who they are. It's good to get to know who they are. Which ones are happier? What do you think? They're both happy. It's probably a self-selection process. And the ones who get into the one and don't like it go to the other one and are happy there. They're equally happy wherever they are. They just have different gripes. So I have different perspectives. You're older like I am. You know it's hard to lose. That's me up there, sort of. You know, you can tolerate almost anything. You got to put up with a lot more than I do because it's a long future But you haven't done anything like I did before so what's the loss? It's all in your imagination right now You haven't run your own practice. You haven't felt the so-called autonomy or the missing of it Mostly, I guess you've all been in a residency right being told what to do So it's not much different when you go to hospital It's easier to to accept All right, so here's the difference what? When we did our contract with the hospital we want to make sure that our practice wasn't going to change and it has And it hasn't because we knew these people be for 30 years one for more than that Basically the same people not a big turnover, and they've lived up to their promise Do they always live up to it absolutely not? But then do you always live up to your promise when you go to a hospital and there meet their expectation the answer is well Maybe not either the two differences are autonomy and personal financial risk When you're in a practice you have the business that has to make money for you to take home money If you don't make money, you don't take it home and If you invest in anything as an ancillary service, there's a risk right Judy Sometimes you lose money big money Because they don't ask for a guarantee from the corporation you work for they ask it from each one of you as an individual sign a personal note because corporation Corporations and groups like mine didn't have any money. We paid it all out at the end of the year why? What serious? No taxes You don't want to pay tax twice So we just pay it out. So we have no money. We wanted to acquire something We borrowed money, and we had to pay interest And that's risk. It's where private practice goes so here's the small group practice decisions Rapid consensus base. I talked to everybody agreed fine. If not, let's have a meeting. We'll get it done Income it's what you bring in by what you do if you work hard you get more and Facility fees if you have invested your money in something else Salary it's a formula you guys decide how you want to divide it up in our practice We divided it all equally, but that was getting harder to do Everybody's working equally hard and bringing in approximately same man You can keep that up a long time, but when there's big disparities especially in how much you want to work Or how much you perceive your partner wants to work? It's not going to work. You're going to have to have some kind of formula financial risk You got it Mentioned and AR accounts receivable if for some reason you can't collect your accounts receivable You don't have you have a cash flow problem, and you can't be paying out all that money without borrowing And then you have to pay on the borrowing so you got risk In a private practice we found that in the last few years we were competing against hospitals and whereas we would bring in someone paid about half as much as we made and Work them up as they earned their keep We couldn't hire anybody Because they can go next door and get paid almost as much as I am or I can hire you To come to my practice and cut my income by a hundred thousand each of us, and you'll make more than I will Now you can see that really doesn't go over very well in a practice So it's hard to recruit if you don't have a financial reserve to pay for this individual Or get a hospital to pay a guaranteed income. They're not doing that very well, but we did that one time move to a Hospital what's different decisions slow? Corp. Corporate's making a decision well you're behind a whole line of other people That want decisions made for them and when they get around to it. They'll make your decision for you Income it's a negotiated salary. It doesn't Necessarily exactly depend on how much you bring in, but it does pin up somewhat eventually eventually on how much you work Salaries fixed my contract it's still usually an RVU production even though where's there's talk about risk contracts and so on There's very few practices that Can figure out how to pay you except on either how much money you actually brought in or a equivalent like an RVU basis you don't have any final financial risk at the hospital if you recruit somebody it doesn't have any effect on your salary and Administrative expense which means if you have to hire another secretary does it cost you anything out of your pocket the answers no Hospital pays for that's that 32% subsidy that I'm talking about So some people often ask okay, well Hospitals getting a good deal We bring in a lot of money How much money is really brought in and I've heard a lot of argument about this and it certainly it varies Why so this is just a survey and it was a small survey Merritt Hawkins again, they asked three thousand people and only a hundred wanted to answer, but this is what they answered over these different years This represents the amount of revenue that a hospital Brought in not what was billed, but what was collected for the neurosurgeon average in that hospital or Wherever they were 2.3 million in 2002 2.4 2.1 2.8 2010 and for some reason Whether it's an error in The survey or an anomaly by 2013 they found that the neurosurgeon reported bringing in 1.6 million big drop Well the neurosurgeons claim is I bring in so much you got to pay me a whole bunch Because of all these extra fees I'm bringing in for you, but if it's really this You're going to get a call the office and say it's not really working out the way. We thought it was working out So what is the value neurosurgeon? I just used the Merritt Hawkins survey and Calculated if the Mendy salary as they say it was about six hundred and seventy thousand dollars in our group We had five that would be a salary of three point three million If each of us brought in two point five million that would be twelve million for the hospital Our total expense was going to be seven million So we had a subsidy of two and a half million take two and a half. I'm sorry for the Mac But the bottom line is here And I'm going to tell you the concept behind this if you take away the two and a half Subsidy from the twelve point five that you gave the hospital that leaves ten million dollars Which is called the contribution to margin and we like to figure that as money free and clear The hospital likes to figure it as well We have a bill to pay for the building We have a bill to pay for all the nurses and everybody who's working in the hospital at the bill pay all these supplies That comes out of a lot of that stuff And you know hospital margins aren't that large anyway, you know three percent margin pretty good so There's a big debate over how much overhead gets loaded on to that And then that's why a hospital will come back and tell us you're putting us in the red You're just not bringing it up and you look at it. You say I'm giving you ten million bucks the five of us different perspective So you got a choice to make there's a lot of different ways to look at it to slice and dice it I can't answer everything about what it's like to work for a hospital But those are the basics from my experience and the differences between being in a private practice and hospital So make a choice and good luck and you know, you can always change but keep on pushing ahead You

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