Physician Recruiting and Retention in Rural Communities...
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Working Model
A rural hospital based model of physician recruiting was developed in a rural, heavily indigent county in west central Alabama by a Sole Community Provider hospital (Pickens County Medical Center... PCMC for short). PCMC is a 501-c-3, not for profit, 56 bed hospital serving a historically physician deficient (federally HPSA designated) rural county with a population of approximately 20,000. Demographics of the county reveal a 50% white, 5% Hispanic, 45% African-American racial mix with high infant mortality rates, scarce public transportation, high unemployment rates and heavy dependence upon welfare support among the populace. Physician recruiting to areas of this sort has historically been most difficult. Yet, this community hospital has developed a very effective and efficient model that has established more than twenty five medical practices over a span of some seventeen years from 1985 to the present. A brief outline is presented here with more of the details to follow.
The Premise
Published data have strongly indicated that children with family roots in a rural community, when educated in medicine, tend to return to rural areas to live and practice at a higher rate than urban reared children.1 In the mid 1980's the board of directors of the hospital developed, as a part of their long range planning process, a general outline for physician recruiting that hinged upon this premise. The medical community became the primary participants in the recruiting process by appointing a local physician to head the project. On an annual basis, this physician contacts local educators (private, public and home schooling) to identify a small group (typically a dozen or so) of high achieving high school students (National Merit Scholars, valedictorians, salutatorians, students making high scores on standardized exams such as the SAT and ACT, etc.) who become the backbone of the program. The physician sits down with these students individually and with the students' families to discuss their potential interest in a career in the medical field. From these initial sessions, long lasting relationships are formed between the students, the physician, the hospital, and others within the local health care system.
College
As these students begin college pursuits, the physician maintains contact through phone calls and email providing advice and encouragement during the student's first three college years. As the student nears his/her final year of college studies, the physician has developed a select group of students who have the credentials to seriously compete for admission to medical schools across the country. Correspondence during this time is intensified. Students are given specific help in choosing schools to which to apply, coached in interviewing skills, and advised on how best to obtain solid letters of recommendation.
Medical School
Upon admission to a medical school, the hospital begins its first financial support of the student. This ranges from $5000 per year to as much as $20,000 per year (depending upon the availability of funds) during each of the four years of medical school. Expenses during these four years typically run in the $30,000 to $50,000/year range at state sponsored schools and several times these amounts at private medical schools. The agreement between the hospital and the medical student states that upon completion of a residency program, should the participant decide to come back to this community to practice, the scholarship/loan is forgiven at a rate of 25% of the total per year over four consecutive years. Experience has taught us that if a physician stays four years, he/she will generally remain in the community long term. Shorter terms of loan forgiveness tend to present the option of the physician leaving too likely. Few students these days seem to make it through the long path of education required in medicine without accruing large school related debts. Hence, school loan repayment, even for students not originally from our area, has become a strategic and necessary component of our ongoing recruitment efforts. As such, this approach is included as a distinct component of this model.
Residency Program
Upon completion of medical school, a student typically competes via a national residency matching program for a position in a residency program of his/her choice. Examples include Internal Medicine, Family Medicine, General Surgery, Pediatrics, Critical Care Medicine, Emergency Medicine, Radiology, etc. Residency programs may last from three to eight years depending upon the type residency and the extent of specialization. At this point, if a student who has already received scholarship/loan funds during medical school training elects to enter a residency completely out of the scope of practice possible in a rural health care system (say, for example neurosurgery or cardiovascular surgery), then loan repayment is triggered since the student has no realistic chance of later establishing a medical practice in a rural community health care system. However, if the student should enter a residency program in primary care (Internal Medicine, Family Medicine, Obstetrics), or perhaps some secondary care programs such as General Surgery, Orthopaedic Surgery, Radiology, etc.) then the student is offered a formal employment contract with a continuing stipend of $1000/month during the entire residency program. Most primary care residency programs last from three to four years. Hence, the student would receive another $36,000 to $48,000 as financial support (scholarship/loan) during the final phase of his/her training.
Practice Establishment
Perhaps the most critical, the most expensive, the most difficult, and yet the most often neglected phase of physician recruitment is that of establishing the young physician's practice in the community. At this stage many of America's most successful health care systems blow the opportunity of a lifetime for a young physician. These young physicians come out of twelve to fifteen years of intense education knowing little if anything about how to run a business, including how to run a medical practice. A typical medical practice is a business with an annual budget averaging $300,000 to $700,000. Expenses in addition to the physician's salary include the salaries of office staff (nurse, bookkeeper, receptionist, lab personnel, etc.) as well as the purchase of some very expensive medical equipment and supplies, office rent, utilities, etc. Expenses can run as high as $40,000 per month in a busy primary care practice. If these young physicians are not taught the basic principals of business management, at least as it relates to the practice, they frequently will fail financially in the first few years in spite of very high cash flow potential. By this time, the recruiting physician has most often been able to establish a trusting relationship with the young new physician. Right from the beginning, the young physician is encouraged to participate in the hiring of his office staff, choosing office location, setting up utilities in his own name, choosing billing software, medical records software, etc. He/she is taught how to set up a chargemaster for professional fees. He/she is taught how to use medical coding resources for accurate professional billing, and how to maintain records of services rendered while working in a hospital setting (weekend rounds, ER visits, consults, continuous bedside care of the critically ill patient, medical procedures, etc.). He/she is taught how to carry forward the charges for such services to the office for follow through in billing. Once a quarter (every three months), the recruiting physician reviews with the new physician a spreadsheet revealing the basic data produced by the practice (monthly expenses, revenues, collections, collection percentage, accounts receivable, numbers of outpatients and inpatients seen per week, etc.). As time passes, the new physician slowly begins to get a feel for how work load relates to cash flow, and how inevitable office employee problems are worked out.
Establishing Practice Independence
By the time the new physician reaches 14 to 18 months of practice, his/her net monthly collections typically begin to approach the amount of monthly expenses. In the months leading up to this threshold, the recruiting physician begins to explain the actual steps to be taken to allow the new physician to establish complete practice and financial independence. There are three major financial barriers to be traversed during this final phase of physician recruiting, (Often by this point, we more aptly might refer to the process as physician retention rather than physician recruitment.) The three barriers are: 1) accounts receivable (AR) 2) in house supplies, and 3) practice hard assets. First, one must bridge the gap of the accounts receivable. This figure will typically be from two to three times the monthly revenue (billing) amount and most often represents the largest of the three items' cost. The raw dollar figure may be in the $50,000 range for a typical primary care practice. If collections have been handled appropriately, the AR will have reached a peak and levelled off. This AR actually belongs to the hospital and must be acquired by the new physician in some fashion. We allow two options: a) The physician may elect to have the hospital to simply keep the AR and continue with collections on the physician's behalf. In this event, the physician will experience a sharp dip in income for six to eight weeks upon becoming a private practicing physician. That's OK, but we must make certain that dip does not come as a surprise to the young physician. Bitter feelings can develop quickly in areas where money is involved. b) The physician may purchase the AR for a mutually agreed upon amount. This is typically decided upon by taking the last four to six months' average collection percentage and multiplying this by the AR. This renders a "fair market value" to the AR and resolves issues that might arise later by entities such as the IRS. In this case, the new physician must be made aware months ahead of time that such a large sum of money will be required to establish independence by dealing with the AR.
During the course of a year or so of practice, the physician will have built up an inventory of supplies commonly used in the day to day practice of whatever specialty he/she is running. Examples include, office supplies, needles, syringes, medications, and other similar items. The value of practice supplies is determined directly by completing an inventory of these items within a few days of the time the physician is to become independent. He/she simply purchases these at original cost. The dollar figure varies by specialty but generally ranges between $5000 and $15,000.
Hard assets form the third category of practice assets. Examples include office furniture, equipment such as computers, copy machines, medical equipment, and phone systems. These are inventoried as well with two approaches to a determination of their value. First, many items will have a "book value" determined by a standard depreciation schedule. Second, older, "depreciated out" items may be still in good working service and have a "fair market value" that is higher than their book value. The book value is straight forward. The fair market value can be determined by mutual agreement, but we recommend utilizing an independent appraiser to avoid wrangling with the IRS later over the values utilized.
The sale of physician practices commonly employs a fourth value factor, that of "good will". This concept basically represents the value that any business would have as a result of its having produced a steady cash flow. We have taken the position that the establishment of a physician's practice is a team effort that will benefit the community for many years to come and hence, do not place a value on the good will of the practice. The medical records themselves belong to the patient, and therefore, no charge is made for the content of the records, though if paper records are involved, a value may be placed upon the charts themselves. Traditionally, this may average three to five dollars per record.
The following represents a summary of typical costs that relate to the three basic phases of this physician recruiting model.
Obviously, physician recruiting and retention is a daunting, long term and expensive undertaking. It is no wonder that most communities fail to be successful in such an undertaking. However, the benefits to the hospital and the local community are quite profound and far outweigh the cost in effort and money. Available data would indicate that each primary care physician brings an additional $600,000 per year to the revenues of the community's hospital. Other indirect benefits include more jobs, the stability of a local health care system which is a requirement for the recruitment of industry to the community. These factors can carry a value far beyond the direct revenues resulting from new physicians in the community. There is a ongoing need for physician recruitment efforts because physicians age, pursue other education, become discontent and move on, and succumb to burnout, all of which contributes to a sustained attrition that must be kept in mind in the long range recruiting plan..
A. Robert Sheppard, M.D.
657 Spring Street
Carrollton, AL 35447
Email: sheppard@pickens.net
Office Phone: 205-367-8915