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Evaluating the malpractice, payer mix and OR situation in the region

Issue: March 2006

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Editor’s Note: This article concludes a three-part series on the orthopedic practice job search, based on interviews with Ryan M. Dopirak, MD, an orthopedic sports medicine and arthroscopy fellow at the Southern California Orthopedic Institute in Los Angeles. This final piece evaluates the malpractice environment, tort reform, payer mix and key regional considerations. Dopirak is also president of Orthopaedic Business Solutions, a company providing consulting services and specializing in assisting young orthopedic surgeons with contract negotiations.

Choosing a practice setting and market that fit a desired lifestyle and evaluating the financial contract are crucial steps in the orthopedic practice job search. Just as important: Evaluating the practice environment.

Before signing a contract, the job-seeking orthopedist needs to ask just a few more questions, concerning the malpractice and tort-reform environment, the region’s payor mix, operating room time, instrumentation and support for inpatient care.

Malpractice in the state

Malpractice is a pressing issue, as many states are currently considered in a “malpractice crisis,” according to Ryan M. Dopirak, MD

“The American Medical Association (AMA) is a great source for learning about the malpractice climate in each state,” Dopirak told Orthopedics Today. “When considering a specific state, you can also contact that state’s medical board.”

Orthopedists can use this information to determine if the state has enacted “meaningful” tort reform, or if tort reform is at least on the political agenda. They can also look at the malpractice premium costs, which depend on the malpractice climate. “The cost of your malpractice policy is a direct expense included in your overhead and consequently has the potential to substantially affect your bottom line,” Dopirak said.

Malpractice premium costs

Knowing the annual malpractice premiums for each practice partner gives orthopedists a general idea of their own premium costs. Also, orthopedists need to know the amount of coverage the policy provides, as well as if the policy is “occurrence” or “claims made.”

While “occurrence” policies cover any event during time of coverage, “claims made” policies only cover events that occur during time of coverage and are filed while the policy is in force. “‘Claims made’ policies are typically less expensive and are more common in today’s market,” Dopirak said.

With “claims made” policies, physicians may need a “tail” policy for continuing malpractice coverage after a “claims made” policy expires – upon relocation or retirement. Some practices agree to pay for a physician’s “tail” policy – another point to address before employment.

Several other factors also affect malpractice premiums, as follows:

• the local and national economy;
• number of years in practice;
• prior history of malpractice claims, settlements and decisions.

Payor mix

The region's payor mix will also significantly affect income. Some orthopedic groups do not accept uninsured, Medicare or Medicaid patients for financial reasons, for example.

Consult the practice physicians and/or the practice or hospital administration for information on whether the group accepts these patients. Then compare the patient distribution by payor source to the average United States orthopedic surgeon's payor mix. This information can be found in the AAOS Orthopaedic Medical Income in the U.S. 2004-2005 report.

"It is also important to consider the average reimbursement of the private payors in the region. This is often quantified as a percentage of Medicare," Dopirak said.

Orthopedists' financial projections are not so good if they find the average reimbursement in the region is substantially less than Medicare.

Other important considerations are the regional HMO penetration - HMO reimbursement is typically low - as well as Workers' Compensation, which reimburses at a higher rate than other insurance carriers. Each state has its own fee schedule for Workers' Compensation.

OR time and instrumentation

In larger markets, expect multiple practices. Consider the relationships among the groups, each group's reputation, the distribution of market share and the nature of referral patterns for patients.

"It is often difficult to accurately assess referral patterns in a specific community, especially in larger markets," Dopirak said. "You should first speak with the physicians in the group you are considering. Hospital administrators are another good source of information."

Ample operating room time is essential to the orthopedist's productivity, as well as lifestyle. "You should speak directly with the management team of the OR to get an idea of how scheduling works at a specific hospital or surgery center," Dopirak said. "They should be able to tell you if there is available OR time at present and if a new physician will have the opportunity for guaranteed block of time."

As a general rule, orthopedists should be able to schedule at least two full days per week in the OR at a time that meets their schedule and lifestyle.

Also an important consideration: available instrumentation. Some orthopedic surgeons may become accustomed to specific orthopedic systems, devices or implants during residency and fellowship training. However, very often hospitals exclusively contract with orthopedic vendors to reduce costs.

"You may or may not wish to transition to a new system upon starting your practice," Dopirak said. "However, you should retain the right to make this decision based on what will produce the best outcomes in your patients."

Inpatient care

Hospitals must have adequate support networks for orthopedic inpatient care, such as a hospitalist program for medical management of elderly orthopedic patients. Orthopedists are not trained to manage complex medical problems. Infectious disease specialists should treat difficult orthopedic infections. And vascular surgeons should care for patients with co-existing orthopedic and vascular problems.

Whether searching for the first practice or the fourth, Dopirak notes: "Consider the social and cultural environment of the community, as well as the quality of the local school systems. Above all, keep in mind that your family must be happy for the situation to work out, regardless of the professional opportunity."

For more information:

• Dopirak RM. Evaluating orthopedic practice opportunities. AAOS Residents' E-Letter. November 2005. Vol. 3 No. 11. www.aaos.org.