Halperin, Edward C. MD, MA
In 2009, the entire clinical faculty of the Department of Neurosurgery of the University of Louisville School of Medicine (SOM) became employees of a local community hospital. The motivations for this action and my response in my role as the school's dean, along with those of the press and politicians, offer an instructive case study for students of academic medicine.
A Perfect Storm
The action of all eight faculty neurosurgeons took place in the context of a major upheaval in academic medicine:
* Whereas academic medical centers (AMCs) represent 6% of the hospitals in the United States, they provide 20% of the hospital beds, administer 62% of the level 1 trauma centers, and provide 41% of the charity care.1 The financial burden of caring for the indigent, accompanied by pressures to subsidize medical education and research, have placed many AMCs in a precarious financial position. In this context, faculty practice plans seek to recruit and retain clinicians to care for patients in AMCs under difficult financial conditions.
* The Emergency Medical Treatment and Active Labor Act (EMTALA), enacted in 1986, prevents emergency departments (EDs) from diverting patients away from care because of an inability to pay. Hospitals and ED physicians are required to evaluate and stabilize any person with an emergency medical condition, including providing or coordinating specialty care. Failure to comply with EMTALA results in penalties or revocation of provider participation in Medicare. As the number of uninsured or underinsured climb, so have malpractice insurance costs, while cutbacks in reimbursement have added an additional burden.2–4
* The financial burden of caring for indigent, unreimbursed, or insufficiently reimbursed patients has led faculty to demand base salary guarantees as protection against the risk that clinicians will not be able to generate their own salaries through clinical billings and collections.5,6 Another manifestation of this problem is the rising chorus of demands for supplemental pay for being on-call.2,3,5,6
* Declining hospital reimbursements have made the referral of paying patients the currency of the realm. Control of physician practices, and the patients that physicians bring with them, are crucial to a hospital's revenue stream. Some private hospitals seek to ensure their survival by employing high-output clinicians.3 The more physicians that a hospital either employs or is committed to making part of the hospital's network, the more MRIs, CTs, cardiac catheterizations, operative procedures, and laboratory tests will be done in the hospital and generate technical revenue.7
* A fully accredited level 1 trauma center must provide the full gamut of clinical specialties related to trauma care. Trauma centers can lose verification if any of these specialties withdraws its services. When a level 1 trauma center at a public hospital closes and patients are diverted, there is a serious public relations risk. When law enforcement officers are shot in the line of duty, buildings collapse, and other catastrophic injuries occur, citizens expect a level 1 trauma center at the ready. When it is not, they question the adequacy of an expected social safety net in return for their taxes.
* The laws of supply and demand have helped drive up the salaries of many procedure-based specialties. The salaries of academic clinicians in orthopedic surgery, neurosurgery, and pediatric urology, for example, have been rising.8 As medical schools compete with the private practice sector for clinicians, demands for higher salaries, coverage of malpractice costs, and limitations on night and weekend call have become the norm in negotiations.
* These economic and social factors have led to a perfect storm.7 In recent years, medical school deans have had to deal with either the threat or the actuality of entire clinical departments either leaving for private practice, opting for employed physician status at a community hospital, or decamping to another AMC.9,10 Such a perfect storm struck Louisville, Kentucky, in 2009.
I Face a Proposal
In January 2009, all eight clinical members of the faculty of the Department of Neurosurgery of the University of Louisville SOM informed me, the dean, that they had signed, without my prior knowledge, an employment agreement with a community hospital.7,11 In their view, faced with rising salaries required for recruiting new faculty, particularly in some of the subspecialties of neurosurgery, and faced with the burden of care for indigent patients at the SOM's primary adult teaching hospital, University Hospital, they needed a new form of clinical employment.7,11–14 They had retained outside consultants and had chosen to approach a community hospital to become “employed physicians,” drop out of the faculty practice plan,* drop out of the faculty's captive malpractice insurance group, drop out of the faculty's single-point contracting program with third-party payers, and have their work assignments determined by their new employer. They had, in addition, purchased a downtown Louisville office building for $2.26 million, planned “a $2-million-plus conversion” of the building, and would move to this site and receive rent from the community hospital, insofar as they were now employees occupying the building.14,15 The neurosurgery group furthermore asserted that precedent had been established for their proposal by the actions of four full-time faculty orthopedic surgeons who, in 2008, had remained faculty and become employed physicians of another community hospital.11,12,16,17
The neurosurgeons felt their actions were necessary for the preservation and prospering of their clinical practice. They sought, over time, to be a dominant provider of neurosurgery services throughout the Louisville metropolitan area. They had interpreted the actions of the four orthopedic surgeons as a legal justification for them to pursue their plan.11–13 They had conducted their negotiations in relative secrecy because they thought that the SOM would not have been supportive had it been brought into the negotiations earlier. “We feel,” the leader of the neurosurgeons said, “we're giving the University of Louisville this wonderful gift at no cost to the university at all.”7
In contrast, I felt that the SOM and I had been blindsided by the action. The SOM had no inkling of faculty unhappiness that would have prompted a wholesale departure. Neither the president, provost, vice president for health affairs, nor I had any knowledge of the action before being told that the contracts with the community hospital had already been signed and would go into effect in seven weeks. The SOM could not accept the proposition that a faculty practice group could unilaterally withdraw from the faculty practice plan, its single-point contracting, and the SOM's determination of work assignments. I asserted that the action taken by the four orthopedic surgeons was permissible because of a well-known 16-year-old special agreement created when several private practice orthopedic surgeons agreed to join the university's clinical practice. Their action was not, therefore, applicable precedent for anyone else.7,18–20 Contrary to the assertion that the university had been given a “wonderful gift at no cost,” I asserted that the SOM's governance structure and authority were under assault.
Resigned or Fired?
The contracts which the neurosurgeons had executed were to go into effect on February 28, 2009. During the seven weeks between when I was first notified of this action and February 28, negotiations took place.21 The position of the neurosurgeons and the community hospital with whom they had signed the contract was that the physicians must become employed physicians of the community hospital, must withdraw from single-point contracting, and must withdraw from the faculty practice plan and that the university-based consortium residency program, neurosciences research program, and research endowments would be transferred to them.
In contrast, I asserted that faculty work assignments were strictly the province of the school, that the school would retain sole control over who was and who was not a member of the full-time faculty, that the residency program, research program, and all research endowments would be retained within the school, and that there were other options for a community hospital desirous of having members of the faculty practice neurosurgery within its walls besides “hiring away” the SOM's faculty members.
As the deadline approached, the stakes rose. Were the neurosurgeons to withdraw from clinical coverage of the level 1 trauma center at University Hospital, it would no longer be, by definition, a level 1 trauma center. Severely injured patients might be diverted to other trauma centers in Cincinnati, Lexington, Indianapolis, or Nashville, and there was concern that, quite literally, lives would be at stake.7,16,22–27 The former faculty neurosurgeons agreed to provide coverage for University Hospital, provided their contract was exclusive.28 The school countered that this would effectively cede control of neurosurgery to an outside entity. A third-party mediator was suggested by the school but rejected by the community hospital.21
I asserted that the neurosurgeons had resigned from the faculty. They countered that they had not resigned, did not intend to, and if the university were to “accept resignations” that, in their view, had never been tendered, they would consider themselves to have been fired without cause.17–19,29,30
No agreement was reached, and lawyers were retained by both sides. The university asserted that the community hospital “improperly interfered with an existing contractual relationship.”24 At the end of February, by registered letter, I accepted the resignations of the neurosurgeons.28
General surgery faculty members became alarmed that the level 1 trauma center had been placed in jeopardy. “If the level 1 trauma center closes,” the chairman of surgery told the press, “patients will die.”28,31,32 Most of the faculty outside of neurosurgery rallied to the defense of the SOM and the faculty practice plan. Their reasons ranged from a belief in established principles of academic governance to demands that “someone needs to stand up to the highly paid proceduralists who think they can do whatever they want.” In contrast, other faculty, concerned about their own clinical referral patterns, urged any accommodation with the neurosurgeons and community hospital that would preserve their flow of patients and clinical incomes.33
Neurosurgery residents, concerned for their ability to progress in their residency and sit for their specialty's boards, were equally anxious. The former faculty neurosurgeons and their new employer announced their intention to establish their own neurosurgery residency program and promptly submitted an application to the Residency Review Committee of the Accreditation Council on Graduate Medical Education.21,34 This application was not approved. The neurosurgeons' departure from the faculty placed the university's residency program in jeopardy.22 Anxious basic science researchers within the department were concerned about financial support for their research.35–37 Many ongoing projects of the SOM were placed “on hold” as the school's leadership dealt with the crisis.
The neurosurgery group gave a series of deadlines to the university for the conclusion of their clinical services at the level 1 trauma center at University Hospital.28 The stakes rose again when the community hospital announced that if an agreement could not be reached with the University of Louisville, they would “seek another educational institution to carry out [their] academic agenda ” and would “continue to pursue options” for “an academic partner” other than the University of Louisville.29,30 The community hospital hired away one of the SOM's fundraisers to raise money for an “institute” it created for the neurosurgeons and vigorously sought donors—many from the same pool that the university was soliciting.14,30 I appointed a search committee that interviewed practicing as well as recently retired neurosurgeons to establish whether or not a new department of neurosurgery could be created in short order.21
The Story Plays Out in the Press
Not surprisingly, the newspapers, television networks, Web sites, and bloggers quickly took notice. Local newspaper reporters latched on to the story, and coverage in the newspapers was intense.14,15,34–38 Investigative reporters from the local television networks sought interviews and statements.32 Press conferences were called by both parties. Two magazines assigned investigative reporters to the story.7,15 The electronic media were filled with substantive comments and unsubstantiated rumors. Kentucky's governor and Louisville's mayor called the university president and the community hospital's leadership into meetings.21,22,31 Concerned about health care in Louisville and the operation of the trauma center, and worried about the repercussions of a disruption of care, the governor did not take sides in the dispute but called for “accessible, high-quality trauma care.”21 A local TV station told its viewers that “trauma care in Louisville is facing grave danger, and that could soon put lives in grave danger too.”32
One Year Later
The eight neurosurgeons ultimately became employed physicians of the community hospital, established a large private practice, and have recruited several new neurosurgeons to join them.14 I, working via a search committee, hired a new chairman of the Department of Neurosurgery and nine full- and part-time new neurosurgeons to create a replacement faculty.31,36 Some locum tenens physicians were used during the transition, from 2009 to 2010. A residency program in neurosurgery remains within the SOM.31 The level 1 trauma center, staffed by the new neurosurgeons, was reverified by an inspecting team of the American College of Surgeons in 2010.
Billboards and newspapers in the Louisville area are now filled with advertisements touting the strengths of the new, large, private neurosurgery practice based at the community hospital.39 The practice has grown from 8 to 15 neurosurgeons, 6 neurologists, physician assistants, and nurse practitioners—a total of 85 employees.14,40 By July 2010, a Louisville newspaper reported that the community hospital's hiring away “all eight of the University of Louisville's faculty neurosurgeons … has paid dividends,” resulting in the admission of “15 percent more patients to [the community hospital] in the first five months” of 2010 versus 2009 and that “outpatient neurosurgery visits rose 46 percent.”40 The community hospital made it clear that it will continue, at its choosing, to attempt to employ other university faculty.13 The neurosurgeons filed a grievance in the summer of 2009 against the leadership of the university, including me, asserting that they had been inappropriately terminated. The university's grievance committee and its board of trustees held that the former neurosurgery faculty had resigned and that the leadership at the school had acted appropriately.41 The office building purchased by the neurosurgeons for $2.26 million would have required extensive renovation, was never occupied, and was placed back on the market.14 One magazine reporter asserted that the episode had been, in the end, a success for all:
What happened … allowed the University of Louisville to snatch victory from the jaws of defeat. It freed up funds, recruited nine new board-certified neurosurgeons from around the nation and retained its gold-standard trauma center rating. Meanwhile, the new [community hospital program] will staff 13 neurosurgeons as a start…. Now that the dust has settled, Louisville and the surrounding region will have more than doubled its capacity in neurosurgery, spawned countless new research efforts yet to be seen, and hopefully, become a larger mecca for neurosurgeons in training.15
The reporter's assertion that the episode “freed up funds” for the university was absurd. Although University Hospital and SOM are no longer subsidizing the former faculty neurosurgery practice, they incurred the expense of locum tenens physicians, support staff, faculty recruitment, loss of associated clinical revenue in diagnostic radiology and pathology, the time and effort of senior administrators and the search committee, legal fees, and the risk of reputational injury. A conservative estimate would be $3.3 to $4.0 million. In my opinion, this was the price of preserving the academic independence and governance structure of the SOM, the integrity of the faculty practice plan, and the future growth of the SOM's clinical and research enterprises.
What I Learned That May Be of Use to Other AMCs
Well-run organizations are not blindsided. I can be faulted for being unaware of faculty dissatisfaction and for failing to anticipate the plan of the community hospital to hire away my entire clinical neurosurgery faculty. Similarly, the former chairman of neurosurgery “never saw it coming…. We tried to make a bid to develop the best department in the country, and the school [of medicine] dumped on us.”7 A newspaper op-ed article by the community hospital's chief executive officer made it quite clear that hiring faculty would continue to be part of the hospital's physician recruitment strategy and publicly placed the medical school on notice that additional raids were likely.13 This strategy is not unique to Louisville and serves as a warning to other AMCs located near competitive community hospitals.
On the other hand, well-run organizations assemble the right leadership group and empower them to make collective decisions. My response to a perceived attack on the SOM's governance and academic prerogatives was a series of faculty meetings, department chair discussions, and disciplined action. Spokespersons for the SOM remained on-message at every encounter with the press and hammered home the same points, over and over. In a crisis, it was far better for the SOM and me to be accused of overcommunicating than undercommunicating.
The tone of my communications was guided by what the business writer Collins42,43 has called “the Stockdale paradox.” How did Admiral Stockdale survive his prolonged imprisonment in North Vietnam? Stockdale claimed that it was the optimists who broke under the pressure of imprisonment. They were always sure that they were going to be free by the next Christmas. When they weren't, they became despondent and some didn't survive. The prisoners who prevailed were those who confronted the brutal facts but never gave up faith that ultimately they would be free. In this vein, I repeatedly said in public venues that “the medical school has been in operation since 1837. It has survived the Civil War, two World Wars, the Great Depression, and the Flood of 1937. It will survive a few neurosurgeons going into private practice.” I endeavored to project calmness, clarity of purpose, and unwavering confidence in final success.
In the future, the SOM will
* change the faculty practice plan to make each departmental professional services corporation or limited liability corporation a not-for-profit entity controlled by a single, physician-controlled organization that will also collect and distribute support payments to the dean. This entity will represent the faculty in single-point contracting, malpractice insurance, credentialing, and other areas of common concern. This will permit the faculty practice plans to function as a single entity in its dealings with the SOM and other entities.
* develop an integrated hospital network with clearly defined academic input into governance to align the needs of the hospital network and practice plans.
* seek “no poaching” agreements with neighboring community hospitals to offer some assurance that these hospitals will not attempt to “hire away” SOM faculty.
After the Dust Really Settled
The action of the eight faculty neurosurgeons resulted in an enormous expenditure of money and time. In the end, the salaries of the former faculty neurosurgeons have become new expenses for the community hospital, which has publicly committed to invest as much as $100 million across a 10-year period to expand clinical services in neurological disease care.30 The university is now paying salaries to its new faculty. The level 1 trauma center and residency program remain intact at University Hospital, and patients with neurosurgical diseases are being cared for at many area hospitals.15 The authority of the university to govern its own faculty has been retained, and all parties continue to deal with a competitive market for recruiting and retaining neurosurgeons.
The community hospital felt it was defending its market share and its physician recruitment and retention pipeline. I felt I was defending principles of academic governance and the faculty practice plan. One might view the protagonists of this episode not as defenders of principles but, rather, as pawns in a larger drama playing out related to a perfect storm of economic and social pressures in American medicine.
The author has benefited from the thoughtful comments of Drs. Larry Cook, James Ramsey, James Taylor, and Shirley Willihnganz and attorneys Glenn Bossmeyer, Angela Koshewa, and Kent Wicker.
1 Mallon WT, Vernon DJ. The Handbook of Academic Medicine: How Medical Schools and Teaching Hospitals Work. Washington, DC: Association of American Medical Colleges; 2008.
3 Harris G. More doctors giving up private practice. New York Times. March 26, 2010:B-1.
4 The Emergency Medical Treatment and Active Labor Act, as established under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (42 USC 1395 dd), Section 9121, as amended by the Omnibus Budget Reconciliation Acts (OBRA) of 1987, 1989, and 1990. Fed Regist. June 22, 1994;59:32086–32127.
5 Lindfors S, Eintrei C, Alexanderson K. Stress factors affecting academic physicians at a university hospital. Work. 2009;34:305–313.
6 Epstein Al, Hupfeld SE. Pay for ED call? Hosp Health Netw. June 2004;78:28.
7 Laidman J. A battle of nerves. Louisville Magazine. August 2009:46–52.
8 Medical Group Management Association. Physician Compensation and Production Survey 2010 Report Based on 2009 Data. Englewood, Colo: Medical Group Management Association; 2010.
9 Mahshie A. MU sports deal fueled surgeon's departure. Orthopedic chair sought team care. Columbia [Missouri] Tribune. July 23, 2008:13-A.
11 Shields CB. Guest commentary: The refusal to change and the value of partnership. Louisville Medicine. May 2009;57:10.
12 Shields CB, Reiss SJ, Raque GH Jr, et al. Neurosurgeons explain split. Louisville Courier-Journal. March 22, 2009;141:H3.
13 Williams SA. Norton plan's many benefits. Louisville Courier-Journal. April 19, 2009;141:H3.
16 Barry MG. Commentary: Neurofibrillary tangles. Louisville Medicine. May 2009;57:6.
17 Looking ahead. Louisville Courier-Journal. May 22, 2009;141:A10.
18 Halperin EC. Guest commentary: The idea of a SOM. Louisville Medicine. May 2009;57:10.
19 Halperin EC. The neurosurgical rift. Louisville Courier-Journal. February 27, 2009;141:A10.
20 Ramsey J. U of L's mission jeopardized. Louisville Courier-Journal. April 19, 2009;141:H3.
23 Dean Halperin discusses controversy involving neurosurgeons, trauma center. US Fed News [wire service]. March 28, 2009.
25 Howington P. 8 brain surgeons offer to stay at University Hospital until May 12. Louisville Courier-Journal. March 20, 2009;141:B1.
26 Howington P. Neurosurgery program put in jeopardy. Louisville Courier-Journal. April 19, 2009;141:A1.
27 Howington P. U of L–Norton dispute threatens neurosurgery program. Louisville Courier-Journal. April 19, 2009;141:A1.
33 Baker BC. The med center, as it used to be. Louisville Courier-Journal. March 9, 2009;141:A6.
34 Howington P. U of L says it's close to hiring neurosurgeons. Louisville Courier-Journal. May 1, 2009;141:B4.
35 Ungar L. U of L hires nine neurosurgeons. Louisville Courier-Journal. May 9, 2009;141:A1.
36 Ungar L. U of L neurosurgery effort OK'd. Louisville Courier-Journal. June 13, 2009;141:A1.
37 Ungar L. Neurosurgeon dispute patched. Louisville Courier-Journal. February 29, 2009:A-1.
38 University of Louisville SOM hires nine neurosurgeons. US Fed News [wire service]. May 9, 2009.
39 Advertisement for a neurosurgery private practice. Louisville Courier-Journal. March 15, 2009;141:A15.
40 Howington P. Norton Healthcare resists recession, Anthem fight. Louisville Courier-Journal. June 26, 2010;142:A1.
41 Recommendation to the executive committee of the University of Louisville board of trustees. Executive committee—January 14, 2010. [Available from the Office of the General Counsel, University of Louisville.]
42 Collins J. Good to Great. New York, NY: Harper Business; 2001.
43 Collins J. Good to Great and the Social Sectors. Boulder, Colo: Jim Collins; 2005.
*The faculty practice plan of the University of Louisville SOM permits each clinical department to establish at least one professional services corporation or limited liability corporation through which faculty can engage in the private practice of medicine, subject to support payments to the dean and the clinical department involved. There is a corporation that collects and distributes support payments to the dean and another corporation that represents the faculty in single-point contracting, malpractice insurance, credentialing, and other areas of common concern. Cited Here...