By Jeffrey Barg

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Published January 1999

• React to this article in the Discussion Forum.

PND: What is Tenet’s approach towards the ownership of physician practices?

LD: Although Tenet is quite capable of owning and managing physician practices—I believe we own and manage over a thousand practices throughout the country—our principal business is the ownership and management of hospitals and that’s where we like to concentrate our efforts. Our approach to developing good relationships with physicians is really built around each individual hospital working through the local CEO. I develop those relationships and try to meet the individual needs of the physicians of the medical staff, their technology needs, their service needs so that they would be encouraged to bring their patients to the hospital. So while we are open to and have successfully acquired physician practices in the past, it’s not our primary method of developing strong physician relationships.

PND: How many of the practices owned by Allegheny were assumed by Tenet?

LD: To my recollection Allegheny owned practices composed of around 250 physicians, excluding the faculty that was part of the University. We offered them a two-step process. We continued their employment with the Tenet Physician Services Division for a period of 120 days with no changes. And during that 120-day period we are offering them three alternatives. First, one to five year employment with Tenet Physician Services. The second is we will provide MSO services to the physician under an agreed contract. Or in the third alternative, we will assist the physicians in going directly into private practice. We’ll work with them cooperatively on any of those three alternatives.

PND: How many of the 250 employed physicians were told that Tenet was not interested in continuing their employment?

LD: There were a certain number of physicians, a few who were not offered continued employment primarily because of their practice location and the fact that they were not proximate to our existing facilities. We’re not in the business of just owning and operating physician practices wherever they might be. So there were a few. There was a very small minority of the total number that were not offered continued employment. And then within that number we did reconsider a few based on the request of individual physicians.

PND: How many of the 250 physicians are still with the system?

LD: Out of the 250 close to 200, I believe, signed up for the 120-day employment relationship. Of the others, several of them decided to go into private practice immediately and didn’t need the employment relationship. Those that decided to do that are still loyal, actively participating physicians at our hospitals.

PND: What is the present situation with the medical faculty?

LD: We need to have a very positive relationship with the faculty who presently are employed through the MCP-Hahnemann University. These physicians staff two of our hospitals, Hahnemann, along with some community doctors, and MCP. So it’s important that we have a very positive relationship with them. In order to assist that relationship we worked with the University to develop a continued employment relationship for faculty physicians for a period of six months. During that six month period, the faculty is going to restructure their practice plans, anywhere from having individual practice plans based on specialty all the way to having perhaps a single practice plan or remaining under a salary model with the University. How the faculty chooses to restructure will be the result of a process that they’re involved in right now with Tenet and Drexel providing consultants.

PND: How do you view the relationship between Tenet, Drexel, the faculty and hospital staff?

LD: Tenet has very successful partnerships with academic institutions throughout the country. And we’re looking for that same level of partnership here in Philadelphia with MCP-Hahnemann University, which will be managed by Drexel. And we feel strongly that the University and medical school, the practice plans and the hospitals all have to be strong. Weakness in any one of those three causes weakness in the other two. We see our success as being very interdependent and plan on working that way with our partners.

PND: How would you describe your commitment to research and education at the University?

LD: We certainly appreciate that, to have a strong medical school and University in general, we need strong research and education to go along with the clinical practice. We need to have those in balance as we go forward. I will say that our immediate need is to rejuvenate the clinical practice and we feel if that gets rejuvenated, education and research will follow.

PND: There have been a number of fairly high profile medical practices that have left your system prior to you taking over, as well as what has generally been accepted as a large number of physician practices that had left the system over the course of its financial problems and bankruptcy. Do you feel that you need to do some significant physician recruitment at this time?

LD: I think the loss of practices has been somewhat overstated. We have as one of our top priorities physician recruitment and retention. This is one of the most important aspects of each hospital CEO’s job and necessary to have good performance. We have a philosophy of having a CEO at each hospital and a local governing board at each hospital that’s made up of over 50 percent physicians. And it’s through the CEO, through the governing board and each local facility that we will develop the physician relationships to retain the physicians that we have and to recruit additional physicians. We have already started on a massive clean-up campaign. Once that’s done we are fixing any safety code issues that we have and then we’ll be making upgrades to technology throughout the system. Each hospital has already developed a priority list of capital needs and that’s going to be reviewed for prioritization across all eight hospitals. It’s our hope and desire that we become even more attractive hospitals for physicians. And we’re going to do that by providing the kind of service they want for themselves and their patients, by providing the environment that they can prosper in, providing them with technology support that they need to provide quality patient care. Tenet has always been a physician-friendly company and we plan on implementing that philosophy here in Philadelphia, and it starts not in my office. It starts at the local hospital level. It’s a philosophy that we use in building physician relationships.

PND: How do you go about developing trust with physicians?

LD: Developing trust is not going to take place overnight. It’s about making commitments and fulfilling those commitments. We started that process by frequent meetings with physicians. I probably met with at least 200 individually and I’ve also met with probably at least a couple hundred more. I’ve been to all the medical executive committee meetings. I’ve been to the quarterly medical staff meetings that have occurred in the last month or so. And we will continue to do that and listen to their concerns and address them. One of the main issues today is to fix problems, and fix them quickly. We think we can accomplish that by having a local CEO who is there to take care of problems and fix issues for physicians, as opposed to having long distance management. And it’s going to be one step at a time. We’re going to be careful about what we say we can deliver, but once we commit we will deliver for the physicians.

PND: It’s generally accepted that the Philadelphia area has a significant excess capacity in acute care beds. As a company that now owns eight hospitals in the area, what’s your strategy to address the excess capacity?

LD: Our strategy is to increase our volume of inpatients and outpatients, to provide more services so that our facilities are utilized more. We will do that in a number of ways. One is through our physician recruitment and retention program that we’ve already talked about. Another is through a very targeted educational campaign that we are currently conducting and will conduct throughout next year to assure that the residents of Philadelphia have confidence in our hospitals and are aware of the quality services that we provide. And thirdly, we will be developing a very positive professional relationship with the payer community.

PND: What will be your approach to the payer community?

LD: We hope to become more attractive to the payers so that they desire to do business with us and have their beneficiaries come to our hospitals. We recognize, however, that we have to be competitive given the market pricing. We think that part of our expertise is operating very cost-effective hospitals. We think our national size gives us some advantage in terms of the provision of many back office functions that are invisible to patients and physicians.