Medical Directorship Precautions

Physicians around the country are entering into medical director agreements in a variety of settings. While such an arrangement has advantages for the physician, there are also some potential consequences that physicians should be aware of as they carry out the duties specified in these roles. Government regulators and medical boards aggressively enforce their rules where they perceive a violation.  Here are two key items to be aware of before entering into a medical director services agreement:

Ancillary personnel supervision. In short, know how to do what you offer. Medical directorship encompasses many requirements, oftentimes including the supervision of various healthcare providers and ancillary personnel. This is part of the agreement for several reasons such as medical staff bylaws, CMS billing regulations, and boards of directors’ oversight stipulations. Failure to provide the appropriate supervision can trigger not only contractual breach notifications, but may also result in allegations of false claims being made to the Medicare or Medicaid programs. Indeed many times governmental regulators seek to hold medical directors accountable for administrative, civil, or criminal damages.

Professional liability issues. Medical directorship also comes with potential issues related to professional liability and the physician’s medical malpractice coverage. These issues may arise from the execution of duties which the medical director is performing as required by the agreement. Physicians serving as medical directors are often required to review clinical, patient care, and risk management policies and procedures as part of their duties and obligations. As mentioned above, medical directors are frequently obligated to supervise other personnel (e.g. other physicians, nurse practitioners, physician assistants, etc.).

There have been cases where the plaintiff’s allegations of negligence are targeted not only at the healthcare provider and facility, but also at the medical director for failure to provide adequate supervision. Therefore, physicians should not overlook medical malpractice insurance and indemnification provisions that are either not included in their medical director contracts or contain poorly written provisions.

Many physicians enter into medical directorship arrangements hoping to “get rich quick” while unsuspectingly jeopardizing their medical license. Medical director services agreements can have unforeseen negative effects on the physicians who serve in these roles. Understanding the duties of the medical director as well as the associated responsibilities and liabilities is paramount. Consequently, those physicians contemplating entering into such an arrangement should have a qualified individual carefully review the document before signing.


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Loyalty is a Two Way Street

The primary requirement for continuing success in practice management is effective leadership. Without it, no matter how sophisticated the practice, procedures, and technology, regardless of how dedicated the people are, the chances for success are minimal. There are many definitions of leadership, but perhaps an all-encompassing definition was offered by General Eisenhower when he stated, “Leadership is the ability to get people to do what you want them to do because they want to do it.” That statement says a great deal, but most of all it brings up the importance of loyalty. Without loyalty from staff members, the practice manager will always find the changes of success relatively slim and certainly short-lived. There is a two-way street of loyalty within a medical practice.

No practice manger could rest easily if he thought his team was not supportive of and loyal to him. Without that support, the difficult, unpopular decisions go down very, very hard. It is entirely right to expect that kind of loyalty, but it does not happen by accident. It is cultivated through mutual respect, trust, and concern. People are what leadership is all about. Many have erroneously believed that loyalty can be built on personal popularity, but that is certainly a totally false belief.

Character determines how someone performs his or her job. The practice manager who has a good character can expect also have a good reputation, and a good reputation will gather influence and prestige. Reputation is like a bond. Professional ability determines how much discretion someone will be allowed. Add to the foregoing professional talent, and the characteristics of a leader begin to take shape.

Loyalty is the foundation of professional character. It is easy for a practice manager to be loyal to physician owners, but it is difficult for him to develop loyalty to himself in his staff members. This must be done through demonstrated performance as a leader. Perhaps the best building block a practice manager has for the development of loyalty is standing up for his team when they are right. Loyalty is a characteristic that must be developed to its fullest extent immediately. Without it, a practice manager cannot be a successful leader.

Loyalty is frequently tested. It is very easy to react to an allegation against a staff member without getting all of the facts. It is even more tempting to form judgments when there are seemingly solid facts to support the judgment.

Loyalty is at the very core of leadership. It can never be legislated, bought, or commanded. It has to be earned and fostered through interactions with all members of the practice. The practice manager who is concerned, supportive, and interested in his subordinates and peers will instill a genuine sense of loyalty to himself in them. He would want no less of his physician owners and, without question, he owes it to them.


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Narrow Networks Squeezing Patients

As more of the Affordable Care Act is implemented, patients are becoming aware of another facet of the law’s intended consequences, “narrow networks”. One of the architects, Jonathan Gruber, has confessed that the law’s mandates on health insurers would indeed limit physician networks. A recent study by Mr. Gruber points out that this design is to control costs. In short, this means that while you may be covered by health insurance, you might be surprised to see which providers are actually covered under your health plan. In fact, in 2015 nearly half of the plans offered on the health exchanges are narrow networks and an additional 20% are considered to be “ultra-narrow”.

A study by the McKinsey Center for U.S. Health System Reform shows that patients who chose such plans last year have stayed with them. However, patients who do not understand how the plans work are finding themselves responsible for extremely high bills. And as pointed out recently in the Washington Post, patients are “predictably frustrated” when they learn that their physicians are not covered. For example, while a hospital may be in your plan’s network, the physicians that a hospital contracts with (e.g. anesthesiologists, radiologists, emergency physicians, etc.) may not be, thus leaving you with bills for out-of-network charges.

To be clear, the narrow networks are squeezing patients. Last month, a study by the Robert Wood Johnson Foundation was published. The results showed that:

  • 11% of plans covered fewer than 10% of physicians in a plan’s region
  • 30% of plans covered between 10%–25% of physicians in a plan’s region
  • Only 11% of plans covered at least 60% of physicians in a plan’s region

As patients continue to migrate into the role of consumers, they must be vigilant when purchasing health insurance because plan type is not a good indicator of network size. This last study cited goes on to note that many patients “who selected narrow network plans largely on the basis of lower premiums were unaware of the network size of the plan they selected.” Many in the healthcare industry are getting flashbacks of the HMO plans from the 1990s that incited much criticism.

And where does this leave the providers? Politics aside, physicians are many times finding themselves in quite a pickle. Many providers have been working overtime to explain to patients upfront about the charges they may incur based upon the medical procedures and the patient’s health plan. Medical practices have hired financial counselors to explain these details to patients and set up payment plans. Some states, however, are taking a different approach. In April, New York enacted a law which essentially states that insurers and providers must resolve medical bills with patients via mediation.


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Patients As Consumers

The changes to the healthcare industry are increasingly focused on addressing patients as consumers. Such a change means that providers must of course emphasize quality and work toward price transparency, but they must also seek to determine what patients desire most. It is this last effort that is transforming the healthcare sector more like businesses of other sectors; what consumers want, is what drives competition and ingenuity (and oftentimes commoditization).

Under the healthcare reform legislation, the federal government views patients as consumers. This emphasis has indeed begun to empower patients in a move that will only gain more momentum over time. The Health Research Institute of PricewaterhouseCoopers conducted a consumer survey regarding the assessments of patients as consumers given the changes on the healthcare industry. Here are some highlights of the survey’s findings:

64% of respondents said they are open to trying new, non-traditional ways of seeking medical attention or treatment if the price is right; 18% would try regardless of price

49% stated they are very likely or somewhat likely to have a wound or pressure sore treated at a clinic in a retail store or pharmacy

44% of respondents said they are very likely or somewhat likely to have an ECG at home using a device attached to their phone with results wirelessly sent to their physician

43% stated they are very likely or somewhat likely to have a pacemaker or defibrillator checked at home wirelessly by their physician

37% of respondents said they are very likely or somewhat likely to have chemotherapy at home

34% stated they are very likely or somewhat likely to get an MRI at a clinic in a retail store or pharmacy

26% of respondents said they are very likely or somewhat likely to have dialysis at a medical clinic in a retail store

The survey can be found here.


Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at