Hospitals have traditionally performed physician needs assessments (PNAs) or medical staff manpower studies
to answer a series of questions related to local
community healthcare requirements: What
will the demand and need for physicians and
advanced practice providers (APPs)
be? What will the supply of physi-
cians and APPs be? Is there a gap
between demand and supply? If
so, what do the studies suggest can
PNAs typically involve identifi-
cation of the hospital’s Stark-defined
service area1 and determination of the physi-
cian full-time equivalent supply and demand
within that market to quantify overall phy-
sician need by specialty. Adjustments may
be made to account for provider attrition,
population health considerations, APPs, and
hospital market share, among other consider-
ations. Further, qualitative information shared
by key stakeholders through executive inter-
views and/or physician practice surveys may
be used to refine quantitative results.
From a compliance perspective, payment to recruited physicians and APPs — in a
Stark-compliant manner2 — used to be a primary driver to complete PNAs. The constantly
shifting environment of healthcare has propelled PNAs into a much more dynamic role.
Though still used in large part for recruiting
purposes, PNAs have expanded their footprint
to become an integral part of a larger picture.
They are now consistently interwoven with
both commercial reasonableness (CR) opinions
and fair market value (FMV) assessments.
PNAs alone are no longer sufficient in
a recruitment exercise. Today, physician
contracts must also be commercially reasonable, and meet Stark and other regulatory
by Tynan O. Kugler
Physician needs assessments
are an integral step
» Physician needs assessments (PNAs) are evolving to play an expanding and dynamic role with respect to fair market value
(FMV) and commercial reasonableness (CR) opinions.
» As the healthcare industry shifts from volume to value, a historical approach to PNAs based solely on physician-to-population
metrics may no longer be sufficient.
» Modern PNAs should consider market specifics relative to healthcare transformation because communities are transitioning at
» PNA findings are important to consider in determining whether a particular transaction is commercially reasonable.
» Justification for a hospital’s recruitment or physician affiliation strategy is a research-intensive, yet critically important, exercise
to support regulatory compliance
Tynan O. Kugler ( firstname.lastname@example.org) is a Principal at PYA, P.C., and is based in