The use of hospitalists to oversee the continuum of patient care has expanded almost exponentially in recent years. While many hospitals have selected hospitalist companies to outsource these programs, many hospitals, especially larger ones, are choosing to manage these services themselves. However, determining compensation and successfully tying it to outcomes can be challenging for hospitals, especially if their foray into hospital medicine is their first time employing physicians.
Randall Kelley, CEO of Inova Loudon Hospital Leesburg, Va., oversees a hospital that has been employing hospitalists for a little over three years. The program now employs more than a dozen physicians to care for unassigned patients and collaborate with primary care providers and specialists on the care of their patients during their time in the hospital. A critical factor for success at Inova Loudon has been benchmarking compensation and tying part of that compensation to performance measures, says Mr. Kelley.
Benchmarking
The processes of determining compensation should start with an examination of data from groups such as the Medical Group Management Association on average and median hospitalist salaries. Although salaries vary widely by hospitalist specialty and region (data such as MGMA's breaks out data points by these categories), the median total compensation for a hospitalist in 2007-2008 was $193,300, according to the Society of Hospitalist Medicine. While a hospital could offer a physician a compensation level equivalent to a regional mean, many hospitals are now guaranteeing only a certain percent of that mean and tying other compensation to performance indicators.
While Inova Loudon has had a fairly easy time recruiting physicians to its programs due to its attractive location in an affluent area outside Washington, D.C., other hospitals in locations that are less attractive might need to offer physicians more to recruit them. Denice Soyring Higman, RN, MSN, president and founder of Soyring Consulting, a hospital management firm that works with Inova Loudon, warns, however, that hospitals not compensate in extreme excess of benchmarks for their region. Doing so would violate fair market value compensation regulations.
Tying compensation to performance
Tying compensation to performance is a critical component of a successful hospitalist program, says Mr. Kelley. Inova ties a portion of its hospitalists' compensation to certain performance indicators, such as adherence to core measures. "You can't realistically tie compensation to all indicators, and you can't tie it to length of stay [doing so would violate federal and state laws against tying compensation to revenue produced]," he says. "However, tying it to certain core measure can really start to improve the quality of care patients receive."
While Inova didn't disclose the exact amount it offers physicians as part of their productivity bonuses, Ms. Soyring Higman says hospitals typically cap such bonus programs at about 5-10 percent of total compensation.
Inova Loudon's bonus program is "driven by productivity" and considers factors such as size of the patient population managed and quality, says Mr. Kelley. Measures that negatively impact a bonus include higher than average readmission rates and major complications. "It's not a massive bonus program, but enough to get people's attention," he says.
Considering productivity when shelling out checks to physicians is also necessary for a hospital-owned medical practice's long-term financial success. "In the '90s, a lot of hospitals acquired practice and hired physicians without any productivity measures," says Ms. Soyring Higman. "They thought they'd be breaking even, but without productivity requirements, they couldn't afford the salaries they were paying physicians."
Consider utilization
Although Inova Loudon does not currently tie hospitalist compensation to utilization, it is considering doing so in the future. "Whether they're employed or a member of the medical staff, the drive is toward quality and efficiency," says Mr. Kelley. "We're building a system that can look at any individual physician and compare his or her utilization to peers to guide best practices." The data is intended to help physicians understand how their outcomes and utilization differ from their peer group with the goal of reducing utilization while maintaining quality.
Hospitals with large Medicare populations have fairly fixed reimbursement as a result of DRG based payments, so patients need to be managed very closely to ensure hospitals remain finically viable, says Mr. Kelley.
"The DRG movement was one of the drivers for the movement toward hospitalists," says Ms. Soyring Higman. As a result, hospitals may benefit from examining the utilization and outcomes of its hospitalists when determining compensation.
Review contracts against performance
Finally, hospitals should include contract provisions that allow for periodic reviews of physician performance using specific measures, says Ms. Soyring Higman. Doing so allows compensation levels to be adjusted accordingly, and allows hospitals to remove any physician that does not meet its criteria, which can help to protect the hospital from any kind of litigation, she says.
Randall Kelley, CEO of Inova Loudon Hospital Leesburg, Va., oversees a hospital that has been employing hospitalists for a little over three years. The program now employs more than a dozen physicians to care for unassigned patients and collaborate with primary care providers and specialists on the care of their patients during their time in the hospital. A critical factor for success at Inova Loudon has been benchmarking compensation and tying part of that compensation to performance measures, says Mr. Kelley.
Benchmarking
The processes of determining compensation should start with an examination of data from groups such as the Medical Group Management Association on average and median hospitalist salaries. Although salaries vary widely by hospitalist specialty and region (data such as MGMA's breaks out data points by these categories), the median total compensation for a hospitalist in 2007-2008 was $193,300, according to the Society of Hospitalist Medicine. While a hospital could offer a physician a compensation level equivalent to a regional mean, many hospitals are now guaranteeing only a certain percent of that mean and tying other compensation to performance indicators.
While Inova Loudon has had a fairly easy time recruiting physicians to its programs due to its attractive location in an affluent area outside Washington, D.C., other hospitals in locations that are less attractive might need to offer physicians more to recruit them. Denice Soyring Higman, RN, MSN, president and founder of Soyring Consulting, a hospital management firm that works with Inova Loudon, warns, however, that hospitals not compensate in extreme excess of benchmarks for their region. Doing so would violate fair market value compensation regulations.
Tying compensation to performance
Tying compensation to performance is a critical component of a successful hospitalist program, says Mr. Kelley. Inova ties a portion of its hospitalists' compensation to certain performance indicators, such as adherence to core measures. "You can't realistically tie compensation to all indicators, and you can't tie it to length of stay [doing so would violate federal and state laws against tying compensation to revenue produced]," he says. "However, tying it to certain core measure can really start to improve the quality of care patients receive."
While Inova didn't disclose the exact amount it offers physicians as part of their productivity bonuses, Ms. Soyring Higman says hospitals typically cap such bonus programs at about 5-10 percent of total compensation.
Inova Loudon's bonus program is "driven by productivity" and considers factors such as size of the patient population managed and quality, says Mr. Kelley. Measures that negatively impact a bonus include higher than average readmission rates and major complications. "It's not a massive bonus program, but enough to get people's attention," he says.
Considering productivity when shelling out checks to physicians is also necessary for a hospital-owned medical practice's long-term financial success. "In the '90s, a lot of hospitals acquired practice and hired physicians without any productivity measures," says Ms. Soyring Higman. "They thought they'd be breaking even, but without productivity requirements, they couldn't afford the salaries they were paying physicians."
Consider utilization
Although Inova Loudon does not currently tie hospitalist compensation to utilization, it is considering doing so in the future. "Whether they're employed or a member of the medical staff, the drive is toward quality and efficiency," says Mr. Kelley. "We're building a system that can look at any individual physician and compare his or her utilization to peers to guide best practices." The data is intended to help physicians understand how their outcomes and utilization differ from their peer group with the goal of reducing utilization while maintaining quality.
Hospitals with large Medicare populations have fairly fixed reimbursement as a result of DRG based payments, so patients need to be managed very closely to ensure hospitals remain finically viable, says Mr. Kelley.
"The DRG movement was one of the drivers for the movement toward hospitalists," says Ms. Soyring Higman. As a result, hospitals may benefit from examining the utilization and outcomes of its hospitalists when determining compensation.
Review contracts against performance
Finally, hospitals should include contract provisions that allow for periodic reviews of physician performance using specific measures, says Ms. Soyring Higman. Doing so allows compensation levels to be adjusted accordingly, and allows hospitals to remove any physician that does not meet its criteria, which can help to protect the hospital from any kind of litigation, she says.