Insights for small community hospitals financial horsepower

I am a visual person. I relate to, and remember new ideas best when I relate the new idea to something familiar.

Let’s look at the analogy of generating revenue in the Small Community Hospital to how an engine produces horsepower. I use the term “financial horsepower” here to describe the amount of revenue your SCH achieves from providing patient care services. In this analogy, your fuel is your population. Your engine is the medical staff. Physicians generate 95%+ of all your revenue. And horsepower is revenue that results from the engine. We will consider the SCH as the structure that houses and supports the revenue engine and can be enlarged as the medical staff grows and generates more revenue.

Financial Horsepower Graphic

You can achieve low levels of horsepower with either a large or small engine, and you can achieve high levels of horsepower with either a large or small engine. It’s all in the design.

In designing any engine, there are some constraints. However, with this revenue engine, the upper limit on horsepower is the fuel source (population). But this limitation should not prevent you from achieving high horsepower since your SCH can be viable with a market share of less than 50% of current population, and most SCHs get an actual market share of less than 30%. The fundamental limitation is an undersized engine (medical staff) that doesn’t intercept enough patient volume from your service area. Therefore, it is the medical staff engine that needs to be redesigned.

Recruiting challenges
The daunting task of recruiting may make expanding the medical staff difficult to even consider. I propose two ideas to make this worth considering. First, don't believe the myth that you can’t recruit to small communities because physicians don't want to work there. Some physicians prefer the small community as a place to live and raise a family. There are just not as many in the overall prospect pool as those who prefer an urban practice option. This can make finding them more difficult; but they are out there. Also, physicians interested in a small community practice may not be entrepreneurial and are not inclined to take on the risk of starting a new office practice. So, there are prospects, but you take the risk.

The risks of traditional recruiting
Second, the traditional method of recruiting physicians to the medical staff comes with several elements of risk.

• Significant cash is required.
• It takes time to recruit.
• It takes time to know if the physician can build a practice (can take two years or longer).
• You may not recover your investment.
• The physician you recruit may not admit his/her patients to your local hospital.
• It consumes significant organizational effort.

With limited financial resources, a recruiting mistake can put you in further financial trouble and possibly out of business. How do we design the medical staff engine to be successful without financial risk?

An alternative: low cost, low risk
Some practice models eliminate the need for office-based physicians to take unattached “call," which makes recruiting easier, but do not directly add to your office-based medical staff. These models do provide an alternative way to achieve growth as a natural by-product without the cost and risk. We do find at times that some physicians that would like a rural practice but don’t know how to locate opportunities, and we don’t have a place to put them. When the hospital is willing to allow an EM/HM physician to work in an office practice, this practice model works effectively, allowing physicians to split their time between working in an office practice and working shifts in the Emergency Medicine and Hospital Medicine practice.

Typically, a physician begins working in an office practice established by the hospital one day a week in addition to working EM/HM shifts. As the office practice begins to grow, the physician works more office shifts and fewer EM/HM shifts. The goal is to let the physician begin to develop a full-time office practice over time with little financial risk. The hospital supports the office and administrative costs, and avoids the investment to fund the office start up, even if the office practice is not successful. If the physician does not (or cannot) build an office practice, the SCH can continue to use the physician in the EM/HM practice. This approach has worked for primary care as well as specialty physicians.

Jim Burnette is the Founder and CEO of HospitalMD. Jim has worked in healthcare for more than 20 years. His mission is to strengthen Small Community Hospitals across the nation and help them thrive in today's rapidly changing healthcare climate. Jim is a graduate of Georgia Tech and resides in Peachtree City, a small community right outside Atlanta, GA. Contact Jim at insight@hospitalmd.com,

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