Common experience shows that hospital employment of physicians continues to rise. From 2012 to 2015, the number of physicians employed by hospitals and health systems increased by more than 50 percent.
More than 140,000 physicians, or 38 percent of those practicing in the U.S., were employed by hospitals in 2015 – up from 95,000 in 2012. That translated into one in four medical practices being hospital-owned last year.
This shift results from payment changes and increasing overhead costs for independent physicians, coupled with hospitals' needs to secure access to their networks to prepare for population health management.
But the cost for a hospital to employ a physician is also increasing. A Kentucky Hospital Association study found that a staggering 58 percent of hospitals reported annual losses of more than $100,000 per physician, a 17 percent increase over the previous year.
If your hospital or health system's physician practices are losing money, take a look at these five signs to determine which apply to you:
1. Ineffective Operations
Hospital leaders must first look at their physician practices' operational effectiveness, including their ease of access, billing performance and patient throughput.
Ease of access: To remain competitive in today's consumerism era, it should not be difficult to obtain care at your practice. Two-week waits for appointments, long hold times on the phone, or prolonged wait times in the office cause lost opportunity for the practice.
Billings: When a hospital takes over a doctor's office it may unintentionally disrupt the sensitive billing and collections relationship with a patient. Patients should not get caught up in the red tape of your billing process, and all issues should be resolved in a timely manner.
Patient throughput: Taking a look at your practices' patient flow can help identify holdups and uncover opportunities to streamline processes. One way to do so is to walk through a typical visit like you're the patient. Well-organized patient throughput will increase capacity and revenue and can improve patient satisfaction.
2. Misaligned Physician Compensation Models
The primary reason hospitals lose money on physician practices is misalignment of the physician compensation model to one that does not currently reflect value received for value paid. Some hospitals have had trouble keeping up with changing trends over the years, or may have overlooked steps when acquiring practices.
Salary Matching: Independent physicians can create revenue for themselves not only by seeing patients and charging fees, but also by providing other services, such as x-rays and rehab. When physicians become hospital employees, payment for those extra services disappear even though base salary may reflect these prior payments. When matching what a physician made in his or her private practice, hospital leaders may not be aware that a percentage of the physician's earnings came from services other than seeing patients, thus creating a revenue gap once employment begins.
National Surveys: Instead of addressing local factors first, hospitals sometimes use national surveys to determine a physician's salary. This has created a transactional compensation model sometimes based solely on work RVUs, or relative value units, which is a measure of a physician's productivity. Hospitals run into problems when they base their payment model on national comparisons that do not accurately reflect local costs and payer mix. They often find they cannot collect the amount they're paying physicians for the service provided in their market.
3. Lack of Integrated Systems
Successfully merging a physician practice into a hospital requires much more than new signage and stationery. It demands that hospital leaders start thinking of themselves as a system, bringing together multiple sites of care to act as one organized network. This includes integrating all aspects of operations – clinical, business, quality measurement, etc. – across the entire system of providers so everyone is working toward the same goals.
4. Insufficient Quality Outcomes Reporting
Quality must be at the center of every healthcare practice. While CMS requires compliance reporting of quality metrics, health systems must define quality for themselves and establish a culture of quality that encompasses the entire system. This is a crucial step to fulfilling the Institute for Healthcare Improvement's Triple Aim – to improve the patient experience of care (including quality and satisfaction), improve the health of populations and lower the cost of healthcare. With upcoming changes in physician payment as dictated by MACRA and anticipated bonus and penalty payments, quality programs are fundamental.
5. Negative Patient Experiences – in the Doctor's Office
Customer experience was, for too long, a forgotten element of service delivery in healthcare. Until recently, the U.S. healthcare system has been designed around doctors, not the patients it serves. This is changing with the rise of consumerism. Hospital systems are realizing that good patient experience is a vital component of sustainability. It's no longer enough to be a good doctor. You must also deliver good customer service and that means putting the patient first. Successful practices deliver care according to a patient's needs, values and preferences and focus on a common goal of healing and improving health and well-being. Patient-centered care is not only the way the healthcare system is moving; it's also the right thing to do.
Bob Teague, MD, is vice president of Medical Transformation at Quorum Health Resources, a hospital professional consulting services firm that works with more than 150 hospitals across the country.
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