4 Best Ideas for Improving Physician-Owned Hospital Profits

At the 10th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago on June 14, a roundtable discussed "The Best Ideas Now: Key Ways to Improve Physician Owned Hospital Profits." The panel included Larry Teuber, MD president of Medical Facilities Corporation, Michael J. Lipomi, president and CEO of Surgical Management Professionals, Goran Dragolovic, senior vice president of operations for Surgical Care Affiliates and moderated by Amber McGraw Walsh, partner at McGuireWoods.

1. Ancillary possibilities.
The panelists discussed ancillary revenue possibilities with physician owned hospitals to increase profitability. "In my view, I think all hospitals have opportunity for ancillary services," said Dr. Teuber. "Ask if it is necessary to support core service line, which is surgery. Think about whether it competes with a potential referrer to your business. If you have physical therapy services, physical therapists from the community won't encourage their patients to use our services."

2. Physician recruitment. Beyond ancillary services, the panelists discussed physician recruitment. "I look at surgeon recruitment like I look at any equipment: what does it cost and what will it do for me," said Dr. Teuber. "A good orthopedic surgeon will draw into the surgical facility a million bucks in the first year, $2 million for spine surgeons."

Mr. Dragolovic discussed recruitment activity in an area that is at capacity. "We try to bring in specialties with high acuity cases and lower our lower acuity cases," he said. "You can significantly improve the bottom line without having to expand ORs in the hospital."

Mr. Lipomi discussed the importance of bringing in physicians who will contribute to the existing culture of the organizations and balance the competitive issues with other surgeons in the same specialty.

3. Driving reimbursement. Many facilities today are looking at bundled payments as a potential model for the future. Mr. Dragolovic is working on a bundled payment that goes beyond the traditional surgeon, anesthesia and hardware fees to include preoperative imaging and lab testing as well as postoperative therapy. "In this market we are already the lower cost provider for the payor, so we are looking where there is variability of the facility surgeons are using for their non-surgical things," he said. "We are looking at a broader spectrum for savings and sharing those savings with the physicians at the facility. The benefit of bundling is you can divide it any way you wish."

One of the issues with the healthcare reimbursement has been how patients interact with insurance companies. "Health insurance has undermined the traditional market," said Mr. Lipomi. "In healthcare, because the employee doesn't pay the premium, even the employer doesn't have a connection to the payment."

4. Expense management. There are several factors the leaders of physician-owned hospitals must consider to manage their expenses, which include payroll, implants and other materials. At his facility, Dr. Teuber assesses a fee to surgeons who aren't ready for the cases to start on time and cut down on employee overtime, with a benchmark of 1 percent to 1.5 percent.

Mr. Lipomi implemented "check book" system to monitor his facility. "Each department has an earned budget and we set it up like a check book for them," he said. "That's a way to help them understand where their budget is at all the time. The best tool we've seen on the supply side is incentivizing employees to keep costs down."

Mr. Dragolovic measures the costs and profitability per minute in the operating room and benchmarks it by physician and specialty. "If you have a large number of facilities in centers across the country, there is variability and we have low hanging fruit to see where facilities aren't optimizing supplies or labor resources," he said.

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