5 ways hospitals can better manage physician spend

By 2027, healthcare spending will reach 19.4 percent of the U.S. gross domestic product, according to CMS. To manage healthcare costs, hospitals and health systems need to think outside the box and consider new approaches to cost containment, especially around a key financial category called, “physician spend.”

Simply put, physician spend consists of the total dollars spent on physician arrangements. This includes how many physicians the organization has on staff and how they're being paid. Not understanding this financial data point is a blind spot for many hospital organizations that can negatively impact their profit margins for years to come.

In an April 25 webinar hosted by Becker's Hospital Review and sponsored by Ludi, Terry Metzger, system CFO for Indianapolis-based St. Vincent Health (part of Ascension), and Gail Peace, president and CEO of Ludi, discussed ways hospitals and health systems can improve the management of their physician spend.

Here are five tips for optimized physician spend management:

1. Find all your contacts. Pull a list of all employed physicians, and then pull a list from accounts payable from the last two to five years, sorting by group indicators. Find a root contract for each payment.

2. Dive into spend. Align with physicians and evaluate what you're spending for medical directorships, teaching, on-call services and hospital-based professional service agreements. Change physician relationships based on your quality improvement goals.

3. Gain visibility. Check who and what you're paying, including what has been paid, and what still needs to be paid. This includes unique contracts with physicians.

4. Track investment buckets. Investment contracts should be evaluated yearly. Tracking investment contracts more effectively can lead to better reimbursement on the Medicare cost report.

5. Automate where possible. Using manual-based systems to calculate by hand can take up a lot of staff time, increase compliance risk and leave reimbursement opportunities on the table. Using software solutions can help hospitals and health systems organize and streamline the payment process through automation, while giving peace of mind that compliance risk is reduced.

"It is very difficult to manage what you do not measure," Ms. Peace said. "If you're an executive and you don't know how your physicians are being paid or you're not personally signing off on these payments, it's worth your time to figure out what paths [are taken] when [physicians] get paid."

Three St. Vincent Health "ah-ha" moments in managing physician contracts and their physician spend

When St. Vincent launched new initiatives around their physician contract approach, the initial goal was to tighten up operational processes and streamline payment for doctors across five of their hospitals. At the same time, they wanted to eliminate any potential compliance risk associated with their physician arrangements.

Three things St. Vincent experienced when they leveraged automation technology to manage their physician contracts:

- Reduced costs. Checking call agreement rates helped St. Vincent identify areas where it was paying too much for services or where billing was inaccurate, saving costs for the hospital and, ultimately, helping them see a full financial picture of their overall spending, year over year.

- Better operational efficiency. Eliminating paper records and moving toward automation improved efficiency when processing physician time logs.

- Peace of mind with compliance. No matter how hard a hospital tries on paper, things may slip through the cracks. With thousands of payments each year, St. Vincent has the confidence they are following their contracts appropriately.


Finding physician contracts, prioritizing transparency around key data points in those contracts, tracking investments and implementing automation are five ways hospitals and health systems can improve their bottom line.

"By sorting contracts in an organized fashion and automating, we can also save money and do the right thing along the way," Ms. Peace said. "We need to make sure we're doing our best to pay our physician partners the correct amount at the most expedient way possible."

To view the complete webinar, click here. To learn more about Ludi, click here.

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