Optimizing your overall physician expenditure

How much does your hospital spend on physicians?

This is a seemingly easy question, but in practice very difficult to answer. Here is the reality, whatever you are spending can be cut with very little effort. But why should executives care you ask? There are many fires to fight. Here is why innovative executive teams see physician spend optimization as something to be done immediately:

• Physicians are the most important partner – messing with their money or not paying them on time hurts the hospital.
• The dollars are enormous – most organizations are spending 50-100% more than they realize. You cannot manage that which you do not measure. Cutting 1-2% is easier than you think, and in health systems that translates into Millions.
• Risk – correct record keeping is needed for the Medicare Cost Report to ensure proper reimbursement. Plus paying physicians is one of the top 4 regulatory risks to a hospital. Payments made incorrectly are strictly interpreted as kickbacks. It isn’t worth the risk.

Hospitals have hundreds of contracts with physicians to perform services and these contracts are often in silos. Employment contracts may or may not include payments for medical directorships and on-call. Payment systems are often manual opening the organization up to rework and potential errors. Here are 7 tactics to improve processes to help rein in this spend.

7 tactics
1. Pull all contracts into one view. Some contracts will be employment contracts while some are Professional Service Agreements with independent physicians or groups. The first task is to find them all. When you think you have found them all, dig deeper. The only sure way to know if you’ve found all payments is to pull payroll AND go to accounts payable for a 3 year period. Find all physician payments, to a PC or MD, then try to find the contracts.

2. Collect documentation. Require physicians to submit time logs for all administrative, teaching, medical directorships, on-call time, virtually all PSAs.

3. Stop all auto pays. In most cases, physicians should be documenting administrative time. Some hospitals automatically make physician payments. Ensure documentation is collected before your issue the payment.

4. Honor hard stops in the contract. Most contracts read, physician has x amount of time to submit time worked. Or, the monthly maximum number of hours is y. Or, annually the payment to exceed z. By following the contracts as written, organizations see a decrease of a percent or two without even trying to spend less.

5. Make every dollar count. Each year, the agreement should be evaluated, reconsidered and tweaked. Before auto renewing a contract with a physician, review the last year of work that was performed and have a live discussion about next year’s goals. Make sure you need the contract.

6. Consider software to automate. Let’s face it, these agreements are complex and carry risk of incorrect payments as well as regulatory risk. Consider software that will match every physician payment to the contract, every time.

Gail Peace is president and CEO of Ludi, Inc., a company that streamlines contract and payment data into one source of truth. Ms. Peace has 20 years of healthcare experience and spent the past six years helping hospitals measure and manage their physician strategy. Contact her at gail@ludiinc.com.

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