We are hearing from almost every healthcare system who has employed physicians in the last decade that they are now losing considerable dollars within their employed physician network. Most organizations are happy to hold their losses to less than $100,000 per employed doctor.
There are a lot of reasons for this trend, many of which having to do more with accounting practices than with business operations, and healthcare systems are looking for ways to turn this situation around. In fact, Coker Group has successfully done this with several organizations and I would like to share some lessons we’ve learned along the way.
First and foremost, most hospitals learned long ago that they are not proficient at billing for physician practices; however, many have not learned that there are several other aspects of managing a physician practice that are quite different from running a hospital and therefore should not be combined. In addition to billing services, many hospitals would be wise to separate out their physician practice HR, IT, Marketing and Legal services from the hospital support departments in these areas.
Second, the integration of physicians and other outpatient providers into the business operations of a physician practice is an essential key to success. Whether it’s getting the clinical documentation and coding correct, up-front, to facilitate the revenue cycle or re-tool clinical care processes and procedures to reduce costs, physicians must be involved. Simply practicing medicine and letting the hospital run the practice won’t work!
Finally, physician compensation models must be scrutinized carefully to assure that they are in line with reimbursement models prevalent in the market. It doesn’t make sense for physicians to be paid primarily for production in a market where value-based reimbursements, such as shared savings bonuses, bundled payments or capitation, are becoming the norm. Likewise, it is counterproductive to base a large percentage of physician compensation on the achievement of quality performance goals if the market is not yet rewarding those activities via value-based reimbursement models.
Hospital employed physician practices can operate effectively and efficiently, however, clear and realistic expectations must be set by both parties. In some specialties, such as primary care, where ancillary service revenues usually determine the difference between profit of loss for private practices, operating at a loss may be a reasonable expectation. However, that loss should be minimized and not aggravated by mismanagement of a clinical operation that is very different than operating a hospital.