An oft-cited rationale for hospital medicine’s generous subsidies from other stakeholders is that it “creates value,” in terms of reducing hospital length of stay, costs per case and improved outcomes. Throughout the years, such savings have received increased scrutiny. Blogger and SHM member Dr. Robert Wachter, MD, professor and associated chairman of the Department of Medicine at the University of California, San Francisco, said in May “research on these metrics is disappointing. … The move toward hospitalist shift work and the resulting fragmentation of care during hospitalization may be eroding any slim advantage the model had in cost savings.” He concluded, “the bubble will burst the morning CEOs wake up and realize that there is no longer a shortage of hospitalists.”
Burke Kealey, MD, assistant medical director, Hospital Medicine Division of HealthPartners Medical Group in St. Paul, Minn., offers powerful reasons for why hospitalists struggle with Finance 101:
- Hospitalists have little incentive to meet financial performance targets;
- HMG leaders are too busy with recruiting, scheduling and retention to focus on finance;
- Difficulties obtaining useful data from hospital administrators; and
- Too few business models that centralize data from multiple hospitals, making financial analysis of an individual group difficult.
To address the needs, Dr. Kealey, who chairs SHM’s Practice Analysis Committee, has spearheaded SHM’s development of dashboards that utilize performance metrics, such as volume data, case mix, length of stay, resource utilization, productivity, and readmission rates, to help leaders guide a practice to economic health.
Steve Liu, MD, the CEO and founder of Ingenious Med, is a hospitalist in one of the nation’s largest HMGs, with 100,000-plus patient encounters annually at Emory Healthcare in Atlanta. A member of SHM’s Benchmarks Committee, Liu puts HMG leaders’ financial ignorance in the context of a growth industry. “Hospital medicine is young, it’s moving very fast, and it is filled with a youngish crowd who don’t feel they have enough time to focus on financial deficits and inefficiencies,” Dr. Liu says.
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Still, a lack of financial knowledge can trip up the best of physician. Dr. Liu advises hospitalist leaders to focus on professional fee revenues, particularly on fees collected per full-time equivalent employee (FTE); eliminating high expenses from inefficiencies; and checking local and national compensation packages to address what he estimates as 30 percent of HMGs who fail to pay physicians appropriately. Other financial mistakes, he says, are HMG leaders throwing warm bodies at problems without enough back-office support; agreeing to see more patients than they can handle in a day; overspending on recruiters; and failure to understand each full-time employee’s return on investment.
Numerous hospitalists, according to Dr. Liu, believe they don’t have enough time to build partnerships with administrators that would lead to more sharing of financial data. “They may even be in a power struggle with administrators over access to financial data. … If you can’t measure it, you can’t manage it. That’s the essence of Finance 101,” Dr. Liu says, “and it’s very frustrating to hospitalists who don’t have the business skill sets and tools to succeed financially.” Since data is power, it’s imperative to ask the chief financial officer (CFO) for data; that way the HMG can work toward profitability.
Making sense of financial data is critical, says Leslie Flores, director of SHM’s Practice Management Institute. “HMG leaders have to learn to take data, such as number of encounters, relative value units, average daily census, number of days worked per year, the total subsidy for the practice, and average subsidy per hospitalist, and make sense of it. Where do the numbers come from and what do they mean are critical questions,” she says.