Figure 1: Healthcare Spending in AmericaHealthcare spending is forecasted to grow a steady 6%-plus in the next few years, according to federal estimates. The government data, however, was compiled earlier this year and does not reflect the current economic crisis. New estimates are expected by the end of the first quarter of 2009.
Hoangmai Pham, a senior health researcher at the Center for Studying Health System Change and lead author of a study on how the hospitalist model has focused attention on patient-care coordination, says changes at the federal level will be a driving factor in the strength of healthcare. Roughly 50% to 80% of a hospitalist’s annual salary comes from clinical billings, according to SHM data. The balance comes from hospital subsidies, in the form of annual contracts, monthly stipends, or pay-for-performance bonuses. Drastic changes in payment policy could have drastic implications on those subsidies.
“The ground is very fluid right now, in terms of where payment policy is going,” Pham says. “If I were hospitalists, part of the nervousness would be I’m not sure what direction things are heading in.”
Potential Solutions
Many hospitalists, however, see positives in the economic morass. Hospitalist Troy Ahlstrom, MD, is financial director of Hospitalists of Northwest Michigan in Traverse City, which serves roughly 400 beds at Munson Medical Center. He says groups can prove their worth by showing how they make it easier for other specialists—cardiologists, orthopedists, etc.—to perform the more lucrative procedures on which hospitals rely for higher reimbursements. Then, the group can negotiate for a piece of the savings under a pay-for-performance contracting model.
“What can we do to help make you more efficient, so you can do two extra surgical cases a week?” Dr. Ahlstrom says. “What if the hospital itself realizes a 15% increase in efficiency? Work out a deal that if we save you 15% … you give us a cut.”
Dr. Westle suggests analyzing cost accounting as another way to offer evidence of productivity. Paying overtime for back-office staff is ineffective if your salary overhead is greater than your billing collection. He also recommends a virtual office to employ billing specialists who work from home and doctors without off-site offices, eliminating real estate, utility, and infectious-waste-disposal costs that can cost private practices 55% to 60% in overhead costs.
Partnerships and reinvention are other avenues for cost-effectiveness. Some smaller, single-hospitalist groups might merge to cut costs through economies of scale, but SHM’s Miller thinks there is an opportunity to create a cooperative structure in which hospital medicine groups maintain individual identifies yet share certain functions, such as a common billing service.
Dr. King, the medical director who was promoted in November, is running a long-term acute-care center (LTAC) to help generate a parallel revenue stream. The center opened in May; during periods of decreased patient traffic at Southwest Medical Center, it affords his hospitalists another place to work, encountering patients and billing services. It also creates a referral stream for his hospital. He also has engaged in preliminary discussions for opening and staffing a pre-operative clinic or a wound-care clinic, but those discussions are in the early stages. King is sitting down with PCPs his group has little history with to increase referrals, and he is meeting with the hospital’s specialists to inform them that earlier consults with hospitalists could allow for streamlined service, shorter stays, and greater revenue.
“If you stop your research and development (R&D) during the hard times, 18 months from now, everyone else has stopped their R&D,” Dr. Westle says. “But if you continued your R&D, you’re 18 months ahead of everyone else.”