Even if you have a valid contract that calls for your compensation to be paid independent of the amount of professional fee collections, a dire shortage of money could lead a hospital to lay off hospitalists or cancel the contract (most contracts would allow the hospital to do this simply by giving a 90-day notice).
I suggest that no hospitalist feel too smug about how well their employment contract protects the group from broader market forces like reimbursement rates. I doubt we’ll ever see an overnight 21% reduction in Medicare rates, but over time, we could see ever-increasing pressure to limit the growth in our incomes.
I believe every hospitalist should spend at least a little time following broader financial issues like this one, and get involved in the political process to let your legislators know your thoughts. For the record, I think the financial underpinnings of our healthcare system are disastrously messed up and something has to be done. And I don’t think anyone’s salary, including mine, is untouchable. But I also believe the SGR is an ineffective way to make the system more financially sound. That said, you don’t need to agree with me; I only recommend that you have a reasonably informed opinion.
One approach might be for your HM group to appoint a “political” or “marketplace” watchdog. This person could be charged with following issues closely and reporting back to the whole group during regular meetings.
“Marketplace” Risk
Medicare rates are only one part of the complex financial ecosystem on which we depend. It is awfully common, and I think pretty reasonable, for hospitalists to have a contractual arrangement with hospitals. The majority of the time, the hospital has most—or all—of the risk for the financial performance of the practice. In fact, most prospective hospitalists, especially those seeking their first jobs out after residency, say one of the most attractive reasons for choosing work as a hospitalist is that many practices provide a salary that is nearly fixed. Any variable components to the salary, such as those based on production or quality, are typically very small.
A hospitalist might think, “I want a practice that pays a fixed salary so I don’t have to worry about any business and financial issues other than when to show up to work.” In fact, a lot of recruitment ads trumpet this very idea (i.e., “you handle the doctoring and get to enjoy the wonderful recreational opportunities and schools our locale provides, and we’ll worry about all the business issues”). That may sound nice, but I worry it is a little short-sighted.
Here is another point of view, which is only slightly more complicated. In most cases, you should try to negotiate a contract that insulates you from “payor risk” (e.g., changes in payor mix and rates paid by payors don’t flow through to your compensation). But you should think twice before asking your employer to assume all the risk for staffing and scheduling decisions, such as whether you get the work done with 10 hospitalists or 11, or whether you have an evening admitter (“swing”) shift. If the employer holds all the risk, then the hospitalists give up nearly all their autonomy to decide how hard they want to work and how they want to schedule themselves. This causes problems for many practices, and is the No. 1 reason I’m called in as a consultant. Contrary to being very risky and stressful, many hospitalists find it liberating to assume financial risk for their staffing and workload decisions.
You should realize that if your employer pays you a fixed compensation, then someone has to ensure that you do enough work to justify that compensation. This can mean that the employer “issues decrees” (i.e., “we won’t add another provide to the practice until we’ve averaged ‘X’ encounters per month for 6 months”). A hospitalist might see this as unreasonable, yet the group has limited recourse since the employer has already guaranteed the compensation.