Last December, St. Peter’s Hospital, a 122-bed acute-care facility in Helena, Mont., crossed a symbolic line in the decade-long evolution of the financial payments that hospitals have provided to HM groups to make up the gap that exists between the expenses of running a hospitalist service and the professional fees that generate its revenue.
Hospital administrators asked the outpatient providers at the Helena Physicians’ Clinic to pay nearly $400,000 per year to support the in-house HM service at St. Peter’s, according to a series of stories in the local paper, the Helena Independent Record. The fee was never instituted and, in fact, some Helena patients and physicians have questioned whether the high-stakes payment was part of a broader campaign for the hospital to take over the clinic, a process that culminated in March with the hospital’s purchase of the clinic’s building.
Still, the Montana case focused a spotlight on the doughnut hole of HM ledger sheets: hospital subsidies. More than 80% of HM groups took financial support from their host institutions in fiscal year 2010, according to new data from SHM and the Medical Group Management Association (MGMA), which will be released in September. And the amount of that support has more than doubled, from $60,000 per full-time equivalent (FTE) in 2003-2004 to $136,400 per FTE in the latest data, according to a presentation at HM11 in May.
HM leaders agree the growth is unsustainable, particularly in the new world of healthcare reform, but they also concur that satisfaction with the benefits a hospitalist service offers make it unlikely other institutions will implement a fee-for-service system similar to that of St. Peter’s (see “Pay to Play?,” p. 38). As hospital administrators struggle to dole out pieces of their ever-shrinking financial pie, hospitalists also agree that they will find it more and more difficult to ask their C-suite for continually larger payments (see Figure 1, “Growth in Hospitalist Financial Support,” p. 37). Even when portrayed as “investments” in physicians that provide more than clinical care (e.g. hospitalists assuming leadership roles on hospital committees and pushing quality-improvement initiatives), a hospital’s bottom line can only afford so much.
“It’s not sustainable,” says Burke Kealey, MD, SFHM, medical director of hospital specialties at HealthPartners in Minneapolis and an SHM board member. “I think hospitals are pretty much tapped out by and large.
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“What we’ve been seeing is practices have been able to ramp up their productivity, but people have also found other revenue streams, be it perioperative clinics, be it trying to find direct subsidies from specialty practices, be it educational funds for teaching. … We’re kind of entering a time when payment reform of some sort is going to have to come into play.”
History Lesson
Support payments have been around since HM’s earliest days, Dr. Kealey says. From the outset, it was difficult for most practices to cover their own salaries and expenses with reimbursement to the charges that make up the bulk of the field’s billing opportunities. “The economics of the situation are such that it is pretty difficult for a hospitalist to cover their own salary with the standard E/M codes,” he adds.