Hospitals, though, quickly realized that hospitalist practices were a valuable presence and created a payment stream to help offset the difference.
John Laverty, DHA, vice president of hospital-based physicians at HCA Physician Services in Nashville, Tenn., says four main factors drive the need for the hospitalist subsidy:
- Physician productivity. How many patients can a practice see on a daily or a monthly basis? Most averages teeter between 15 and 20 patients per day, often less in academic models. There is a mathematical point at which a group can generate enough revenue to cover costs, but many HM leaders say that comes at the cost of quality care delivery and physician satisfaction.
- Nonclinical/non-revenue-generating activities performed by hospitalists. HM groups usually are involved in QI and patient-safety initiatives, which, while important, are not necessarily captured by billing codes. Some HM contracts call for compensation tied to those activities, but many still do not, leaving groups with a gap to cover.
- Payor mix. A particularly difficult mix with high charity care and uninsured patients can lower the average net collected revenue per visit. There also is the choice between being a Medicaid participating provider or a nonparticipating provider with managed-care payors. So-called “non-par” providers typically have the ability to negotiate higher rates.
- Expenses. “How rich is your benefit package for your physicians?” Laverty asks. “Do you provide a retirement plan? Health, dental and vision? … Do you pay for CME?”
Dr. Kealey says it’s not “impossible” to cover all of a hospitalist’s costs through professional fees; however, “it usually requires a hospitalist be in an area with a very good payor mix or a hospital of very high efficiency, where they can see lots of patients. And often, there might be a setup where they aren’t covering unproductive times or tasks.”
Another Point of View
Not everyone thinks the subsidy is a fait accompli. Jeff Taylor, president and chief operating officer of IPC: The Hospitalist Co., a national physician group practice based in North Hollywood, Calif., says subsidies do not need to be a factor in a practice’s bottom line. Taylor says that IPC generates just 5% of its revenues from subsidies, with the remaining 95% financed by professional fees.
He attributes much of that to the work schedule, particularly the popular model of seven days on clinical duty followed by seven days off. He says that model has led to increased practice costs that then require financial support from their hospital. The schedule’s popularity is fueled by the balance it offers physicians between their work and personal lives, Taylor says, but it also means that practitioners working under it lose two weeks a month of billing opportunities.
He’s right about the popularity, as more than 70% of hospitalist groups use a shift-based staffing model, according to the State of Hospital Medicine: 2010 Report Based on 2009 Data. The number of HM groups employing call-based and hybrid coverage (some shift, some call) is 30%.
When the pie shrinks, the table manners change. People are going to have to figure out how to slice that pie.
—Todd Nelson, MBA, technical director, Healthcare Financial Management Association, Chicago
“There is nothing else inherent in hospital medicine that makes this expensive, other than scheduling,” Taylor says. “Absent a very difficult payor mix, it’s the scheduling and the number of days worked that drives the cost. … We have been saying that for years, but we haven’t seen much of a waver yet. Once hospitals realize—some of them are starting to get it—that it’s the underlying work schedule that drives cost, they’re not going to continue to do it.”