When hospitals abandoned the practice of employing physicians in the late 1990s because they weren't making money on them, Our Lady of the Lake Regional Medical Center in Baton Rouge, La., held on to its 35 employed physicians and cast about for a new strategy.
According to the hospital's accounting model, these physicians were responsible for a total of $6.5 million a year or $100,000 per doctor in employment costs. "We needed to find a new way of handling this," says Curtis Chastain, MD, medical director of the employed physician group, Our Lady of the Lake Physician Group. Dr. Chastain says the hospital brought in Halley Consulting Group, which helped it come up with the following steps.
1. Enhance collections. The hospital's billing department, which was accustomed to billing for inpatient collections, had not been doing a good job collecting for employed physicians. Collections were improved as a result of the hospital's efforts.
2. Improve payor contracts. The hospital also lacked experience in negotiating payor contracts for physicians. Armed with a better negotiating strategy, the hospital revisited these contracts and got better deals.
3. Offload non-producing physicians. Six of the original 35 employed physicians were seeing markedly fewer patients a day. They were let go. This action, along with shifting from a salary to work RVUs, increased the average number of patients seen by a physician from 15 to 26-30 per day.
4. Create a fair model of physician costs. Traditional accounting models used to track hospital-employed physician practices include expenses that independent practices would not be responsible for, such as Joint Commission reviews, signage and unused office space. The hospital kept the model for accounting purposes but created a second model to report expenses to employed physicians that stripped out the extra expenses. This put its physicians on an even playing field with their independent peers.
5. Don’t take credit for ancillary services. The net earnings report should not give physicians credit for lab or x-ray revenue, because this might be seen as a violation of the Stark or anti-kickback laws.
6. Provide production-based compensation. Hospital contracts require employed physicians to see more Medicaid and Medicare patients than they would allow in a private practice. This problem is addressed by paying physicians based on work done, as measured by work RVUs, rather than revenues collected. "This cuts our physicians free from cherry-picking private patients," Dr. Chastain says. "They're going to get paid no matter what."
As a result of these changes, the hospital brought down its loss per physician from $100,000 to $35,000. That might still seem like a light, but Dr. Chastain said that must be balanced by the downstream revenue each employed physician brings in for the hospital. According to Merritt Hawkins, one internist generates $1.6 million in downstream revenue each year.
The hospital has also hired more physicians. As of 2009, it had 160 employed physicians in various specialties. It recently acquired a general surgery group and is negotiating to buy two more groups.
Learn more about Our Lady of the Lake Medical Center.
Read more about hospital-employed physicians.
-Five Hiring Trends at University Hospitals in Cleveland
-Five Tips for Successful Management of Hospital-Owned Physician Practices
-8 Best Practices for Hospitals to Improve Physician Practice Revenues
According to the hospital's accounting model, these physicians were responsible for a total of $6.5 million a year or $100,000 per doctor in employment costs. "We needed to find a new way of handling this," says Curtis Chastain, MD, medical director of the employed physician group, Our Lady of the Lake Physician Group. Dr. Chastain says the hospital brought in Halley Consulting Group, which helped it come up with the following steps.
1. Enhance collections. The hospital's billing department, which was accustomed to billing for inpatient collections, had not been doing a good job collecting for employed physicians. Collections were improved as a result of the hospital's efforts.
2. Improve payor contracts. The hospital also lacked experience in negotiating payor contracts for physicians. Armed with a better negotiating strategy, the hospital revisited these contracts and got better deals.
3. Offload non-producing physicians. Six of the original 35 employed physicians were seeing markedly fewer patients a day. They were let go. This action, along with shifting from a salary to work RVUs, increased the average number of patients seen by a physician from 15 to 26-30 per day.
4. Create a fair model of physician costs. Traditional accounting models used to track hospital-employed physician practices include expenses that independent practices would not be responsible for, such as Joint Commission reviews, signage and unused office space. The hospital kept the model for accounting purposes but created a second model to report expenses to employed physicians that stripped out the extra expenses. This put its physicians on an even playing field with their independent peers.
5. Don’t take credit for ancillary services. The net earnings report should not give physicians credit for lab or x-ray revenue, because this might be seen as a violation of the Stark or anti-kickback laws.
6. Provide production-based compensation. Hospital contracts require employed physicians to see more Medicaid and Medicare patients than they would allow in a private practice. This problem is addressed by paying physicians based on work done, as measured by work RVUs, rather than revenues collected. "This cuts our physicians free from cherry-picking private patients," Dr. Chastain says. "They're going to get paid no matter what."
As a result of these changes, the hospital brought down its loss per physician from $100,000 to $35,000. That might still seem like a light, but Dr. Chastain said that must be balanced by the downstream revenue each employed physician brings in for the hospital. According to Merritt Hawkins, one internist generates $1.6 million in downstream revenue each year.
The hospital has also hired more physicians. As of 2009, it had 160 employed physicians in various specialties. It recently acquired a general surgery group and is negotiating to buy two more groups.
Learn more about Our Lady of the Lake Medical Center.
Read more about hospital-employed physicians.
-Five Hiring Trends at University Hospitals in Cleveland
-Five Tips for Successful Management of Hospital-Owned Physician Practices
-8 Best Practices for Hospitals to Improve Physician Practice Revenues