Thursday, August 12, 2010

Paying Hospital Based Physicians Must Be Contingent On Far More Than Productivity

The pendulum that swung away from making physicians hospital based ten years ago has clearly swung back. Hospitals are moving away from contracting with independent groups for many services and returning to salaried arrangements. But this time the payment arrangements are far more complex. It appears the hospitals have learned from mistakes made in the 90's when hiring physicians was last popular. In that era many physicians benefited from the naivete of hospitals in negotiating these arrangements.

I know of one hospital that plunged headlong into hiring physicians not just for hospital based services but they also set up a large primary and specialty care group. This new practice was largely responsible for the subsequent year's $5 million dollar profit for the hospital. The problem was that the practice itself lost $11 million that year.

There is also the case of two primary care physicians who sold their practice to a large hospital chain and made a big windfall. The chain kept them on seeing their same patients for a nice salary. This continued until the chain decided to dispose of all owned practices and paid these two doctors another nice windfall to take responsibility back for their patients, which they did. They are now back to where they started except they have pocketed two nice checks in the meantime.

Well this time the hospitals have started protecting their investment with payment tied to performance measures. It started with simple productivity measures. Physicians get paid for the number of patients they saw. Then it was discovered that not all patients took the same amount of resources, so RVUs were developed. It soon became obvious that there were other duties involved and time spent in a physician's day can be far more complicated than this.

According to Hospital Review, the following are key factors in payment formulas for salaried physicians today:

-Clinical services provided
-Administrative duties performed by the group
-Call coverage
-Quality measures, which still tend to be process oriented
-Measures tied to strategic objectives
-Professional fees

There are many factors driving physicians and hospitals toward salaried arrangements in today's environment. Clearly hospitals do not need to repeat the mistakes made 20 years ago. But the contracts will need to be based on a number of factors that include volume, complexity, quality, customer service and strategic initiative indicators.

More on this later.

Mark Brodeur

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