Wednesday, June 20, 2007

Hospitals and Doctors – Cash Relationships

In the book James Hawkins and I wrote for hospital CEOs, Sailing the Seven “C’s of Hospital Physician Relationships: Competence, Convenience, Clarity, Continuity, Competition, Control, Cash (Practice Support, Inc), Jim observed:

Cash, in many ways, is the measuring stick for the other six “Cs.” The key questions that often determine the quality of the hospital-physician relationship may be the following -"At the points of intersection between the hospital and the doctor, is the hospital putting money into or taking money out of the doctor’s pockets?” If the hospital is contributing to the doctor’s ability to make a living and be professionally and personally satisfied, then the hospital will have gone a long way towards establishing a positive relationship. The converse is equally true.

Let’s examine the converse. What kind of net in patient and outpatient revenues do physicians in various specialties generate for hospitals? Here are the numbers derived from a 2004 survey, Merritt, Hawkins, & Associates conducted with hospital chief financial officers nationwide.

•Orthopedic surgery, $ 3.0 million

•Cardiology, $2.6 million

•Cardiology (invasive), $2.5 million

•General surgery, $2/4 million

•Neurosurgery, $2.4 million

•Internal medicine, $2.1 million

•Family practice, $2.0 million

•OB/GYN, $1.8 million

•Hematology/Oncology, $1.8 million

•Pulmonology, $1.8 million

On average, physicians generate over $1.5 million a year in inpatient and outpatient revenue for affiliated hospitals. That’s one reason why the physician shortage concerns hospitals. Each month that a needed physician is not in place can cost a hospital $100, 000 or more. On the other side of the equation, each time a high tech specialist, such an orthopedic surgeon or cardiovascular specialist pulls out of the hospital to form or own his/her own facility can cost the hospital $2.5 to $3.0 million for each departing specialist.

The cash problem get more complicated when you consider more and more physicians are seeking hospital employment or asking to be paid for doing hospital duties. Physicians are asking of hospitals, “Show me the money!” and I will cover the emergency room, take care of your inpatients, spend time on administrative committees, act as head of a hospital department, permit you to cover my malpractice premiums, and even allow you to pay me a salary.

In “The ‘Hire’ Road: Physician Employment Makes a Comeback” ( News, January 3, 2005), hospital consultant Preston Gee says “Hospital employment is back on the strategy radar screen and spreading like wildfire throughout the industry. If your hospital is not already pursuing the model, or seriously considering it, you are likely an anomaly.”

Today, it is specialists and sub-specialists and hospitalists, who are hot when it comes to physician employment. For hospitals, salaried specialists fill a void – in-house patient coverage, ER coverage, and prestige in the community.

For the physician, other factors are at work – a predictable 40 hour week, which fits the life styles of young or burnt-out physicians, a refuge from the unceasing bureaucratic demands of running a practice and pressures to buy EMRs. Many doctors are saying, “To hell with it, I am going to work for the hospital,” and escape from soaring malpractice costs. For others, there is a genuine desire to collaborate rather then compete with the hospital.

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