Home Cover Story Is belt-tightening squeezing your practice?

Is belt-tightening squeezing your practice?

June 2015

Published in the June 2015 issue of Today’s Hospitalist

FOR THE FIRST TIME, many hospitalists are learning what it’s like to practice with financial clouds looming on their horizon. Hospital administrators are battening down the hatches, and belt-tightening has ensued.

That’s because the C-suite is now facing a storm of change that includes accountable care, reimbursement cuts, bundled payments and population-based medicine. Whether those changes are already in place or in the not-too-distant future, hospitalists are facing closer scrutiny of their operations, along with new questions about proposed (and untried) service lines and a much tougher line on their use of locum staffing.

Other groups are coping with compensation plans that put more of physicians’ own income at risk for the first time, while many programs are under new pressure to figure out how to best use nonphysician providers.

“Every institution is looking at sizeable threats to its bottom line,” says John Dickens, MD, MPH, medical director and hospitalist at Central Maine Medical Center in Lewiston, Maine, and medical director of the Central Maine ACO. “I think the next six months are going to say a lot.” As for belt-tightening in a difficult fiscal climate, “we are absolutely having this conversation.”

But how these financial challenges are filtering down to hospitalist groups varies widely. And not surprisingly, while hospitals may be cutting back on many budget items, no one is suggesting paring back on hospitalist programs. Many hospitals are still going full steam ahead with hospitalist recruitment. Further, hospitalists say that administrators are newly eager to invest in resources such as clerical staff to help hospitalist programs run more smoothly.

But even hospitalists who feel immune to budget cuts are hearing a constant drumbeat of how everyone needs to cut costs and prove value.

“There is no question that it is trickling down,” says Thomas Frederickson, MD, the medical director of hospital medicine at CHI Health. Dr. Frederickson is based at CHI Health’s Alegent Creighton Clinic in Omaha, Neb. “Hospital budgets are tighter and reimbursement is changing, and that affects everyone, including us. They are asking us to take a look at how we can deliver on our value equation more efficiently.”

Pushback on budgets
At the far end of hospitals taking financial hits, more than half of all rural hospitals are reportedly experiencing negative total margins. According to the North Carolina Rural Health Research Program, 51 rural hospitals across the country have closed since 2010.

Of course, hospitalists losing posts in shuttered hospitals are usually snatched up quickly elsewhere. In upper New York state, for instance, where one small hospital in the Trinity Health system is being converted to an outpatient and behavioral health center due to consolidation, the few hospitalists who work there will all have jobs in the system’s other facilities. At the same time, says Amanda Welch, MBA, executive director of hospitalist operations at Albany’s St. Peter’s Health Partners, which is part of the Livonia, Mich.-based Trinity Health, hospitalist recruitment across the three remaining hospitals continues in high gear.

But that doesn’t mean that life for the hospitalists hasn’t changed. “Trinity’s big push “as in most organizations at this moment “is standardization, streamlining, Lean everything,” explains Ms. Welch, who oversees the operations of the 75-FTE hospitalist group. And “this is the first time we have submitted the budget to the parent company, and there is a lot more pushback than we have experienced in the past.” The conversation now is “how can we be creative with our current resources or pilot projects on a smaller level,” instead of just automatically hiring new FTEs.

Many predict that as hospitals deal with financial woes, hospitalists could become busier and more critical to hospital operations than ever.

Hospitalist Brent Burkey, MD, is the vice president of medical affairs at Fairview Hospital in suburban Cleveland, one of the Cleveland Clinic’s community hospitals. As Dr. Burkey sees it, hospitals that haven’t “already accepted the financial responsibility to provide affordable care to their patients” will have a tough time surviving the looming changes in health care.

Due to the increasing urgency to optimize throughput, quality performance, HCAHPS scores and EHR use, Dr. Burkey believes there will be a growing demand for hospitalists and for their participation in hospital leadership.

“The challenge,” he says, “will be to recruit, retain and provide the leadership training needed to develop new clinician leaders.”

Work investments
Within Dr. Dickens’ hospital in Maine, he says that a bit of austerity has trickled down, mostly through leaving positions unfilled until the new fiscal year.

As for the hospitalists, they are now working with documentation consultants newly hired by the hospital to improve billing and the all-important case-mix index. Another example of “the hospital investing in the work environment,” he points out, is communication training for physicians and nurses to improve patient safety, collaboration and satisfaction scores.

He and his colleagues are also dusting off 25 to 30 small quality improvement projects designed to reduce care variations; the physicians had started those projects some years ago, but they had fallen by the wayside. According to Dr. Dickens, if the hospitalists can cut out waste like ordering urinalyses for every patient and distributing incentive spirometers “indiscriminately,” they should be able to stave off more drastic types of belt-tightening.

“If our patients get one less needle stick per hospital visit, it will add up to safer care and a lot of savings,” he says. “If you have 10,000 discharges a year and you can cut $100 from each one, that’s the first $1 million in savings right there.”

In Omaha, Dr. Frederickson is now trying to figure out a less costly way to cover nights, a big ticket item at small and midsized hospitals where night work is mostly nonbillable cross coverage.

“That work has to be done, but we don’t have the economies of scale of a 600-bed hospital,” he points out. “So we are asking if there are other ways to do it. Should we be leveraging NPs and PAs to help? Should we be covering from home, or covering more than one site at a time? These are the types of things we are being asked to look into.”

Cutting the cord on locums
At Trinity’s St. Peter’s Hospital in Albany, one directive from the top is to get a handle on locum use and expenses. As Ms. Welch points out, cutting their dependence on locum staffing has long been a priority of the hospitalist group.

“But our CFOs are definitely more keen to know what we are spending on locums and why we still have to use them,” she says.

As Thea Dalfino, MD, St. Peter’s chief of hospital medicine, explains, “Just getting rid of five locums will save us $1 million.” The trick, of course, is to figure out how to do so without burdening full-time doctors with more shifts and burning them out.

Dr. Dalfino’s first priority is to hire more permanent hospitalists. Her second is to cross-credential a small group of physicians so they can be deployed across the whole system during a shortfall.

“The problem is, we don’t have a surplus of doctors to begin with,” says Dr. Dalfino. “The vision is to eventually have enough doctors to move a select few who might be interested and coordinate them within the different sites. The cost-savings would come from not having to pay for locums.”

Many groups are also being asked to look at their provider mix. In Ohio, for instance, “our hospitalist group at Fairview just hired its first NP,” says Dr. Burkey.

That’s due not only to a new focus on program costs, but because nonphysician practitioners in the state can now admit and discharge. “A lot of systems,” Dr. Burkey points out, “have to catch up with their bylaws to allow those individuals to have certain hospital privileges.”

But cost concerns are often behind the decision to hire more NPs and PAs. Hospitalist consultant O’Neil J. Pyke, MD, is the national director of hospital medicine for Keystone Healthcare Management, which is based in Memphis, Tenn. He has been working with one group that is “dramatically increasing its midlevels because you can get midlevels at a third of the cost” of hiring doctors, while maintaining good quality of care. The staffing ratio of PAs and NPs to physicians in that program, Dr. Pyke explains, has gone from 4:14 to 6:12.

Tracking new data
Another way financial troubles for hospitals are affecting hospitalists: nervous hospital administrators asking for hospitalist help in getting their financial houses in order.

“The C-suite wants the hospitalist service to fix every problem because we are part of every problem,” says Sterling H. Ray III, MD, chief of hospitalist medicine for the ARC Hospitalist Program of Texas’ Austin Regional Clinic. But that doesn’t necessarily mean, he adds, that “we are a part of every solution.” To survive tough times, says Dr. Ray, hospitalists need to prove not only how valuable and indispensable they are, but educate administrators about their limitations.

Dr. Ray offers the example of a project that his group has been working on in response to an administrative mandate: discharging patients before 11 a.m. The hospitalists clearly have a big role to play in that initiative, but they have also collected data that show that even when they write discharge orders early, patients typically don’t leave the hospital for another three hours. In virtually all those cases, the reasons behind those delays have nothing to do with the hospitalist group.

“Because of the data we are collecting and analyzing, our conversations with our hospital partners have become more technical in the last year,” Dr. Ray says. While hospital administrators are finding those data to be very useful, “we have to demonstrate what we do and what we don’t do, and how we need better support from the other services.”

Pressure to improve
As for physician compensation, consultant Dr. Pyke points out that belt-tightening has not led hospitals to cut back on hospitalist pay.

“You aren’t going to see that,” he says. “What is happening is that hospitals are getting smart and saying, ‘I will pay you what you are getting paid now, but some of that money is going to be at risk. You have to have some skin in the game.'”

And in a number of hospitals where he has been consulting, Dr. Pyke says that hospitals are “giving notice” to hospitalist groups that their current contracts are up for renegotiation. Hospitals are making it clear that in times of financial constraints, national or regional management companies can make a compelling argument for their ability to improve throughput and HCAHPS scores.

“Hospitals don’t necessarily want to change their outsourced providers or outsourcing model,” Dr. Pyke points out. “But they are insisting that hospitalist performance has to improve and demonstrate alignment with the hospital or health system.”

Both of those demands have come to the Austin market. In the next several months, Dr. Ray expects that his hospitalist group will, for the first time, have some quality incentives as part of their compensation.

“Shifting from salary and productivity-based compensation to quality-based compensation is very new, but we have to reinforce good behavior or remove maladaptive behavior,” says Dr. Ray. That change in compensation will be the latest development in a several-year process to collect and report data on a number of components “cost per DRG, core measures, infection rates “that the group is using to prove its value to the health system.

That complicated effort, he says, was a reaction to pressures from the corporate parent of Seton Healthcare, which owns most of the hospitals they work in (Ascension Health) to scrutinize budgets and operations.

While Austin Regional Clinic’s physicians have worked hand-in-hand with Seton Healthcare for decades, “the writing was on the wall. Essentially, they were asking, ‘What do we get from you that we can’t get from national groups that are out there advertising their value and services?'”

It was, he points out, now or never to invest in figuring that out. “There is a lot of competition,” Dr. Ray says, “and there are a lot of people who want to underbid you to get in the door. You can’t take anything for granted.”

Deborah Gesensway is a freelance writer who covers U.S. health care from Toronto.