Published in the May 2010 issue of Today’s Hospitalist
Your hospital COO wants to talk. He says he needs your hospitalist group to do more “without increasing staff. And while he’s willing to pay you more to get the job done, most of that new money will be tied up in performance bonuses and incentives.
If that sounds like a bad dream, you may be due for a reality check. As hospital administrators start to truly understand how hospitalist programs can improve patient care and their bottom line, many are asking their programs to step things up. And if your group can’t improve its performance, your COO may start looking for other leadership that can.
That’s the consensus of program directors, consultants and management companies who have seen hospital leaders become more much aggressive in their expectations of hospitalist groups. Your program saved half a million dollars last year by reducing length of stay? This year, administrators expect you to make it an even $1 million. The same executives who appreciated the extra $1 million your group raised in additional revenue last year through improved billing and documentation want $2 million this year.
And if the number of hospitalist programs in transition is any indication, hospitals unhappy with their hospitalist program are more than willing to shift management gears and put someone else in charge.
While there are no good data on how many programs are switching management models, practice consultants and management companies say they’re making a good living by going into troubled programs and reengineering them. As they’re quick to point out, consultants are being called in to evaluate both outsourced groups and programs employed by hospitals.
While administrators’ heightened demands continue to fuel the debate over the best management model for hospitalists “hospital-employed vs. an outside management company or private group “others say the issue of who hospitalists work for is quickly becoming obsolete. Instead, the issue is now which group can produce the best value for a particular hospital. Groups that can’t deliver are more likely to find themselves under new management, no matter who they work for.
A new financial reality
Why are hospital leaders leaning so hard on hospitalist groups to increase their bottom line? Ronald Greeno, MD, chief medical officer for national management group Cogent Healthcare in Brentwood, Tenn., says everyone in health care is looking for ways to work under new systems of care that promise to reward performance. Initiatives like bundled payments and pay for performance are just the tip of the coming iceberg, and hospitals are scurrying to prepare.
“Payers are putting dollars at risk to force doctors and hospitals to figure out better ways to take care of patients,” Dr. Greeno explains. “To do things really well “and get paid as much as possible “hospitals need physician partners.”
For many executives, hospitalists are an obvious place to start. As an example, consultant Martin Buser, MPH, a founding partner of Hospitalist Management Resources LLC in Del Mar, Calif., cites one hospitalist group he consulted with that, after receiving recommendations on how to improve the program, helped the hospital go from a $1 million annual loss to a positive $16 million hospital bottom line in one year.
“The hospital called us back after that first year and asked, ‘What can we do to make the program even better?’ ” Mr. Buser says.
Some hospitals think the best way to partner with hospitalists is to bring them in-house. That’s part of a bigger trend in which health delivery systems are once again trying to vertically integrate health care, owning every part of the process. Many health systems have gone on a buying spree, purchasing physician practices “including hospitalists “wherever possible.
Ownership and control
The trend toward integration and closer partnerships has some predicting that hospitals will increasingly move toward hospital-employed groups.
“Hospitals realize that they live or die by whether they have a functioning hospitalist program in place,” says Leslie Flores, a principal with Nelson Flores Hospital Medicine Consultants in La Quinta, Calif. “When they realize how important hospitalists are to their ability to provide core services, some hospitals feel they need more control over that service.”
Tarun Kapoor, MD, a hospitalist in southern New Jersey who’s a consultant with Ingage Health LLC, sees that line of thinking in many of the practices he works with. “Hospitals are saying, ‘We need to own our docs to best leverage our investment in these expensive programs,’ ” Dr. Kapoor says.
Many hospitals want more in-house control, Dr. Kapoor explains, because hospitals, not physicians, stand to take the biggest hit from new initiatives being rolled out.
He cites the Physician Quality Reporting Initiative as an example. Most hospitalist groups may see only an extra few thousand dollars for following the initiative’s onerous reporting requirements, but hospitals will lose much bigger dollars if physicians don’t comply with similar hospital-based quality reporting, such as core measures.
There’s a similar disconnect, Dr. Kapoor points out, in incentives to improve coding and documentation. While the difference between documenting heart failure and acute systolic heart failure can add up to $2,500 per patient “a huge amount for hospitals ” physicians see little of that.
“The incentive for the hospital to get it right is bigger than ever,” Dr. Kapoor says. “That’s why many hospitals say that owning their docs leads to a better alignment of incentives.”
With so much on the line, it’s no surprise that many hospitals are walking away from programs that aren’t making the grade. In parting ways with outside groups, for instance, some hospitals feel they can run an in-house program less expensively “or step in more decisively to fix problems.
That was the experience of Beverly Hospital in Beverly, Mass., which decided in late 2008 to convert a local private hospitalist group to an in-house program.
The hospital’s first priority was to improve retention and recruitment. That’s because the outside group had lost physicians faster than it could replace them and had proposed cutting back services, says Peter Short, MD, Beverly’s senior vice president of medical affairs.
After taking the program in-house, the hospital was able to stabilize the group by offering retention bonuses to the remaining hospitalists and recruitment incentives to newly-hired physicians. The hospital was also able to get hospitalists on board with mutually agreed upon program changes, according to an established timeline.
Those changes allowed the group, says Dr. Short, to focus as a team on providing high quality care. As a result, the program has since seen much better scores for patient, primary care and hospitalist satisfaction.
“The quality of care has improved while the hospital’s subsidy per FTE has decreased 15%,” Dr. Short points out. “From everyone’s perspective, the program has been a success.”
Consultants are quick to point out, however, that the exact same recruitment and productivity problems can crop up in hospital-employed groups. Many hospitals divorcing themselves from in-house groups have the same complaints.
O’Neil Pyke, MD, a practicing hospitalist, medical director of Medicus Hospitalist LLC and founder of AMP Hospitalist Consulting LLC, is a staunch proponent of hospital-employed groups. But he’s seen a number of in-house programs that lack organizational expertise and muscle.
“Some hospitals try to do it on their own and figure that it’s easy enough to get some physicians on the schedule, which couldn’t be farther from the truth,” Dr. Pyke says. Because most hospitalists are not proceduralists like cardiologists, he adds, they don’t bring in enough revenue from professional billing. “It takes expert guidance to make the program more efficient and to implement cost-saving measures,” he says “savings that some hospitals are at a loss to produce on their own.
Aspirus Wausau Hospital in Wausau, Wis., is a case in point. It recently decided to re-launch its existing hospitalist program, but moved to outsource the program management.
Jeanne Rowe, MD, the hospital’s CMO, says she had no initial intention of turning the group over to a management company. But “the daily operational management of the hospitalist group was taking a significant portion of my effort as CMO,” Dr. Rowe says.
Despite those efforts, the group continued to struggle with staffing, patient throughput and a fluctuating census. “The physicians reported that they felt like history and physical machines,” Dr. Rowe says. “They felt like residents, not hospitalists.”
Organization and cohesiveness suffered. The physicians never felt they had time to gather or analyze data, and they even stopped holding monthly operational meetings. “They were working very hard,” Dr. Rowe says, “but they weren’t working efficiently. ”
Because the hospitalist program and physician satisfaction were two of the hospital’s top priorities, Dr. Rowe first brought in a physician consultant who specialized in in-house programs. But the group didn’t have the leadership it needed, she points out, to implement that consultant’s recommendations.
Only then, she says, did she bring in several hospitalist management groups to consult, eventually opting to turn program management over to the Canton, Ohio-based Hospitalists Management Group. While she hopes new management will raise satisfaction rates among hospitalists, primary care physicians and medical staff, she also wants the hospitalists to take leading roles in areas like quality and technology.
“The hospitalists should be the ones showing the rest of the medical staff how care processes work,” Dr. Rowe explains. “They should be saying, ‘Here are the evidence-based protocols, here’s how CPOE is going to help us, here’s how we need to coordinate transitions of care.’ The hospitalists should be our champions.”
A fast-moving target
Hospitalist management groups say they hear similar stories from so many hospitals with in-house programs that more than half their business now comes from taking over faltering groups previously employed by hospitals.
Stephen L. Houff, MD, CEO of Hospitalists Management Group, says that several years ago, he definitely detected a bias on the part of hospitals to build their own programs. But nowadays, his company is frequently called in to evaluate programs because administrators are unhappy. While issues like physician recruitment and satisfaction scores come up in these conversations, Dr. Houff says the overriding concern is that these programs don’t produce enough value.
Part of the problem, Dr. Houff says, is that hospital medicine is such a fast-moving target that programs that used to get the job done when they were first started can’t always keep up.
“There are a host of issues that hospitals may not have thought they would need to address when they first built the program,” he explains. But when administrators now ask hospitalists to tackle issues like readmissions, they find they don’t have the leadership to get the job done.
Hospitals are also learning that running a hospitalist program is much different than managing other types of specialists. “Other fields have a wealth of physicians with 20-plus years of experience,” Dr. Houff says. “Hospital medicine is an explosive field populated by young physicians, many of whom are stepping into a leadership role for the first time in their career.”
Chris Frost, MD, senior vice president of hospital medicine for TeamHealth Hospital Medicine in Knoxville, Tenn., says that hospitals are also discovering that just because they “own” physicians doesn’t mean that they can hold them accountable.
“I see hospitals that have a difficult time getting physicians to march in stride with them,” Dr. Frost says, “even if the hospitals are signing the physicians’ paychecks.” Many develop a level of tolerance for the status quo and may not push for required changes.
“Hospitals know the general direction they want to go in, but there is often anemic measurement of metrics. That makes it difficult to manage the process,” says Dr. Frost. “They’re looking for partners who will be accountable for the metrics that determine the hospital’s success.” Those include quality and fiscal performance, he adds, as well as the satisfaction of stakeholders.
All about value
What do these changes mean for the specialty? Some say that shifting management strategies is a natural result of changes taking place in health care financing. Many say that in the end, the exact model a group is using “in-house vs. outsourced “will be less important than how well that group performs.
“Models will be hospital-centric, not physician-practice-centric,” says Cogent’s Dr. Greeno. “To be successful, hospitalists will have to be aligned with their hospitals, share risk and lend themselves to working under a system of care.”
The most important question, Dr. Greeno adds, will be how effectively a group helps its hospital succeed. “Hospitals will be fronting the effort, pooling part A and part B money,” he explains. “Some will come from physician billing, but the hospitals are going to be putting in extra dollars. They’ll be the financial engine that drives this.”
No matter which management model your hospital opts for, consultants say, you should expect the increasing scrutiny of programs to continue. “Hospitals are going to be questioning the cost-to-benefit ratio,” says Mr. Buser, “and asking how programs add more value.”
Edward Doyle is Editor of Today’s Hospitalist.