Home Career Tough balancing act for teaching hospitals

Tough balancing act for teaching hospitals

October 2009

Published in the October 2009 issue of Today’s Hospitalist

For many hospitalists, teaching hospitals have typically been seen as sheltered places to work. While these facilities might not be able to match the wages that private groups pay, there have traditionally been plenty of perks, from lighter patient loads to opportunities to teach and do research.

Increasingly, however, it looks like hospitalists at teaching hospitals are being hit hard in tough economic times. Like their colleagues at nonteaching hospitals, these hospitalists are getting a lot of heat to increase productivity and lower program costs.

While physicians at nonteaching hospitals have to deal with slimmer (or non-existent) profit margins, academic centers are reeling from their own litany of problems. They face not only dwindling endowments from a down stock market, but cuts in a major source of support: state funding.

That has left the directors of these programs struggling to strike a precarious balance between preserving their teaching mission and mitigating their institutions’ financial woes. Faced with staff reductions and salary freezes, these hospitalists are working hard to hold onto their physicians, shave costs and find new business.

Today’s Hospitalist recently spoke with the directors of four hospitalist programs about the challenges they’re facing “and the innovations they’re embracing “to ride out the downturn.

Still time for teaching?
Like academic centers across the country, the University of Virginia Medical Center, Charlottesville, is reeling from revenue shortfalls and state-funding cuts. And the university is looking beyond hiring freezes to stanch the flow of red ink, reports George Hoke, MD, section head of hospital medicine.

Ancillary staff, for instance, have been cut. “We were short to begin with,” says Dr. Hoke, who launched the seven-hospitalist program in 2006. “That means my docs end up faxing, completing forms and other clerical tasks.”

Those cuts come on top of two years of compensation freezes and a new department of medicine policy that calls for a 10% salary cut for any faculty member who doesn’t meet RVU targets two years running. (For full-time faculty, the administration has set that bar at 80% of the MGMA-mean RVU target of 3,711 because hospitalists spend 20% of their time teaching.)

“We were already being pressured to increase volumes,” Dr. Hoke points out. “But now we’re at risk for salary reductions.”

The Virginia program started as a largely non-teaching service designed to unburden the residents and later added the teaching component. Now, Dr. Hoke fears that teaching time “which has been a big draw for the program’s hospitalists, despite the fact that it isn’t reimbursed very well “will be cut back. The medical center will likely need to expand the non-teaching service because more than 70 new beds are slated to be added in 2011.

“The danger is that the administration will fall out of love with medical education and in love with 24/7 hospitalist coverage,” he says. Already, he adds, state budget cuts have reduced compensation for teaching activities by about 15%.

Dr. Hoke worries that the faculty defection that’s starting to occur in other departments within the university may soon hit his. “I’ve got a stable group that’s committed to teaching,” he says. “If I asked, ‘Who wants to go over to a non-teaching service?’ and offered an additional $20,000, no hands would go up. People who are concerned about the viability of their positions will start to leave.”

In the meantime, Dr. Hoke adds, the group has added one additional week of clinical time per full-time physician per year. The hospitalists have also decided to have one physician cover multiple services “a combination of general medicine and geriatric consults, palliative care and hospitalist service “especially on weekends.

Taking a hit in compensation
The hospitalist program at Oregon Health & Science University (OHSU), Portland, is within a freestanding division of hospital medicine, which is part of OHSU’s department of medicine. The division is further carved up into three fiscally distinct programs with separate faculty, says Alan J. Hunter, MD, who heads the division and all three programs: the medical teaching service that was established in 1998, and the more recently added clinical hospitalist service and preoperative medicine clinic. The older teaching service is funded exclusively through the department of medicine.

Before the clinical service and preop clinic were added, Dr. Hunter says, the department’s focus on education provided a buffer during economic hard times. But that protection is no longer available, and the division is being challenged to find ways to cut costs.

“We are certainly being tasked,” Dr. Hunter says, “to decrease costs or increase productivity.”

That’s less of a problem for the preop clinic unit, which has a lease arrangement with the hospital. “They’re in good shape, and my division bears less of the financial risk because the hospital supports the service,” he says. That’s not the case for the clinical and teaching hospitalist units, however.

OHSU, like many mammoth academic centers, was facing financial challenges even before the recent downturn. Now, with state funding further reduced, it’s in crisis mode, with the university recently postponing plans to open two new patient towers.

The budget cuts and economic pressures are hitting the 15-member university section of the hospitalist division hard, especially in terms of compensation. Salaries have been frozen since 2008, and the hospitalists staffing the teaching service have taken on an additional 10% of uncompensated care. While that has helped boost revenues, it has physicians working about two additional weeks per year. The salary freeze is also affecting hiring. The clinical hospitalist service this year lost two physicians to fellowships and one to illness, and recruiting their replacements was tough.

“Staffing is one of the biggest challenges right now for the clinical program,” Dr. Hunter says. “While we’ve got a pretty good package overall, it is tough to compete with non-academic centers for hospitalists.”

For the teaching service, the challenges are a combination of age-old issues of being tied to department dollars and new economic pressures. OHSU wrestles with duty-hour restrictions and still uses teams that consist of one resident and one intern. While the group opted for that model to improve the educational experience, it limits the volume of patients treated “and potential revenue.

Compared with the two- or even three-intern teams that are more standard elsewhere, Dr. Hunter explains, “we probably average about one-third fewer patients per team than other teaching programs.” At present, he adds, “we are tied to this team model.”

To meet a university-mandated budget reduction last spring, he made the difficult decision to cut out CME funding for the year, in addition to freezing salaries and cost-of-living increases. Dr. Hunter fears he’ll have to pull money from other critical educational or clinical budget items in the near future.

“In the absence of new resources, I’m running out of options, unless we can increase revenues without new costs,” says Dr. Hunter, adding that his undergraduate degree in economics has finally “come back to haunt me.”

Toward “firmer financial footing”
Well known for its strong academics, the University of Chicago’s hospital medicine program is also one of the country’s largest, with 28 physicians. But even the venerable Chicago program has had to deal with hard times, acknowledges hospital medicine section chief David Meltzer, MD, PhD.

“There were a lot of very rapid cuts here, and the process of going through them has been tumultuous for all of us,” says Dr. Meltzer. “What we’re hoping at this point is that the cuts will help us get back on firmer financial footing.”

Of course, the hospitalists aren’t the only group at the medical center being affected. A January 2009 mandate, across the board, was to cut 7% of total costs at the medical center. No program escaped some combination of staff cuts, salary freezes and hiring slowdowns, Dr. Meltzer observes.

For the hospitalists, the cuts have primarily affected program staffing. While patient volumes have remained steady this year, the hospitalists are doing more with fewer physicians. That means they’ve had to figure out how “and where “to find that 7% cost reduction.

Dr. Meltzer says the group ultimately identified a three-hour period of staff overlap between the day and evening shifts. By reallocating staff and adjusting schedules, the program was able to cut the equivalent of nearly one full-time hospitalist per year. The group also consolidated some services to make better use of its staffing.

“We had a little slack,” Dr. Meltzer says. “This gave us an opportunity to become a little more efficient.”

The net effect of that staffing change, when combined with a hiring freeze, “is that we’ll be down 10% in our workforce this academic year without a commensurate patient-volume reduction,” he explains. Although the hiring freeze was recently lifted, Dr. Meltzer reports that his group is still playing catch-up in terms of trying to hire.

And not all the institutional constraints were relaxed, he adds. Cuts recently forced the group, for example, to lay off a nurse who had worked with the program for several years on quality improvement initiatives. There are no plans to replace her.

Dr. Meltzer also says that the hospitalists are looking for ways to enhance earnings and billings. To that end, they now bill for procedures that the service “used to absorb.”

The hospitalists are also “coding a lot more carefully,” especially when attendings supervise resident-performed procedures like paracenteses. In addition, the program recently combined its five-day-a-week medicine-consult service and its inpatient anticoagulation service to offer both seven days a week. “It’s a combination of new business and looking for efficiencies,” Dr. Meltzer explains.

“We’re not sure where all this will lead,” he adds, “but my sense is that what we’ve done so far will allow us to cover any budget reductions.”

On the academic side of things, Dr. Meltzer says that the hospitalists are being nudged, individually and collectively, to maximize research funding possibilities and to write more grants. “We’ve always been vigilant,” he says, “but we’re even more so now because we need that funding.”

Saving money by standardizing care
So far, the hospitalist program at Lehigh Valley Health Network, which serves two hospitals in southeastern Pennsylvania, has escaped budget and staffing cuts. But the pressure is on to boost performance, observes Michael Pistoria, DO, chief for inpatient medicine.

Heading that performance list is reducing length of stay and cost per case. Another goal is to increase outside referrals as high-revenue services, such as elective surgeries, drop off.

“The administration hasn’t sent down any mandates yet, but we’ve certainly gotten a gentle push to start looking at care standardization,” says Dr. Pistoria. “So we’ve started our own version of Toyota Lean to figure out how we can streamline things and get patients to the most appropriate level of care more quickly.”

Several processes have emerged as targets for standardization, from admission and discharge communications and hand-offs to lab utilization. In the communications realm, the 16-hospitalist group has developed a template to guide conversations between the ED doctors and the hospitalists to make sure that “receiving” physicians have the information they need to avoid playing phone tag later.

And the hospitalist charged with standardizing labs discovered that hospitalists were ordering many STAT labs unnecessarily, given the lab’s generally fast turnaround. That was driving up costs and utilization.

To preserve its academic mission, the group is eyeing new potential revenue sources. The most promising area, Dr. Pistoria thinks, is telemedicine consults, which Lehigh Valley’s pediatrics department already provides. “We’ll build off of that, once we reach a comfort level,” he says. The hospitalists hope that tele-exams could help physicians in outlying facilities determine whether they could stabilize or start treating patients themselves, in the case of a cellulitis, or whether transport should be via air or ground, based on patients’ heart and lung function.

Tele-teaching opportunities is another area that is also being explored. “The potential is enormous,” Dr. Pistoria says. “Of course, we want to encourage those outlying facilities to send the neuro and cardiac patients.”

Bonnie Darves is a freelance health care writer based in Seattle.