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Crunch Time

From: The Hospitalist, February 2009

HM needs to brace for a rugged economic environment and seize new opportunities

by Richard Quinn

Before his recent promotion, hospitalist Garth King, MD, medical director of the Schumacher Group at Southwest Medical Center in Lafayette, La., had hoped to add a fourth full-time doctor to his roster. The hiring made sense at the time. As recently as last summer, the group’s three full-time doctors were averaging 35 to 40 patient encounters a day, enough to warrant the additional hospitalist position. But the group’s census dropped 25% in the fourth quarter of 2008, and these days, Dr. King simply can’t justify the math to bring on another six-figure salary.

“Over the past two, three months, patient slowdown has pushed off the ability” to add staff, Dr. King explains. “We’ll wait until things ramp up again, once we get the numbers to where they were before.”

Dr. King could be in for a long wait. The fiscal meltdown that began in 2007 and last year mushroomed into a full-blown recession has taken hold in the world of hospital medicine. More and more, hospitals are reporting decreased revenues and increased levels of charity care. The result: Planned group expansions have been put on hold, open positions are going unfilled, and some hospitalists have been laid off.

Constituencies from health-system executives to rank-and-file hospitalists to economists remain cautious of acting too boldly before President Obama and the new Congress unveil much-anticipated changes to Medicare billing and reimbursement schedules. Aggressive reforms, such as extending health coverage to more than 45 million uninsured Americans, could swamp hospitals with new patients and lead to cuts in reimbursement rates. A more temperate approach by the new administration could leave a relative status quo.

Brace your HMG for tough economic times

What can hospital medicine groups and their leaders do to insulate their practice from the economic crisis and the possibility of drastic changes to government reimbursements? Interviews with nearly a dozen industry leaders suggest a few tactics:

  • Prove value. One-on-one relationships with chief executives are important, but data is undeniable. Track as many metrics as possible—length of stay, throughput, patient encounters, coding and billing efficiency—and present the data on a regular basis.
  • Be objective. Negotiation is one thing, brinksmanship another. Understand the group’s role in an overall healthcare perspective and tailor data to accentuate the positives. Remember data points aren’t just for the group’s singular point of contact. They have to impress the boss’ boss’ boss.
  • Branch out into less traditional roles. Take on tasks some specialists might be reluctant to do, including intubations, radiology, and placing central lines. A specialist remembers the group that freed them up from four central lines, which afforded them the time to perform a more lucrative procedure.
  • Offer the group’s expertise to the hospital community. Have an employee skilled at coding and billing? Think about scheduling a hospitalwide seminar to work with others involved in billing.
  • Develop a strong relationship with the chief financial officer. Data is king, but cash rules. Profit-and-loss statements often push policy, and the person in charge of the balance sheet pulls a lot of weight.

Either way, hospital medicine has never endured a recession so deep that some healthcare economists liken it to the Great Depression, so the practical effect on the industry is difficult to forecast with accuracy. Hospitalists and their observers agree on one thing, though: This is the year hospital medicine will have to prove its worth more empirically than ever. Positive public relations and studies proclaiming reduced lengths of stay and sped-up emergency department throughput have given the industry a “rarified position as a specialty,” one researcher says. But in constrictive economic times, those figures likely will be revisited, says Mark Pauly, professor of healthcare management at The Wharton School at the University of Pennsylvania. “When revenues are falling, you go back and look at that evidence again,” Pauly says. “Is it really bulletproof?”

Still, the prognosis for economic health is not all bad. Many hospital medicine leaders think the concerns over whether chief financial officers will look to hospital contracts as places to cut spending might spawn improved coding and billing, create new partnerships between hospital medicine groups, and push new revenue streams, such as preoperative clinics or inpatient palliative-care initiatives. This also is a time for hospital groups to reaffirm to their respective C-suites—through a deft combination of data and intangible relationships—that they are an indispensable staffing measure that their respective institutions cannot do without.

“This is an opportunity for hospitalists,” says Joe Miller, SHM’s executive advisor to the CEO. “The problem is we’ve got young, inexperienced leaders. Can they see this? Can they recognize this and not see this as a challenge?”

Problem Identification

Hospitalist Marc Westle, DO, FACP, president and managing partner of Asheville Hospital Group in North Carolina, thinks tracking, collating, and reporting quantifiable metrics is the fastest way to convince hospital executives that hospitalists are not the place to cut spending. And when those same executives are looking at staff reductions—53% of hospitals already are cutting or considering cuts, according to the most recent American Hospital Association data—hospital medicine leaders need to be able to point to specific numbers to prove their worth. Detailed information on coding, cost of capture, revenue production, and patient referrals generated are data points that can strengthen a presentation, especially if an argument shows that revenue production and collection is maximized.

“Don’t leave money on the table,” Dr. Westle says. “Your billing department is only going to bill what your physicians tell them to bill. For hospital groups that have not mentioned both the upfront E&M coding by their doctors and the back-end billing efficiency, those are definite things they need to do, today or yesterday. That efficiency may not have hurt them before, but it could hurt them in the next 12 to 18 months.”

Dr. Westle and others also note that hospitalists have to see the economic downturn through the eyes of hospital executives—and the hospital’s bottom line. Recent AHA data show 29% of hospitals are reporting moderate decreases in admissions, and another 9% of hospitals categorize those drops as significant. More than 3 in 10 hospitals have reported a noticeable reduction in elective procedures.

Pauly, the Wharton professor, also cautions that a tightened economy might force primary-care physicians (PCPs) back into hospitals, taking away patients now in the hospitalists’ purview. Hospital medicine’s beginnings trace to those PCPs acquiescing hospital rounds to a new intermediary—hospitalists—in return for the ability to focus more on their daily practices, Pauly says. Ancillary benefits included not being on call 24 hours a day, seven days a week.

“A lower income may change that willingness,” Pauly notes. “Leisure is a luxury good, and if your revenue is falling, you may want to get that business back.”

Another part of the equation is the rising tide of the uninsured, currently estimated at 47 million. It remains to be seen what effect the uninsured have on overall healthcare spending in the U.S., which is projected to rise 6.6% in 2009 to $2.6 trillion, according to the most recent data available from the Centers for Medicare and Medicaid Services (see Figure 1, below). Those projections, however, were released nearly a year ago, long before the severity of the current financial crisis became clear. Pauly says adjusted numbers released this winter, which assumedly will reflect the nation’s ever-deepening financial hole, should be a better gauge on whether healthcare remains as recession-proof as some think it is.

Figure 1: Healthcare Spending in America
Figure 1: Healthcare Spending in America
Healthcare spending is forecasted to grow a steady 6%-plus in the next few years, according to federal estimates. The government data, however, was compiled earlier this year and does not reflect the current economic crisis. New estimates are expected by the end of the first quarter of 2009.

Hoangmai Pham, a senior health researcher at the Center for Studying Health System Change and lead author of a study on how the hospitalist model has focused attention on patient-care coordination, says changes at the federal level will be a driving factor in the strength of healthcare. Roughly 50% to 80% of a hospitalist’s annual salary comes from clinical billings, according to SHM data. The balance comes from hospital subsidies, in the form of annual contracts, monthly stipends, or pay-for-performance bonuses. Drastic changes in payment policy could have drastic implications on those subsidies.

“The ground is very fluid right now, in terms of where payment policy is going,” Pham says. “If I were hospitalists, part of the nervousness would be I’m not sure what direction things are heading in.”

Potential Solutions

Many hospitalists, however, see positives in the economic morass. Hospitalist Troy Ahlstrom, MD, is financial director of Hospitalists of Northwest Michigan in Traverse City, which serves roughly 400 beds at Munson Medical Center. He says groups can prove their worth by showing how they make it easier for other specialists—cardiologists, orthopedists, etc.—to perform the more lucrative procedures on which hospitals rely for higher reimbursements. Then, the group can negotiate for a piece of the savings under a pay-for-performance contracting model.

“What can we do to help make you more efficient, so you can do two extra surgical cases a week?” Dr. Ahlstrom says. “What if the hospital itself realizes a 15% increase in efficiency? Work out a deal that if we save you 15% … you give us a cut.”

Dr. Westle suggests analyzing cost accounting as another way to offer evidence of productivity. Paying overtime for back-office staff is ineffective if your salary overhead is greater than your billing collection. He also recommends a virtual office to employ billing specialists who work from home and doctors without off-site offices, eliminating real estate, utility, and infectious-waste-disposal costs that can cost private practices 55% to 60% in overhead costs.

Partnerships and reinvention are other avenues for cost-effectiveness. Some smaller, single-hospitalist groups might merge to cut costs through economies of scale, but SHM’s Miller thinks there is an opportunity to create a cooperative structure in which hospital medicine groups maintain individual identifies yet share certain functions, such as a common billing service.

Dr. King, the medical director who was promoted in November, is running a long-term acute-care center (LTAC) to help generate a parallel revenue stream. The center opened in May; during periods of decreased patient traffic at Southwest Medical Center, it affords his hospitalists another place to work, encountering patients and billing services. It also creates a referral stream for his hospital. He also has engaged in preliminary discussions for opening and staffing a pre-operative clinic or a wound-care clinic, but those discussions are in the early stages. King is sitting down with PCPs his group has little history with to increase referrals, and he is meeting with the hospital’s specialists to inform them that earlier consults with hospitalists could allow for streamlined service, shorter stays, and greater revenue.

“If you stop your research and development (R&D) during the hard times, 18 months from now, everyone else has stopped their R&D,” Dr. Westle says. “But if you continued your R&D, you’re 18 months ahead of everyone else.”

Dr. Westle refers to his method as “weaving yourself into the fabric of the health system.” Caring for the unassigned adult population and handling internal medicine assignments is low-hanging fruit for hospital medicine groups. He suggests creating programs to teach residents who are participating in hospital quality committees or other panels to deal with coding and billing, staffing LTACs, and improving the referral process for smaller, outlying hospitals to send patients to larger hospitals.

And, of course, there is relationship-building. Although tight economic times will require hospitalists to provide more quantitative data to prove their worth, the hospitalist model thrives on doctor-to-doctor interactions. Connections built with proceduralists and nurses, who can vouch for the value of a hospital medicine group, can mean a lot when hospital boards are searching for areas to trim costs.

“If you talk to seasoned directors of hospitalist programs, you win over hearts and minds one at a time,” Pham says. Most hospital executives “know there is value beyond that which can be proven on the balance sheet. It’s difficult to price things like convenience, satisfaction.”

Insulation strategies for individual hospitalists

A hospitalist’s most important economy is his or her own employment. So what can individual hospitalists do to protect themselves in turbulent times? Hospital medicine professionals say the key is differentiating yourself from others:

  • Position yourself as the go-to doctor. Referrals are a business of reputation, so perform well, be professional, answer consults timely, and develop relationships.
  • Search out programs that add lines to your resume, even if they’re not yet accredited. SHM has started a Fellow in Hospital Medicine designation and other, more formal programs exist. Each requires a certain level of commitment and time. Decide how important the title is to you.
  • Talk to your boss. Ask what you can to do to be more valuable, then act on those suggestions. Take the initiative, but be sure to follow through. Accomplished managers will notice the eagerness and start to think of you as a potential leader within the practice.
  • Know the hospital leadership. Never make the mistake of overstepping your boundaries, but given the appropriate opportunity, introduce yourself to the movers and shakers. Given the choice of cutting one of two equal doctors—one a stranger, one with a name and a face—most managers will choose the stranger.

What’s Next

Doug Cutler, MD, a hospitalist at Banner Sun City Hospitalists in Arizona, which serves 800-plus beds in two hospitals in Sun City and Sun City West, has watched economics change his situation. His old employer, Banner Health, recently merged its two hospitals with Sun Health. The new owners are learning how Cutler’s group works, talking to both hospitalists and other hospital staff. They have the group’s documentation to review, but individual doctors now have the opportunity to prove themselves as standouts.

“Find out the needs and service them the best you can,” Dr. Cutler says. “If it’s a throughput issue, work with them on that. Are you on committees? Are you on the quality committee? Pharmacy and therapeutics? Find what they need and fill a niche. Talk to medical directors, work with case managers. Don’t be the one that they hate to page; be the one they’re not worried about stopping in the hallways because you’re the go-to physician.”

SHM’s Miller agrees that individual hospitalists should take every opportunity to stand out. Whether it’s making sure hospital executives know your name, earning as many certifications as applicable, or applying for the society’s new Fellow in Hospital Medicine program, each doctor has to look at the economic crisis from a professional and personal viewpoint.

And while some could reason that Dr. Cutler’s situation—working for a hospital-owned group as opposed to a large multistate group or multispecialty practice—gives him more job security, he could argue the lack of negotiating leverage might give him less. But as he often tells his patients when they ask for a diagnosis: It’s hard to see 10 seconds into the future.

“I don’t want to think I’m sitting here fat, dumb, and happy and they won’t let me go,” Cutler says, knocking on wood. “I just don’t know. Every company … realistically needs to look at everything if they want to survive. We’re potentially on the chopping block, but do you lop off something that costs a million dollars when it saves you five? Are you willing to go back to a time before that?” TH

Richard Quinn is a freelance writer based in New Jersey.


This copy is for your personal, noncommercial use only. No part of this article can be reproduced without the written permission of the publisher. Order presentation-ready copies for distribution to your colleagues, clients, or customers by contacting our reprints department at reprints@wiley.com. Copyright © 2009 Society of Hospital Medicine, administered by John Wiley & Sons Inc.

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