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Physician Payment Systems Remain Constant

From: The Hospitalist, August 2012

Where payment for the service of hospitalists fits into the insurance/Medicare payment system.

Dr. Hospitalist
Dr. Hospitalist

I would like to know where payment for the service of hospitalists fits into the insurance/Medicare payment system. Are hospitalists considered employees of the hospital and, therefore, billed through the hospital system? Are they considered independent doctors and, therefore, do their own direct billing? Do they, in general, accept assignment of benefits from you for your insurance/Medicare? Do they sign contracts with insurance/Medicare to participate in their plans?
Carole L. Hughes

Dr. Hospitalist responds:

For the sake of argument, let’s say that Carole is on the outside looking in—meaning she’s not a healthcare practitioner, but a consumer. It might seem a bit strange to wonder where all these “hospitalists” come from, and who pays for them. Let’s walk through a few scenarios as outlined here.

Are hospitalists considered employees of the hospital? They certainly could be directly employed by the hospital, but it’s just as likely they could be contracted with the hospital for certain services, such as taking ED call for unassigned patients. It’s also entirely possible that the hospitalist has no direct financial relationship with the hospital at all. In this case, a hospitalist is taking cases that are referred from other physicians and for which there is a coverage agreement. The most common situation is a primary-care physician group that is looking for a hospitalist to care for their patients in the hospital. This is usually a handshake agreement, with no money involved.

Do hospitalists do their own direct billing to the insurers? As for this part of the question, it’s time to separate “hospital services” from “hospitalist services.” Hospital services are billed under Medicare Part A, while physician services are billed under Medicare Part B, meaning that even if a physician is employed directly by the hospital, that physician’s professional services are still billed and paid separate from any hospital charges (for things like the bed, supplies, and nursing). Because Medicare sets the ground rules, other insurances typically follow suit. Payment applies similarly to the contracted hospitalists and independent hospitalists.

Do hospitalists have to be credentialed with the insurers? Yes. Whether it is Medicare or Cigna or United, each individual physician must be credentialed with the payors to receive payment. Medicare credentialing for physicians is pretty universal, given that most of our patients have this as their primary insurance. Without it, there is no payment from Medicare to the physician. Many groups or hospitals won’t even let their physicians begin seeing patients until that paperwork is approved. Due to timely filing rules, you can’t just start to see patients and hope to get paid later. And there’s no negotiating with the government—whatever Medicare pays in a region for a specific service is the payment the physician receives.

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For the private insurers, it’s generally easier to receive payment if you are credentialed, but I’ve seen a few physician groups negotiate payments without agreeing to a flat contracted rate. I don’t recommend this setup, as the patient can often get caught in the middle with a rather hefty bill. Still, there is some room for negotiation on the private insurer payment rates.

In summary, whether a hospitalist is employed by the hospital, contracted, or truly independent, they all bill Medicare and the insurers for their professional fees. Medicare payments won’t vary, but private insurance payments can. It’s certainly a challenging payment system to understand, from either the provider or the patient point of view.


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