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Financial Support Increases for Hospital Medicine Programs

From: The Hospitalist, December 2012

Group leaders need to know the impact on hospitalist compensation, healthcare costs

by Dan Fuller

There are various things that each of us look for in the 2012 State of Hospital Medicine report ( Many of us look to see what has happened to compensation, while others look at productivity information. There is also, however, a subset of us that focuses on trends in the financial support for hospitalist programs. Certainly those of us who manage HM practices want to justify to our clients that the cost of our services is appropriate. It’s never easy going to administration and asking for more money in these uncertain times.

Those in the business of providing “turnkey” services often have to ask for more financial support during a contract term in order to keep up with physician salary increases. It’s vital that we understand not just the cost and revenue equation, but also how those factors impact the financial support for the program. With looming budget cuts, uncertainty surrounding the impacts of value-based purchasing, readmission penalties, and a stagnant economy, we must continue to ensure that our programs are cost-efficient, all the while maintaining quality patient care.

Dan Fuller
Dan Fuller

The 2012 State of Hospital Medicine report shows that the cost of providing hospitalist services is on the rise (see Table 1). The median level of financial support per FTE for nonacademic HM groups serving adults was $140,204. This figure is up 6.6% from the 2011 median of $131,564. There are regional differences in the data, with the median support cost highest in the South at $159,258 per FTE. This might be due to the fact that hospitalist compensation tends to be higher in the South than in other parts of the country, while professional fee reimbursements tend to be lower. Another finding borne out by the data is that very small programs tend to require more financial support per FTE than do larger programs. This makes sense given the ability to spread fixed costs out over the larger model and the increased productivity that comes with the larger model.

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Table 1. Median Annual Financial Support per FTE Nonacademic Adult Medicine Practices

The 2012 State of Hospital Medicine report also offers a unique opportunity to look at factors that might be contributing to the increase in financial support. Compensation, or labor cost, which constitutes the majority of program costs, rose 6% to $233,855 for adult medicine hospitalists. At the same time, the median number of annual encounters for adult hospitalists declined by 6.4% from the 2011 level, while collections per encounter for adult hospitalists increased 13%. The intersection of all these variables (compensation, encounters, collections, and even size and staffing models) affect the cost of a program and the resulting support required to operate it.

In a time of uncertainty about where healthcare is headed, we need as much information as possible to make informed decisions. It is crucially important that we understand the relationships between physician compensation, the scope of our service, the revenue we generate, and the impact these factors have on cost.

The 2012 State of Hospitalist Medicine report is the best source for all of us to get the information we need to make these informed decisions. I would encourage every HM leader to review and understand the information that is so critical to the success of any hospitalist program.

Dan Fuller is president and founder of IN Compass Health and is a member of SHM’s Practice Analysis Committee.

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 Copyright © 2009 Society of Hospital Medicine, administered by John Wiley & Sons Inc.

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The Hospitalist newsmagazine reports on issues and trends in hospital medicine. The Hospitalist reaches more than 25,000 hospitalists, physician assistants, nurse practitioners, residents, and medical administrators interested in the practice and business of hospital medicine.

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ISSN: 1553-085X