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Dodging Disaster


I became a hospitalist in the 1980s, in the same year CDs outsold vinyl records for the first time. During the next eight to 10 years, I watched and participated in the growth of hospitalist practices around the country. But, by the late 1990s, a new phenomenon had begun to appear occasionally: failed hospitalist practices. I became interested in the relatively few practices that started up only to fail and dissolve. I wanted to know why they had failed and what happens at a hospital that loses its hospitalist practice?

It is worth remembering that the whole idea of hospitalist practice was more controversial in the late 1990s than it is today. Many doctors saw the concept as an invention of managed care, with the sole aim of reducing costs. When a practice collapsed, some doctors at the institution were usually delighted because, as far as they were concerned, this proved that hospitalist practice was a bad idea. Yet, to the dismay of these critics, the failure of a practice was reliably followed by an intense—sometimes even frenzied—effort to create a new and improved hospitalist practice. In fact, I’m not aware of any institution in which a hospitalist practice failed and a new one didn’t replace it. I suspect such places exist, but they’re not common.

Creating a replacement hospitalist practice is usually stressful and expensive, so of course it’s better to get it right the first time. To that end, I think every institution should be aware of the most common reasons practices fail and should work to avoid these problems. What follows are the issues I’ve seen come up regularly. While they may not cause the failure of a whole practice, they are likely to result in physician dissatisfaction and/or increased turnover.

Creating a replacement hospitalist practice is usually very stressful and expensive, so of course it’s better to get it right the first time. To that end ... every institution should be aware of the most common reasons practices fail and should work to avoid these problems.

1) Failure to appreciate rapid growth in volume in a new practice: Unquestionably, this is the most common mistake made by new hospitalist practices. Patient volume often grows dramatically—even within the first weeks a new practice is in operation. Some institutions mistakenly plan on growth rates similar to those experienced in other types of practices. When growth proves much more rapid, the first few hospitalists in the practice can become worn out and might even quit. This has led to the collapse of some practices. There are two ways to guard against this problem. One is to continue recruiting (even with no clear need for additional staff), anticipating the length of time it can take to recruit new hospitalists. In other words, most practices should never stop recruiting.

The other, less desirable but sometimes unavoidable strategy is to have the practice start with a limited scope of work that increases as new hospitalists are added to the group. For example, the practice might accept only unassigned medical admissions from the emergency department (ED) at the outset; once a predetermined number of hospitalists has joined the group, it is ready to start accepting referrals from primary care doctors and other sources.

2) Hospitalists who have an employee mentality, rather than that of a practice owner: Hospitalist practices tend to attract doctors who simply want to see patients, leaving the management of the practice and its financial health to others. This tendency may be exacerbated in practices that compensate hospitalists in a way that is not connected to the overall financial health of the practice (e.g., a straight salary).

Unfortunately, this situation can create a culture in which a hospitalist feels that the only job that is important is to see the next patient. These hospitalists may be reluctant to participate in efforts to ensure the financial health of the practice. Examples: 1) They may not be attentive to optimal documentation and coding, and the practice may lose significant billing revenue; 2) They may not want to accept new referrals or encourage growth in the practice; or 3) They may be too quick to add doctors to the group, with the aim of working fewer hours.

Even if the doctors are employees of a hospital or other large entity, make every effort to encourage them to think of themselves as owners of their practice. One way to create this environment is to have a tight connection between the economic health of the practice and the hospitalists’ income (e.g., production-based incentive compensation). This should lead to greater autonomy in decision-making, as well as hospitalist satisfaction.

3) Poor leadership: Many hospitalist practices start with doctors who have no prior hospitalist experience. This may result in physician leaders poorly suited for their roles. For a practice that is uncertain whether it has an appropriate medical director among the initial doctors it has hired, it might be a good idea to wait a year or two to select the leader. An interim leadership model can be implemented, taking advantage of physician leaders in the hospital, perhaps including the vice president for medical affairs, respected primary care physicians, or emergency physicians. Establishing a hospitalist oversight committee that is made up of leaders among the medical staff can also provide guidance for the new program until there is an effective hospitalist leader in place.

4) Excessive or inappropriate hospitalist overhead: This can take two forms. First, excessive overhead results from securing too much office space and/or staff support. Because the majority of a hospitalist’s work is done on the hospital wards, it is usually sufficient for a hospitalist group to share a single office with enough seating and workstations, including computers, for one-third to one-half of the total number of doctors in the group. For example, a 12-hospitalist group might share an office with four to six workstations. A small group—six or fewer doctors—might function effectively with a single clerical assistant supporting the hospitalists and some other department at the same time.

Second, inappropriate overhead may occur in multispecialty groups that charge hospitalists the same overhead paid by office physicians. This high overhead rate—more than 50%—may leave insufficient funds to pay the hospitalists a competitive salary. Thus, it is important for the group to assess hospitalists’ overhead based on what they actually consume. In general, this should include the cost of billing and collections, malpractice insurance, and modest clerical support. The hospitalist collections should not ordinarily go to support office-based expenses such as support staff and building/equipment expenses.

5) Initial tolerance of inappropriate expectations of hospitalists: To gain support from the medical staff in the early stages of a program, hospitalists sometimes overcommit, assuming responsibility for the scut work that no one wants to perform. This is not a sustainable model. Eventually, it will be hard to tell physicians that they must take back responsibility for something the hospitalists have been doing. This is likely to lead to unhappiness for everyone involved.

One common example of this problem is when hospitalists assume responsibility for tuck-in admissions—those in which the hospitalist admits a physician’s patient overnight and then transfers the patient back to that physician the next day. Another example involves hospitalists who assist with paperwork on patients they did not care for; for example, the hospitalist is expected to do a discharge summary for a heart surgeon, even though the hospitalist wasn’t involved in that particular patient’s care.

The best strategy to use in avoiding this pitfall is to identify the most important services for hospitalists to provide, keeping the list relatively small initially (e.g., admit unassigned emergency medical patients, accept referrals from primary care physicians, and perform consults from other doctors). Other services, such as co-management of some surgical admissions, can be added as hospitalist staffing allows and after hospitalists have had an opportunity to participate in deciding which services are the most appropriate to add.

6) Excessive workload, leading to hospitalist dissatisfaction: A variety of factors can lead to excessive hospitalist workloads or patient volumes. The most common reason (mentioned above) is referral volume that grows faster than staff can be added. In other cases, hospitalists can make the mistake of scheduling each doctor to work relatively few annual days or shifts; this practice results in a high workload for each day worked, even though the annual patient volume may not be excessive.

Hospitalists, like other professionals, seek balance in their jobs. The biggest threat to this goal is an excessive workload, which can hinder a hospitalist’s ability to devote adequate attention to ensuring the satisfaction of the patient and the referring physician. It also limits the hospitalist’s ability to assume non-clinical responsibilities like protocol development and hospital committees. Some data suggest that, at some point, an increasing patient load begins to result in an increased length of stay. And, over time, it is likely to result in poor job satisfaction, burnout, and turnover among physicians in the group.

7) Insufficient financial support: SHM survey data from 2006 show that, in addition to collected professional fees, 97% of hospitalist practices receive financial support and/or services in kind. This money usually comes from the hospital in which the hospitalists work. The few practices that don’t receive such support usually have some combination of the following factors:

  • Hospitalists who work only weekday hours;
  • Hospitalists who are not responsible for emergency, unassigned patients; and
  • A hospital with an excellent payer mix.

Practices that accept all the unassigned medical admissions from the ED and keep a doctor in the hospital 24 hours a day for seven days a week usually have professional fee collections that fall far short of the amount needed to pay competitive salaries. They usually need financial support from a source such as their hospital to supplement their fee collections. Without it, they must maintain high patient volumes to collect professional fee revenue that is adequate to pay reasonable salaries and benefits to the doctors. These practices are at risk of poor performance or collapse.

To Succeed, Avoid Failure

So why go to the trouble of starting over when you can get it right the first time? Setting clear and realistic expectations from the beginning gives any hospitalist practice a better chance of succeeding. TH

Dr. Nelson has been a practicing hospitalist since 1988 and is a co-founder and past-president of SHM. He is a principal in Nelson/Flores Associates, a national hospitalist practice management consulting firm. This column represents his views and is not intended to reflect an official position of SHM.

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