If ignorance is bliss, then a substantial slice of hospital medicine group (HMG) leaders are in heaven—about finance, that is. Perhaps they didn’t become physicians to solve the sub-prime mortgage mess or take their companies public, as Dr. Adam Singer, MD, CEO of IPC: The Hospitalist Company, did in January 2008.
Dr. Singer, recently named 2008 Physician Entrepreneur of the Year by Modern Physician, always has insisted HMGs can be financially self-supporting. In 2002, he wrote in Physician Executive “when revenue (fees divided by number of patient encounters) exceeds expenses, the practice becomes economically viable.” He calculated that factoring in malpractice insurance, general expenses, 10 percent of revenue for billing and collection, two patient encounters a day per full-time equivalent employee was an HMGs’ break-even point. “Even at a ridiculously minimum encounter volume of two, a hospitalist practice is viable without any outside subsidy,” he concluded. To drive home his point, Dr. Singer suggested HMGs augment their revenues by serving nursing homes and rehab facilities, teaching, securing research grants, medical directorships, and taking on contracts to manage ER unassigned patients.
Nevertheless, a recent Society of Hospital Medicine survey shows a number of HMG leaders lack the basic financial acumen to get and keep their practices fiscally healthy. Data from SHM’s 2007-2008 Bi-Annual Survey on the State of the Hospital Medicine Movement reveals the vast majority of HMGs fall short of economic independence. Survey results show many HMG leaders’ grasp of basic finance leaves room for improvement.
Key findings include:
- 37% of HMG leaders didn’t know their annual expenses;
- 35% didn’t know their annual professional fee revenues; and
- Among those that didn’t know their expenses and revenues, 85% were operating at a deficit.
Additionally, a negative correlation exists between HMG financial performance and compensation. HMG production remained flat, while average hospitalist compensation increased 13% to $193,000 annually. Cushiony subsidies persist; the survey showed 91% of HMGs receive some form of financial support, an average of $954,000 per group or $97,375 for each full-time physician.
Drilling down into the survey’s financial data, analysis by Joe Miller, SHM Executive Advisor to the CEO, points to an ominous monetary “perfect storm” brewing for HMG leaders. Deficits are growing as hospitalist leaders’ knowledge about their groups’ finances are declining.
The trend data also suggest subsidies obscure declining financial support in several areas. Compared to the 2005-06 SHM survey, the latest survey shows the percentage of HMGs receiving financial support dropped in all five categories in which HMGs receive subsidies. Results from the two most recent surveys showed hospital financial support dropped from 60% to 51%; other support from 17% to 12%; income guarantees fell from 72% to 61%; services in-kind declined from 71% to 60%; and case rates slid from 12% to 11%.