Someone connected to the practice, often in the billing office, should review the fee schedule—at least annually—to ensure that services aren’t being billed below the rate allowed by payors.
Negotiated Rates Paid by Commercial Insurance
Some hospitalist groups are able to negotiate higher payments than the typical rates paid by commercial payors. Because commercial insurance is a relatively small portion of most hospitalists’ payor mix, this might not have a large impact on the overall practice finances. So my sense is that most groups don’t pursue this opportunity.
Groups in markets with significant managed care are an exception. They usually are aggressive in negotiations for commercial payor rates.
Some hospital-employed HM groups might end up with lower commercial rates than they could have. Here is how it might happen: A hospital negotiates with Aetna to pay rates for hospital services (the bills submitted by the hospital, not the physician bills) that are attractive to the hospital. To make this proposal more palatable to Aetna, the hospital says it will accept lower rates for its employed physicians, including hospitalists. So the hospitalists’ collections end up lower, and the support paid by the hospital to the hospitalist group is correspondingly higher. The hospital ends up fine in this scenario, because it is being paid an attractive rate by Aetna for hospital services, but the hospitalist practice appears to be underperforming financially.
It is worth knowing if this is an issue at your practice, but in most cases it won’t explain larger problems in the hospitalist budget or amount of support required from the hospital.
Budgets and financial statements can be confusing, and revenues and expenses might not be what you expect. For example, in my practice, auditors told our accountants that we needed to accrue an extra month of salary into this year’s budget. So when looking at our fiscal year-end financial statement, the salary expense is for 13 months instead of 12 months. This quirk made it appear that we required more than the budgeted amount of support from our hospital, when in fact we performed better than budget this year.
I certainly can’t explain all the reasons for unusual accounting issues, and I still struggle to understand why accrual accounting is better than cash-basis accounting. My best advice is to have the lead hospitalist in your group get to know the accountant who handles your budget and financial statements. The accountant should explain all of these issues clearly.
In next month’s column, I’ll review how a hospitalist practice’s internal operations, such as staffing and scheduling, can have a major influence on the budget and the amount of support required from the hospital. TH
Dr. Nelson has been a practicing hospitalist since 1988 and is co-founder and past president of SHM. He is a principal in Nelson Flores Hospital Medicine Consultants, a national hospitalist practice management consulting firm (www.nelsonflores.com). He is also course co-director and faculty for SHM’s “Best Practices in Managing a Hospital Medicine Program.” This column represents his views and is not intended to reflect an official position of SHM.
- Centers for Medicare and Medicaid Services. Improper medicare fee-for-service payments report, November 2006: long report. CMS Web site. Available at: www.cms.hhs.gov/apps/er_report/preview_er_report_print.asp?from=public&which=long&reportID=5. Accessed Sept. 1, 2009.