Practice Economics

Subsidy or Payment?


Question: Before hospitalists, who cared for hospitalized patients?

Answer: Generalists—in other words, internists, family physicians, pediatricians.

Q: How much did that system cost hospitals?

A: Nothing, or very little. In some cases, support dollars were available for weekend, night, or uninsured patient coverage, but by and large this system cost hospitals little. Physicians admitted their patients to the hospital because the alternatives (sending a hypoxic pneumonia patient home from clinic, turning out the office lights and hoping the patient survived the night, or bringing the patient home with them) offered uncomfortable ethical, malpractice, or alimony consequences. So doctors admitted these patients to the hospital and visited them daily.

Q: The average amount of support per hospitalist is $131,564, or about $1.7 million per HM group seeing adult patients. The bulk of those dollars come from the hospital. If we assume that the people running hospitals are smart, then why would those smart businesspeople pay $1.7 million for something they used to get for free?

A: Because there is something they get in return for that money. Or, perhaps, something they think they are getting in return for those dollars.

To be great, to best help our patients, to give our hospitals what they want and need, we have to evolve from “internists in the hospital” to hospitalists.

Q: What?

A: I often go through this exercise with the residents in our hospitalist training program when we discuss the drivers of the HM movement. I usually discuss the reasons why a hospital should fund these groups; it always seems like such a no-brainer to me.

Enter a recent news item from Montana. The story from the Helena Independent Record (see “Unsustainable Growth?” p. 1) noted that a multispecialty group practice in Helena announced they were no longer admitting their patients to a local hospital in protest over a new hospital policy to charge the clinic practice. The fee was to defray some of the costs of the HM program. A hospital representative was quoted as saying “physicians are responsible for obtaining hospital coverage for their own patients, not the hospital.”

I can’t really argue with the logic of that statement. Surely a clinic has responsibility to ensure that their patients get cared for while they are inpatients. If an internist is going to see a patient in the clinic and admit them to the hospital, shouldn’t an internist then see the patient in the hospital?

If I’m a hospital CEO, the answer is no.

To retrench a bit, yes, I’d want a board-certified internal-medicine (or pediatric or family medicine) physician to see the hospitalized patient. But in the process, I wouldn’t want them to only practice internal medicine. That was the model hospitals had 25 years ago—a model that cost them very little, a model that they played a large part in exterminating. The fact that most hospitals are willing to pay millions or more per year to not have that system tells me that they don’t want that system.

Q: So, what do hospitals want?

A: Hospitalists, not internists in the hospital.

What’s the difference? Well, it’s a perception issue. Many, if not most, believe that all it takes to be a great hospitalist is to show up for your shift, provide great care to your 15 patients, and go home. That is, the job is defined by the clinical effort—the internist part. Although there is tremendous benefit to this and I recognize its importance (and let’s not forget the weekend, night, and holiday coverage), this sells us short and puts our financial stability in peril.

To be great, to best help our patients, to give our hospitals what they want and need, we have to evolve from “internists in the hospital” to hospitalists. Hospitalists are defined not by our clinical effort but rather by our nonclinical effort. This is what hospitals are paying $1.7 million per year for. They had the internist in the hospital model and chose to pay more—they chose the hospitalist model.

To be a great hospitalist group means embracing the nonclinical work that envelops the clinical practice—the process and quality improvement (QI). That is, fundamentally changing the unsafe systems that surround our patients. Making them safer, more efficient and of higher quality.

This takes time.

Time = Money

It takes time to implement a QI project to reduce central line infections in the ICU. Or to develop and implement a VTE prophylaxis order set or an insulin or heparin drip protocol. Or to work closely with nursing to reduce falls on a medical unit. It takes time to be at the pneumonia core measures meeting every Monday at 7 a.m. and the hospital credentialing committee meeting every other Friday at 3 p.m. It also takes time to implement a new electronic health record or roll out the new LEAN project to reduce ED wait times.

This takes time, effort, and bandwidth—the kind that can’t be shoehorned into the average clinical day. This is work that needs to be done primarily during nonclinical hours. It’s the kind of work that defines HM as a field; the kind of work that increasingly determines your hospital’s bottom line; the kind of work that has tremendous value; the kind of work that requires remuneration.

In paying for the hospitalist model, your hospital is paying for the clinical (internist) and nonclinical (hospitalist) work you do. The $1.7 million per year is not a subsidy they pay to keep you in business. It’s the price they must pay to compensate your group for all the nonclinical work you do around quality, safety, efficiency, and leadership.

Q: But what if my group isn’t doing these kinds of things?

A: Then your hospital funding is at risk. The Montana story addresses just such a scenario. Clearly the hospital C-suite in this instance only valued (or was presented with) clinical work. Therefore, they felt that others should subsidize the hospitalist salaries—in this case, the clinic. I don’t know the particulars of this case but deduce this because it would be ludicrous to expect the clinic to pay for the part of the hospitalists’ time spent improving the hospital’s systems of care.

Writing the Final Chapter

At the core of the HM funding model is the concept of subsidy versus compensation. If we are only providing clinical care, then the offset dollars from the hospital to support our salaries is functionally a subsidy—a dollar amount to make up for our collections shortfall. However, if it is support for the nonclinical work we are doing, then it is compensation.

As the story of hospitalist funding is written, the report from Montana should serve as a cautionary tale. Hospital financial pressures likely will focus more scrutiny on the hospitalist financial support model. And as this story plays out, HM groups will be expected to bring more to the table than patient care.

Those that do will live happily ever after.

Those that don’t will be forced to answer the tough question: What’s the difference between an internist in the hospital and a hospitalist? If the answer is nothing, that story will have a decidedly and predictably less happy ending. TH

Dr. Glasheen is associate professor of medicine at the University of Colorado Denver, where he serves as director of the Hospital Medicine Program and the Hospitalist Training Program, and as associate program director of the Internal Medicine Residency Program.

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