Doctors bring in a lot of money for hospitals

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Doctors are generating a lot of revenue for hospitals — much more than those doctors receive in salary, according to a recent survey by physician staffing firm Merritt Hawkins.

Why it matters: It’s easy to see why hospitals view acquiring physician practices as a lucrative opportunity — which hospitals are doing at a rapid pace.

  • “This is [a] good reminder that doctors are the gateway to the rest of the health care system. It’s doctors that make the decisions about whether people get admitted to the hospital, or get a lab test, scan, or prescription,” the Kaiser Family Foundation’s Larry Levitt said.

Go deeper: A recent survey by the American Medical Association found that for the first time ever, the U.S. has more physicians who work as employees than those who run their own practice.

Click to access MerrittHawkins_RevenueSurvey_2019.pdf







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An upcoming CFO roundtable provides a peer-sharing platform to learn best practices for advancing a healthcare organization’s financial health.

Today’s healthcare financial leaders face escalating costs, quality improvement issues, difficult reimbursement environments, an increasingly complex service portfolio, and risk management associated with performance contracting.

Pressure mounts on CFOs to ensure their organizations remain viable as they deal with these issues, which makes gleaning proven strategies from colleagues imperative.

Four dozen executives will convene at a private roundtable forum during the 2018 HealthLeaders Media CFO Exchange, August 8–10 in Santa Barbara, California, to
address top-of-mind concerns.

In pre-event planning calls, Exchange participants—representing integrated health systems, academic medical centers, community hospitals, and safety net providers from across the U.S.—want to know how others are taking on risk, improving costs, addressing consumerism, and capturing additional reimbursement.

During the two-day event, a series of moderated roundtables will explore areas of special interest expressed by CFOs, including the following:

1. Cost improvement

Since costs are increasing at rates higher than reimbursement, how does a CFO drive cost performance to maintain sufficient operating margins? How are systems successfully leveraging scale to rationalize administrative and support services?

2. Proliferation of mergers and acquisitions

How can an independent organization survive in this environment? Should it consider other affiliations? For those involved in new entities, how are leaders achieving value?

3. Taking on risk

How does an organization prepare to take on and reduce risk, and when does an organization know that it is ready? How can CFOs build reserves to offset unexpected outlays?

4. Enhancing revenue cycle performance

How can financial leaders improve payer terms, reduce denials, ensure payer compliance, and improve clinical documentation? What are effective ways to deploy new workflow technologies in patient accounts?

5. Performance-based contracts

How are organizations engaging medical staff to reduce the cost of care and improve outcomes?

6. Medical group employment

How does a health system minimize provider subsidies for employed physicians and improve practice performance?

7. Medical consumerism

How can healthcare organizations compete against disruptors in the growing environment of consumer choice? What are creative ideas for meeting consumer demand without adding cost?

Additional information will be shared during the two-day gathering. The CFO Exchange is one of six annual HealthLeaders Media events for healthcare thought leadership and networking.

Revenue cycle and patient financial experience

Recently, HealthLeaders Media hosted a Revenue Cycle Exchange, which brought together 50 executives to discuss improving the patient financial experience; maximizing reimbursement; managing claims denials; technology adoption and data analytics; revenue cycle optimization; and creating a leaner, more effective team.

Noting how consumerism is influencing bill payment and giving rise to the patient voice, leaders are seeking ways to make paying easier. Consumer feedback suggested easy-to-understand and consolidated statements.

“We have a single business office with Epic, so regardless of where a patient gets their services, they get one bill from our organization,” says Cassi Birnbaum, director of health information management and revenue integrity at UC San Diego Health.

“We’ve also created a position for a patient experience director, so any complaint goes through that unit and they’ll contact one of my supervisors to ensure the patient gets the answers they need. That’s helped a lot and provides a one-stop, concierge, patient-facing experience to help ensure the patient’s balance is paid,” Birnbaum says.

Providing estimates and leveraging technology are also helpful for fostering patient payments. More health systems are promoting MyChart, an online tool for patients to manage their health information, as well as kiosks in key locations.

“We have a patient portal in which you can see any outstanding balance at a hospital or clinic and decide what you want to pay today,” says Mary Wickersham, vice president of central business office services at Avera in Sioux Falls, South Dakota.

“Patients can also extend their payments since we have a hyperlink that goes to the extended loan program if needed. With kiosks at our clinics, patients pull out their credit card and complete their copay. Nobody asks; they just automatically do it,” she says.


Front- and back-end staff play an integral role in calculating payment estimates, collecting dollars in advance of procedures and tests, and communicating the often-puzzling connection between hospital charges for physician practice and provider-based department patients.

“One of our big challenges now is we’re bringing a lot of that back-end work to the front,” says Terri Etnier, director of system patient access at Indiana University Health in Bloomington, Indiana.

Centralizing processes

As facilities move toward centralized scheduling systems to manage reimbursement, some facilities are centralizing coding and billing processes.

“We don’t have a full comprehensive preregistration function for our clinics mainly due to volume. We’re piloting a preregistration group for our clinic visits to work accounts ahead of time since we are continuing to work toward automation,” says Katherine Cardwell, assistant vice president at Ochsner Health System in New Orleans.

“We have kiosks in some of our clinics. Epic has an e-precheck function where we can now do forms. You can sign forms on your phone, and make your payment and your copayment ahead of time. And you can actually get a barcode that you can just scan when you get to the clinic,” Cardwell says.

Hospitals acquired 5,000 physician practices in a single year

Since hospital-employed doctors tend to perform services in an outpatient setting, the trend increases costs for Medicare and patients.

Hospitals have been scooping up physician practices at a record clip. Research conducted by Avalere for the nonprofit Physician Advocacy Institute shows hospitals nabbed 5,000 physician practices and employed 14,000 physicians between July 2015 and July 2016, an 11 percent uptick.

Since 2012, that’s a 100 percent increase in hospital-owned physician practices, indicating those medical groups may be struggling to maintain independence in a healthcare landscape that is increasingly geared toward larger, integrated systems.

That scenario increases costs for both Medicare and patients themselves, since hospital-employed physicians tend to perform services in a hospital outpatient setting. The researchers revealed higher costs for services such as colonoscopy and cardiac imaging.

Increased physician employment by hospitals, in fact, caused Medicare costs for four healthcare services to rise $3.1 billion between 2012 and 2015, with beneficiaries facing $411 million more in financial responsibility for these services than they would have if they were performed in independent physicians’ offices, the research showed.

From mid-2012 to mid-2016, the percentage of hospital-employed physicians increased by more than 63 percent, with increases in nearly every six-month time period measured over these four years. All regions of the country saw an increase in hospital-owned practices at every measured time period, with a range of total increase from 83 percent to 205 percent.

This trend, the authors said, shows government- and insurer-mandated payment policies favor larger health systems, creating a competitive disadvantage for independent physicians, many of whom are already struggling financially due to administrative and regulatory burdens. Independent physicians often find it prohibitively difficult to cut costs while maintaining clinical quality, and failure to maintain quality can result in federal reimbursement penalties.

The acquisition trend held true in every region of the country, but was most prevalent in the Midwest; it was least prevalent in the South.

PAI is examining these trends as part of an ongoing effort to better understand how physician employment and health care consolidation affects the practice of medicine and impacts patients.

Healthcare’s Consolidation Landscape

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Market and regulatory factors have unleashed a wave of merger, acquisition, and partnership activity that is changing the delivery of healthcare services.

Consolidation in the healthcare-provider sector has accelerated in recent years, reshaping the relationships between health systems, hospitals, and independent physicians across the country.

In the Buckeye State, healthcare consolidation activity has been a transformational force at OhioHealth, says Michael Louge, CPA, who serves as executive vice president and chief operating officer at the 11-hospital health system based in Columbus.

“When you look at OhioHealth, and you go back two or three decades, it was a much different organization. The reason it is different today is because of philosophy and the way we approach regional partnerships—how we have worked with physicians and hospitals in the region. Our whole organization’s evolution has been through successful partnerships and consolidations with regional players.”

Over the past year, statistics have been gathered on the pace of healthcare-provider consolidation.

In a recent HealthLeaders Media survey, 159 healthcare executives—mainly from health systems, hospitals, and physician practices—were asked about their merger, acquisition, and partnership (MAP) deals.

Eighty-seven percent of the respondents said their organizations were expected to both explore potential deals and complete deals that were underway in the next 12–18 months. Only 13% of the respondents said their organizations were not planning MAP deals in that same time period.

From the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010 through the end of last year, merger and acquisition transactions involving acute-care hospitals increased 55% from 66 announced deals to 102, according to Skokie, Illinois–based Kaufman Hall. Last year, the operating revenue of acquired organizations was more than $22 billion, according to the consultancy.

Kit Kamholz, managing director at Kaufman Hall, says two sets of drivers are propelling consolidation activity among health systems and hospitals.

“There are transactions that are driven by financial rationale. This is driven by a level of distress at the smaller organization, either from a historical-financial standpoint, an access-to-capital standpoint, or they are experiencing some significant clinical deficiencies. … The second bucket is in the category of strategic rationale. These are organizations that tend to be relatively strong financially, that are considered to be strong community-based providers in their marketplaces; but they are looking at the landscape of the evolving healthcare environment and saying, ‘Do we have the skills and capabilities to be successful in this new era of value-based care?’ ”

Healthcare consolidation activity is impacting the country’s physician practices and physician-employment trends.