Transcript Current Topics in Physician Employment

Current Topics in Physician
Employment
John C. Forester
WV United Health System
Autopsy of an Income
Statement
How to Herd Cats with Only
Minor Scratches
How to Pull Out Your Hair in 30
Days or Less
Current Industry Trends
 More physicians are being employed – 50% of residents that
graduated in 2011 were hospital/health system employed
 2012 Review shows that 63 percent of Merritt Hawkins’
recent search assignments featured hospital employment of
the physician
 American Hospital Association has indicated that the number
of physicians employed by hospitals has increased 34% from
2000 to 2010
 Some research suggests that truly independent physicians
now only comprise about 33% of the total physicians
practicing
Current Industry Trends
 The Private Practice Model is Becoming Unsustainable




Shrinking reimbursement and an uncertain future
More complicated billing/regulatory environment
Revenue cycle risks – living check to check
The costs of education – the median four year cost to attend
medical school for the class of 2013 is $278,455 at private
schools and $207,868 at public schools, according to the
Association of American Colleges
 Practice costs are increasing – EMRs, SW&B, supplies
 Good help is hard to find - tough employment environment
 Pressures on Clinical Time and Administrative Time…
Practice Maintenance and Upkeep
Work / Life Balance
Charts… Bills… SCANNING!!!
Some Physicians Try to Stay Ahead…
So, as hospitals employing physicians –
what issues do we face???
Physician Employment Environment
– Do these issues sound familiar?
 Shrinking reimbursement and uncertainty
 Average practice loss per physician FTE was $189,560 in 2011
– over $200,000 for new physicians in the first few years of
practice
 Practice costs increasing and physician shortages in areas of
the country continue to drive salaries upward
 Hard to find good help…
 Variance in production – private practice vs. employed
 Production/practice operations impacted by operating
environment
So, why employ Physicians?
Because, they make it rain.
 They examine and diagnose our patients
 They place orders and refer patients for diagnostic testing,
procedures, and treatment
 They prescribe medications
 They perform surgeries and procedures
 They are integral in the quality of the service we offer
 They are an integral part of our financial performance
more than ever
 They make it rain
So, before employing that physician,
let’s think through a few things…
 Physician Needs Assessment
 Business Plan – who, what, why, and how much
 Proforma Assessment:
 Compensation
 Practice Expense
 Contribution
 Recruitment or Acquisition
 Operational Metrics
 Future Topics
Needs Assessment, Business Plan, &
Proforma
 Physician Needs Assessment:


New service or a replacement? Can you obtain info from an existing physician(s)?
Specialty Statistics – population and prevalence analysis

Internal Analysis – Discharges/Transfers/Ancillary Revenues and Services

Medical Staff Input and Issues:
 Physician needs per capital, mortality and morbidity rates
 Look for trends and opportunities – can tell you a lot about your physician relationships
 Physician Reputation and Personality
 Delineation of Privileges and Hospital Services – can you deliver the physicians expectation?
 Call Coverage
 Community physician support – what does the landscape look like?
 Practice Structure – three primary models

Community Based Private Practice


Community Based with Internal/External MSO support
Employment
 Self Supporting
 Becoming more rare
 Some start up support via income guarantee?
 Proforma Analysis for the practice and the hospital
Practice Proforma
Volume Assumptions - Y1
Ambulatory Encounters
Office
Inpatient
Hospital Outpatient
Nursing Home
TOTALS
Mix %
Gross Revenues per
Encounter
Office
Inpatient
Hospital Outpatient
Nursing Home
Medicare
2,150
210
415
2,775
44%
Medicaid
689
70
110
869
14%
Medicare
Medicaid
140
1,950
1,045
-
135
1,856
1,032
-
Net Revenues per Encounter Medicare
Medicaid
Office
Inpatient
Hospital Outpatient
Nursing Home
Admissions
Discharges
LOS
Ambulatory Surgical Cases
Ancillary Testing
Bad Debt % of Gross Revenue
Charity % of Net Revenue
65
852
685
110
110
3.32
809
1,200
3.0%
2.0%
50
802
605
-
BC/BS
725
30
81
836
13%
BC/BS
150
2,088
1,048
-
BC/BS
82
1,652
858
-
Workers Managed
Commercial
Comp
Care
135
210
987
15
35
50
20
90
185
245
1,112
3%
4%
18%
Workers
Comp
145
1,855
1,030
-
Managed
Commercial
Care
141
148
1,898
1,925
1,101
1,085
-
Workers
Comp
70
1,410
700
-
Managed
Commercial
Care
70
85
1,588
1,620
825
920
-
Other
210
5
43
258
4%
Other
TOTAL
5,106
365
809
6,280
100%
Average
135
1,905
1,154
-
Other
Average
60
1,400
615
-
Professional Gross and Net Revenues can be derrived
Develop hospital gross and net revenues per Inpatient,
Surgical, and Ancillary Stat
Practice Proforma
Proforma Income Statement Example
PATIENT SERVICE REVENUE - By POS and Payer
CLINICAL REVENUE
INPATIENT REVENUE
OUTPATIENT REVENUE
TOTAL PATIENT SERVICE REVENUE
LESS: CONTRACTUALS - Payer Breakdown
Contractual %
Y1
Y2
Y3
730,464
695,445
842,751
2,268,661
782,327
720,215
820,355
2,322,897
630,895
420,125
492,213
1,543,233
(907,465)
40.0%
3 Year
Totals/Averages
2,143,686
1,835,785
2,155,319
6,134,790
(1,010,460)
43.5%
(671,306)
43.5%
(2,589,231)
42.2%
NET PATIENT SERVICE REVENUE
OTHER INCOME
NET REVENUE
1,361,197
1,361,197
1,312,437
1,312,437
871,926
871,926
3,545,560
3,545,560
EXPENSES:
PROFESSIONAL SALARIES
SALARIES & WAGES
PAYROLL TAXES
EMPLOYEE BENEFITS
RENTAL EXPENSE
MEDICAL & NURSING SUPPLIES
OFFICE EXPENSES
PROF ED.,DUES,LICENS.,SUBSCRIPTIONS
MALPRACTICE INSURANCE
INSURANCE EXPENSE
CONSULTING FEE
LEGAL FEES
DEPRECIATION
TELEPHONE
REPAIRS & MAINTENANCE
COMPUTER EXPENSE
ADVERTISING
TRAVEL
UTILITIES
TAXES - OTHER
OTHER EXPENSES
PURCHASED SERVICES
BAD DEBT LESS RECOVERY
TOTAL EXPENSES
792,000
242,461
39,242
87,435
40,000
20,000
12,000
7,000
44,000
1,000
500
800
14,000
5,000
1,000
12,210
2,000
2,000
4,000
250
2,500
35,000
68,060
1,432,458
815,760
249,735
40,420
90,058
41,200
19,284
8,500
7,000
44,000
1,000
500
800
14,000
5,000
1,000
12,500
2,000
2,000
4,000
250
2,000
36,050
69,687
1,466,742
485,000
168,000
24,772
55,193
42,436
12,811
6,500
3,500
22,000
1,000
500
800
14,000
5,000
1,000
6,500
2,000
1,000
3,500
250
2,000
23,950
46,297
928,009
2,092,760
660,196
104,433
232,685
123,636
52,095
27,000
17,500
110,000
3,000
1,500
2,400
42,000
15,000
3,000
31,210
6,000
5,000
11,500
750
6,500
95,000
184,044
3,827,209
INCOME (LOSS) FROM OPERATIONS
ADMINISTRATION ALLOCATION
NET INCOME (LOSS)
(71,261)
78,892
(150,152)
(154,306)
70,000
(224,306)
(56,082)
36,000
(92,082)
(281,649)
184,892
(466,540)
Practice Proforma
PATIENT ENCOUNTERS
CLINICAL
INPATIENT
OUTPATIENT
TOTAL ENCOUNTERS
REVENUE PER ENCOUNTER STATS
CLINICAL
INPATIENT
OUTPATIENT
TOTAL REVENUE PER ENCOUNTER
TOTAL PAID HOURS
TOTAL FTE's
TOTAL ENCOUNTERS PER FTE
NET PATIENT REVENUE PER ENCOUNTER
TOTAL EXPENSES PER ENCOUNTER
OPERATING INCOME (LOSS) PER ENCTR
NET OPERATING MARGIN
PROJECTED WRVUs
TOTAL OFFICE PRACTICE DAYS
AVERAGE OFFICE ENCTRS PER DAY
TOTAL SURGICAL DAYS
AVERAGE SURGICAL CASES PER DAY
PROJECTED GROSS REVENUE CONTRIBUTION
PROJECTED NET REVENUE CONTRIBUTION
PROJECTED CONTRIBUTION
PROJECTED TOTAL OPERATING CONTRIBUTION
PROJECTED CAPITAL OUTLAY
3-YEAR RETURN ON TOTAL INVESTMENT
PAYBACK PERIOD (MONTHS)
5,106
365
809
6,280
5,208
360
750
6,318
4,200
210
450
4,860
3 Year
Totals/Averages
14,514
935
2,009
17,458
143.06
1,905.33
1,041.72
361.25
150.21
2,000.60
1,093.81
367.66
150.21
2,000.60
1,093.81
317.54
147.70
1,963.41
1,072.83
351.40
14,560
7.00
897
217
228
(11)
-5.2%
10,676
165
31
47
17
6,832,220
3,826,043
1,298,122
1,226,861
155,000
14,560
7.00
903
208
232
(24)
-11.8%
11,057
165
32
47
16
6,570,686
3,548,170
1,248,430
1,094,124
10,000
10,400
5.00
972
179
191
(12)
-6.4%
8,262
165
26
47
10
4,061,956
2,112,217
771,772
715,690
-
Y1
Y2
Y3
39,520
6.33
919
203
219
(16)
-7.9%
29,995
494
29
141
14
17,464,862
9,486,431
3,318,324
3,036,675
165,000
415%
8
Recruitment and Retention
 Internal or External Recruitment:
 Must have an individual focused tenaciously on recruitment
 Recruiter must have a good track record and be trustworthy
 Recruitment Package – get it all together
 Compensation and Model
 Benefits – have a document with all benefits offered including CME, dues and
subs, licensure, CME, relocation
 Other Topics:
 Call requirements spelled out clearly
 Staffing and Practice Operations – who does what and what is the physician’s
role
 Fair Market Value assessment of the package
 Malpractice Coverage
 Non-competes, moonlighting
 Medical records system(s) and expectations
 Expense reimbursement policies
 Private Practice to Employee Concerns
Recruitment and Retention
 Interviewing:
 Identify Interview Process, Team, and Itinerary – be organized and prepared
 Phone interviews first before travel?
 CEO, Practice Manager, employed physicians, supportive community physicians (same
specialty, if possible)
 Tours and visits to key hospital areas/individuals
 Key things to listen for:
 Long term commitment language
 Production expectations
 Check references AND check with your other physicians – it is a small, small world
 Why are they interested in you?
 If there is a spouse, what do they think??? Interests or hobbies?
 Community Tour:
 Focus on schools, if applicable, recreation and culture – do your homework
 Offer and employment:
 Know how far you are willing go with an offer
 Determine the process for the offer – who makes the decisions and communicates with
the candidate
 Have contracts completed accurately and ready to go – employment agreement, loans,
sign-on’s, relocation agreements
 Get the deal DONE
Recruitment and Retention
 Life balance – a significant part of the physician
mindset
 Be upfront and candid about what it is like to be an
employed physician
 Set clear and obtainable goals and allow physicians to
be a part of the decision making process [as much as
possible without relinquishing total control of the
practice or your organization]
Compensation Strategies and
Physician Alignment
 An effective compensation model must:
 Be simple, easy to understand, measurable and easy to manage
 Be real – goals should be reasonably achievable
 Be aligned with organizational goals and be relevant
 Production – minimizing practices loses
 Quality and satisfaction for both the practice and the hospital
 Have a big picture approach – what are we trying to achieve and what challenges do we
face. Are we rural? Bad payer mix? What is the supply and demand for this particular
specialty?
 Several different models each with variations:
 Eat what you kill: cash collections minus expenses = physician compensation
 Pure base salary: base salary negotiated at each term
 Base plus profit sharing: base salary and a profit share that is typically a % of cash minus
expenses
 Pure Worked Relative Value Units (WRVU): typically a rate per WRVU model or some
variation
 Base plus incentives (WRVUs, quality, satisfaction, operations)
Compensation Strategies and
Physician Alignment
 How “RVU”??? Compensation trends have been moving towards Relative Value Unit based
models
 Medicare physician fee schedule reimbursement was implemented as part of the
Omnibus Budget Reconciliation Act of 1989. The practice expense, physician work,
malpractice expenses associated to a specific Current Procedural Terminology code is
scored under the RBRVS system and payment is determined.
 Typically the Worked Relative Value Unit is used in production based compensation
models
 Implementation plan
 Physician input can help with buy in of the program
 Board driven
 Modeling
 Clear Timeline
 Communicate clearly, consistently and often
 There are pluses and minuses to all models – there really is no silver bullet with
compensation
Compensation Strategies and
Physician Alignment
PRODUCTION COMPENSATION EXAMPLE
Base Salary per Annum:
WRVU Payment Rate:
WRVU Target:
Quarterly WRVU Target:
$ 160,000 Usually a % of Expected Production Compensation (based on previous years)
$
30.00
5,333.33 (Base / WRVU Payment Rate)
1,333.33
Quarterly Production Compensation Reconciliation
Actual WRVUs
1st Quarter
Produced
Dr. A
1,410.00
Targeted
WRVUs
1,333.33
Production
Variance
76.67
Rate per
WRVU
$
30.00
Production
Compensation
$
42,300
Actual
Compensation Reconciliation
Paid *
$
39,452 $
2,848
* Actual Paid can be prorated on the number of Workdays, Calendar Days, Months in the Quarter, etc.
Actual WRVUs
2nd Quarter
Produced
Dr. A
1,200.00
Targeted
WRVUs
1,333.33
Production
Variance
Rate per
WRVU
(133.33) $
* A Production Shortfall has occurred. What do you do???
30.00
Production
Compensation
$
36,000
Actual
Reconciliation
Compensation
*
Paid
$
39,452 $
(3,452)
Compensation Strategies and
Physician Alignment
 Production Shortfall Options (all need to be clearly
stated in the agreement or compensation plan):




Withhold from a future pay(s)
Withhold from the next reconciliation
Withhold at the end of the compensation year
Adjust the base salary at the beginning of the next
production compensation period
 Adjust the base at the end of each reconciliation period
Operational metrics





Setting expectations and measuring operations
Tool to communicate with physicians and office
Helps to have realistic and achievable metrics
Can be a simple P&L to scorecards with benchmarks
Benchmark data:
 MGMA, industry analysts, industry consultants, recruiters, trade
journals, previous performance
 Make sure you are comparing apples to apples – private practice
vs. hospital owned, years in practice, region
 Be careful of sample sizes
 Scorecard Example…
2013 Scorecard Report
KEY:
= POSITIVE VARIANCE
PHYSICIAN
Month-Year
= NEGATIVE VARIANCE
Volumes/Conversions/Production
Number of
Clinic Days
Office Visits
2012 MONTHLY AVERAGE
Office Visits
per Clinic Day
No Shows
No Show %
Business Development
Surgeries/
Procedures
Surgeries/
Procedures
Conversion as
a % of
Referrals
Number of
Referrals
WRVUs
Earliest Office
Number of
Appointment
Weeks Out for
for New
New Patient
Patient
Appointment
(MM/DD/YY)
Next Surgery
Block Time
Open
(MM/DD/YY)
Number of
Weeks to
Next Open
Surgery
Block
177
15
11.80
27
15.3%
31
54.4%
432
57
2.1
2.1
1,284
180
7.13
120
9.3%
360
50.0%
5,400
720
3.0
3.0
2013 MONTHLY TARGETS
107
15
7.13
10
9.3%
30
50.0%
450
60
3.0
January-13
106
15
7.07
9
8.5%
31
56.4%
455
55
2/14/13
2.0
2/10/13
1.4
February-13
115
14
8.21
9
7.8%
33
54.1%
461
61
3/21/13
3.0
3/20/13
2.9
March-13
125
15
8.33
11
8.8%
38
60.3%
495
63
4/15/13
2.1
4/15/13
2.1
2013 ANNUAL TARGETS
3.0
April-13
May-13
June-13
July-13
August-13
September-13
October-13
November-13
December-13
YEAR TO DATE or AVG.
346
44
7.86
29
8.4%
102
57.0%
1,411
179
2.4
2.1
YEAR END PROJECTION
1,384
176
7.86
116
8.4%
408
57.0%
5,644
716
2.4
2.1
PHYSICIAN
Financials and A/R Performance
Month-Year
Charges
Collections
Contractual
Adjustments
Collections %
Total A/R
A/R > 90 Days
% of A/R > 90
Bad Debt &
Days
Charity W/O's
Denials
2012 MONTHLY AVERAGE
$
87,737
$
31,775
$
44,983
36.2% $
114,000
$
27,100
23.8% $
9,451
$
1,488
2013 ANNUAL TARGETS
$
1,650,660
$
624,000
$
1,057,404
37.8% $
110,000
$
15,000
13.6% $
30,744
$
13,200
2013 MONTHLY TARGETS
$
137,555
$
52,000
$
88,117
37.8% $
110,000
$
15,000
13.6% $
2,562
$
1,100
January-13
$
138,554
$
45,453
$
85,450
32.8% $
115,454
$
14,541
12.6% $
2,102
$
250
February-13
$
138,505
$
58,545
$
90,151
42.3% $
102,899
$
13,541
13.2% $
1,845
$
503
March-13
$
149,051
$
68,556
$
92,565
46.0% $
112,345
$
15,856
14.1% $
3,897
$
32
April-13
May-13
June-13
July-13
August-13
September-13
October-13
November-13
December-13
YEAR TO DATE or AVG.
$
426,110
$
172,554
$
268,166
40% $
110,233
$
14,646
13.3% $
7,844
$
785
YEAR END PROJECTION
$
1,704,440
$
690,216
$
1,072,664
40% $
110,233
$
14,646
13.3% $
31,376
$
3,140
Downstream Impact
 Measuring the contribution margin of all physicians
 Many different philosophies of how to measure
contribution:
 The KEY is to get a model that everyone is comfortable
with and agrees to
 Be careful with this information – it is prone to
misinterpretation and misunderstanding
 Information must be timely and easily obtainable
 Must be comfortable with the measurement to set
benchmarks and to eventually assist with decision
making
 This is just a piece of the puzzle – need to consider all
factors when making decisions based on this
information (mission, community need, others)
 Example…
Downstream Impact
YTD 12/31/2011 Contribution Margin Analysis
HOSPITAL NAME
Dr A
Dr B
Dr C
Dr D
Dr E
Dr F
Dr G
Dr H
Dr I
Dr J
Dr K
Dr L
Dr M
Dr N
Dr O
Dr P
Dr Q
Dr R
Dr S
Dr T
Dr U
Total
Gross Inpatient
Charges
$26,468
$1,086,376
$298,570
$0
$411,674
$3,300,798
$0
$558,002
$0
$7,940
$24,865
$4,234,595
$0
$1,615,272
$0
$0
$35,846
$176,709
$0
$0
$0
$11,777,115
Gross
Outpatient
Charges
$525,954
$1,529,875
$903,354
$80,153
$1,104,794
$24,556
$569,897
$1,563,776
$533,865
$988,899
$838
$366,858
$625,107
$633,695
$34,193
$1,002,426
$267,830
$1,666,039
$722,013
$504,376
$584,113
$14,232,608
CCRs Applied to
Gross Charges by
Cost Center
Total Gross
Charges
$552,422
$2,616,251
$1,201,924
$80,153
$1,516,468
$3,325,354
$569,897
$2,121,778
$533,865
$996,839
$25,703
$4,601,453
$625,107
$2,248,967
$34,193
$1,002,426
$303,676
$1,842,748
$722,013
$504,376
$584,113
$26,009,724
Projected Net
Direct Expense
Revenue
$265,024
$1,274,951
$621,160
$44,742
$861,309
$1,267,653
$304,677
$1,046,914
$256,104
$514,771
$9,779
$1,764,727
$277,558
$987,906
$17,993
$474,866
$160,861
$918,133
$364,195
$266,167
$279,449
$11,978,940
$122,853
$816,368
$293,453
$17,543
$385,146
$1,226,315
$124,732
$521,186
$116,846
$218,620
$9,947
$1,617,680
$136,816
$721,109
$7,484
$219,399
$70,193
$422,512
$158,025
$110,392
$127,844
$7,444,462
Projected
Contibution
Margin
$142,171
$458,583
$327,707
$27,200
$476,163
$41,338
$179,944
$525,727
$139,258
$296,151
($168)
$147,047
$140,742
$266,797
$10,509
$255,467
$90,669
$495,621
$206,170
$155,776
$151,606
$4,534,477
Indirect
Expense
$75,508
$515,270
$181,869
$10,766
$239,478
$781,766
$76,547
$323,173
$71,707
$134,191
$6,357
$1,028,506
$83,963
$455,940
$4,593
$134,643
$43,295
$260,416
$96,979
$67,746
$78,457
$4,671,171
Projected Net
Revenues Should be
Actual Payments, if
obtainable
Projected
Income (Loss)
$66,663
($56,687)
$145,838
$16,434
$236,685
($740,428)
$103,397
$202,554
$67,551
$161,960
($6,526)
($881,459)
$56,779
($189,143)
$5,916
$120,824
$47,374
$235,205
$109,191
$88,029
$73,149
($136,694)
Net Rev %
of Gross
48%
49%
52%
56%
57%
38%
53%
49%
48%
52%
38%
38%
44%
44%
53%
47%
53%
50%
50%
53%
48%
46%
Gross
Gross Margin
Contrb
Margin
26%
25%
18%
-4%
27%
23%
34%
37%
31%
27%
1%
-58%
32%
34%
25%
19%
26%
26%
30%
31%
-1%
-67%
3%
-50%
23%
20%
12%
-19%
31%
33%
25%
25%
30%
29%
27%
26%
29%
30%
31%
33%
26%
26%
17%
-1%
Arguments over
Indirect Expenses
and Incremental
Costs
The Big Picture: Alignment of Goals
 Maximize Practice Operations and Efficiencies
 Physician Compensation, Incentives and Alignment with
Goals
 Physician Balance and Satisfaction
 Physician Integration into the Network – EHRs,
Physician Referral Relationships and Communication
 Hospital Programming and Growth
 Inpatient Performance and Impact on Quality,
Outcomes, and Satisfaction (HCAPS, Quality Blue, etc..)
 Downstream Contribution
 Preparation for the future…
Future Topics
 Population Health – why are some people healthy and
others aren’t? Health research driving policy
 Primary Care Medical Home – comprehensive, coordinated,
accessible, patient-centered care
 Concierge Medicine
 Affordable Care Act (ACA) – Medicaid expansion, Health
Insurance Exchanges, program costs & funding
 Big uncertainties
 Hospital and Physician Alignment – Value Based Purchasing
and Surviving the Cuts
 Communication
 Coordination
 Let’s get comfortable – we’re going to be in this thing
together
Questions or Comments?