Docs Don't Drain Hospital Finances, Systems Say

Jeff Goldsmith in Modern Healthcare

Expenses also not always apparent

The physician-related expenses that health systems incur extend well beyond the direct cost of employment alone. Hospitals increasingly add administrative pay to physicians' salaries, for example if they also serve as medical directors, said Jeff Goldsmith, national adviser for Navigant. 

Hospitals also contract with independent physicians to cover their emergency departments and intensive-care units, as well as pay doctors for being on call. 

“The losses on employed physician groups are only a piece of the total physician outlay a hospital has,” Goldsmith said. “The problem is all of those costs are rising as fast or faster than any other cost the hospital incurs. It's not just physician employment, it's the sum total of subsidies to physicians.”

In some markets, hospitals pay doctors to serve as medical directors and to work on-call shifts in order to secure their loyalty and encourage them to direct patients back to the facility, Goldsmith said. In certain cases, he said physicians view hospitals “as a cash register,” and take advantage of such payments. 

“It's one of the most difficult issues in managing the hospital —nfinding the appropriate balance between what a hospital needs and what its physician community wants,” he said. 

Intermountain Healthcare, a 21-hospital system based in Salt Lake City that also is hiring docs, monitors its employed physicians' financial performance more holistically —nwith respect to the health system overall, including its health plan, said Clay Ashdown, the system's vice president of financial strategy, growth and development. 

“Although it's something we're very mindful of, it's not something we look at in a vacuum to say, 'All right, this practice is performing at such-and-such a rate,' ” he said. “It's a data point, but ultimately we look at, 'What do we need to provide services in our community?' ”

In some parts of the South and Midwest, retiring physicians aren't being replaced, and if there are no doctors, there are no hospitals, Goldsmith said. In those situations, hiring or partnering with new doctors is not optional for health systems, he said. 

“Unless the hospitals subsidize the physicians to replace those older docs, the hospitals are toast,” he said. 

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