Insights from Ludi

With this kind of title, I bet you were thinking, “Hey, there is going to be a trick!” Well, there’s not a really a trick. But, we do have a tip: Use market data to establish physician payment rates.

There it is. The straight story from someone who is not in the business of producing, assimilating, repackaging, benchmarking or from one who gains by suggesting this be part of your strategy. And, here’s another tip: Use market data consistently and often. Take a page out of Nike’s book — Just Do It!

Given that it is May 1 and you will likely be staring at a stack of 100 time logs from physicians who want to be paid, here are 3 tips for minimizing compliance errors:

This year’s 22^nd Annual Compliance Institute in Las Vegas is off to a great start with amazing keynote speakers and informative sessions. If I had to describe a theme of the sessions and the conference, it would be connectivity. Compliance is not one person’s job alone in an organization, but a culture. Doing the right thing should be our priority and working across the organization is necessary. Legal, audit, risk, operations, leadership, the medical staff all must be rowing in the right direction!

As hospitals cut costs in every area, one of the last remaining protected buckets is physician contracts. What if I told you that you can cut 1% off your total spend this next year. Would you believe me? There are 3 solid ways to cut your spend, and actually, with data, all can be relatively painless. You need a ginzo knife to get in there and trim the fat.

Over the past two decades the number of physicians employed by hospitals has increased exponentially. Employment is one form of physician alignment but there is a whole other bucket that is surprisingly large, let’s call it everything else. Everything else includes medical directorships, teaching agreements, committee work, co-management agreements, on-call and hospital based services. So here is our calculation:

What is physician spend? This is a term used to describe all the dollars that flow from hospitals to physicians. It can be in the form of employment, a contract to provide a particular type of coverage, ie Emergency Room physician staffing, or it can be for a service, ie medical directorship. Now that it is defined, what are the reasons it is super hard to measure?

A wise person once told me there are only 2 levers in business. You can do one of two things to succeed profitably. You can increase your revenue or decrease your expenses.  It’s really that simple.  To improve profitability you must either increase your revenue or decrease your expenses. I’ve personally been part of organizations that were growing as well as those that were not growing, even shrinking in revenue. Let’s start with growth though.

Health care organizations pay physicians for a variety of duties that are not patient care based, but are more administrative or perhaps task based activities that are for the benefit of the company, not necessarily the physician. These activities are not defined as productive time, meaning the physician cannot bill insurance companies or a patient for this time. It is work being performed on behalf of another organization, not a patient. Over time, health care organizations such as hospitals, device companies, large physician groups, pharmaceutical companies have had to pay physicians a fair hourly rate for all the hours asked of physicians.

So your organization has a contract management system, meaning your physician contracts are covered right? WRONG.

Contract management systems do a great job of managing the development of new physician contracts, executive approval, and any redline changes that are made on the various versions. Once signed, the contract management system is not the best place to manage the activity on these contracts. The day-to-day management falls to the operational and financial side of the house.

The regulatory environment dictates that hospitals who contract with physicians meet specific conditions in order for the contract to be legal. The conditions are meant to ensure the physician payment is not based on volume or value of business because it can lead to overusing services and increasing overall costs of care. Technically violating your own contracts can lead to multi-million dollar settlements.