Insights from Ludi

Directing Your Hospital Dough – Financial Best Practices on Physician Contracts

Posted by Michelle Harmon on May 15, 2018 9:00:00 AM

Directing Your Hospital Dough – Financial Best Practices on Physician Contracts (1)-1

LEAN, Sixth Sigma – man, we have all heard it, trained on it, and implemented it. This type of efficiency mantra is the bedrock of how to stay profitable; hospitals continue to have more and more pressure to cut any type of fluff from their budgets, to deliver quality care, and be able to grow services to meet the needs of the communities they serve.

Physician administrative agreements are one of the last bastion of “stuff” that is not addressed; it’s not part of a health systems platform, EMR, or other IT software that hang out in the hospital world. These agreements are on paper and not easily accessible. The agreements are fraught with issues, as they are on paper and, therefore, harder to manage.

So, what do best practices look like for one of the last paper-driven process residing in a health system that also drives physician partnership? For starters, find the darn things. Physician agreements can be largely driven by each hospital’s leadership style, physician philosophy, and legacy. With all the mergers happening between hospitals, there is a giant “Grand Canyon of surprise” about contracted relationships with physicians, and no one source of truth to locate, “know”, or manage them.

Once a health system creates one source of truth, the hospital team can move into automation to gain best practices. Back to the LEAN thing, removing steps that aren’t necessary is number one in moving to best practices. Then, you need to be sure to know: Are your agreements expired? Do you have approvals in place for this payment? Did the physician document her work that is also within the scope of her agreement?

Collection of accurate time logs for physician non-patient care activities, for both employed and independent physicians, drives improving reimbursement and decreasing the finance team’s time for cost reporting. Standardizing and streamlining physician agreement duties is also a best practice. This duty business can be the “waterloo” of any hospital team; it is time consuming to check a time log against specific duties each month.

Approvers or managers of the physicians’ time logs should have an automated solution to help with the burden of this work effort. (One of our clients was receiving 500 emails per month just around approving physician time logs.) Training and clear accountability are necessary for best practices; this is very difficult to do with current manual processes.

Plus, the math that is created in these physician contracts can require a PhD to cipher through how to pay the physician. There are differing cycles hospitals use monthly, bi-monthly, and weekly. There are 24 payment mechanisms that can exist within a health systems’ physician agreements. Those include payments for one individual physician, group payment, or shared individual payment. (hourly min/max, unit of service, stipend, shared stipend, shared unit of service min/max, etc.) Any one nauseous?

Clients of Ludi have incorporated documenting fair market value and commercial reasonableness. Best practices have also included board approval of highly compensated physicians. Every health system should house all physician contracts in one location, manage the process, pay attention to creative payment types, and execute in an automated fashion. A satisfied physician partner who is working for the betterment of the health system is the best practice of all.

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