Insights from Ludi

Last Bucket Standing – Financial Management of Physician Contracting

Posted by Michelle Harmon on Jun 19, 2018 9:00:00 AM

Last Bucket Standing – Financial Management of Physician Contracting

Health systems are expanding and continue to acquire new facilities. This type of growth requires examination of all the legacy physician “deals” that are in place. Yet, at LudiTM, we often hear that examination of physician administrative contracts that include medical directorships, co-management, and shared or on call agreements are often put on the back burner for health system teams. We get it, management of physician contracts is messy, and teams do not get overly excited about having to deal with this process. Teams are short on time and people, so this is the bucket that gets pushed down the priority list or even completely ignored.

But it shouldn’t!

Given how pinched every budget is these days — not to mention the executive team’s limited time -- physician contracts is not the place to skimp on financial management. This is one place that you can recoup your costs on your Medicare Wage Index simply by turning in the documents that your physician files for their time logs. Done on paper, this is a massive hassle factor for teams — due to the paper process, the lack of infrastructure in place, and limited time. Automation of your physician administration agreements creates an easy-to-use system for physician time submission for Medicare Wage Index. Think of it as an “Easy Button” for this otherwise cumbersome process.

And, since we are in the season of cutting costs for 2018, your finance team better be on scooping those dollars up off the floor.

Do you know what you are paying your physicians? And if it makes sense? Again, due to paper processes and limited time, these valuable pieces of information get overlooked and ignored. Ludi clients can easily monthly monitor which physicians or physician groups they are paying and for what service. Trust us, knowing this information is worth your while. Elimination of just one contract that no longer serves the health system can drop $50,000 to $100,000 to your bottom line immediately.  

Physician spend on administrative agreements has traditionally been protected by CEOs and has largely been spared the cost-cutting pain that all other departments have to endure over and over. But these days, health systems can no longer afford to skip analyzing the bucket of medical directorships just because of long-standing physician relationships that served the system 5 to 10 years ago.

Every medical directorships should be a viable partnership that serves patients. When was the last time your health system dusted those paper contracts off and had a look at the financial spend, the accrual, the fair market value and actual measure of what “goes out the door” for these partnerships? Don’t get me wrong. Hospitals and physicians need each other. Careful management of the economic spend between the two is necessary.


Tracking, managing, and paying on physician administrative contracts is full of trials and tribulations. We know you’re not the only one dealing with this. To prove it, we’re surveying your counterparts at hospitals across the country to find out just how challenging it is.

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Topics: physician management, hospital management, physician spending, hospital spending