Physician Salaries Endangered in Some Hospital-Owned Practices

In many hospital-owned practices, physician salaries are endangered when productivity and net collections drop. Sadly, it’s a common and documentable by-product of the ongoing shift from privately owned practices to hospital-owned practices. It turns out that in many instances, if you sell your practice to a hospital, your income may go down.

The causes behind this disturbing outcome—and how to correct the problems—are examined in an insightful article by George Conomikes published on MedScape: Why Income May Drop if You Sell Your Practice to a Hospital: Why Profits May Plummet After Sale to a Hospital.

The situation is framed by a recent Medical Group Management Association (MGMA) report that “hospital-owned practices are 25 percent less productive than those that are privately owned.” As CEO of the Conomikes Associates organizational consulting group, and a member of the MedScape Business of Medicine Editorial Board, the MGMA report echoes his own experience.

“In some cases, previously-profitable practices start to see a decline in their income. In other cases, the practices may have been less profitable to begin with.” Three root causes are cited:

• Centralized and remote billing operations disconnect the physician and the practice staff. “And there is no data that supports the effectiveness of centralized billing,” writes Conomikes. “It may appear to more efficient, but usually is not as effective.”
• Physicians have less control and are less involved. “When physicians code and document their services, optimum billing and collections result. No one is better able to document and determine the correct codes than the involved physician.” Moreover, hospital-employed physicians can feel disconnected from the financial performance of the practice.
• Lower performing practices opt-in, while higher-performing practices are less likely to sell. Thus, if the practice is a “low performer,” the challenge for the hospital is to employ strategies to increase revenues from the outset.

For hospital-owned practices (and private practices that may be considering selling) Conomikes offers several corrective actions—beginning with a serious conversation with the hospital administration.

“First, ask for a status report on how the practice has been doing since acquired by the hospital. If you haven't yet sold your practice to a hospital but are in negotiations, bring up some of these issues so that you can avoid problems developing.”

And further…

• Consider bringing billing and collections back to the practice level.
• Ensure that physicians are responsible for financial performance.
• Suggest a system of incentives based on results.
• Consider coding and documentation workshops.

We recommend this related post about the shift to hospital employment, quality assurance and reduced costs can be read here.