Do hospital docs slack off? Latest data say no
Do hospital docs slack off? Latest data say no
How do your practice’s charges stack up?
Conventional wisdom places most of the blame for the losses reported by system-owned medical practices on poor physician productivity. More to the point, the common assumption is that after selling their practice to a larger system, physicians just stop working as hard.
Elizabeth Woodcock, a consultant with the Medical Group Management Association (MGMA) in Englewood, CO, says that assumption is baloney. "While physician productivity does drop somewhat in the hospital setting, the drop isn’t big enough to fully account for these kinds of losses," she says. For instance, other areas with even bigger losses than those attributed to reduced physician productivity come from the practice giving over its ancillary services to the hospital, plus comparatively poorer collections and a lack of support staff compared with the private practice, she says.
Consider the revenue
To create a more accurate picture of their practices’ contribution, system administrators must look beyond expenses and consider the revenue, she stresses. MGMA studies, for instance, find the differences in productivity between private and hospital-owned practices is relatively small.
However, there is a much bigger and often overlooked difference between the kinds of activities physicians do in each setting and how much they charge for them. The following two tables compare overall charge activity based on procedures of the average private group and hospital-owned practice. All charts in this story are based on MGMA’s Cost Survey: 1999 Report Based on 1998 Data.
Family Practice, Single-Specialty Activity Based on Charges | ||
Hospital-Owned | Private | |
Nonsurgical, inpatient | 68.98% | 59.80% |
Nonsurgical, outpatient | — | 7.37% |
Surgical, inpatient | — | 6.03% |
Surgical, outpatient | — | 4.85% |
Other | 26.23% | 19.83% |
Source: Tables on pp. 75-76 are from the Medical Group Management Association in Englewood, CO. |
Family Practice, Single-Specialty Median Charge Per Procedure | ||
Hospital-Owned | Private | |
Nonsurgical, inpatient | $54.90 | $48.12 |
Nonsurgical, outpatient | $98.12 | $80.43 |
Surgical, inpatient | — | $54.43 |
Surgical, outpatient | — | $531.57 |
Lab | $20.49 | $25.39 |
Radiology | $63.32 | $80.94 |
Procedures per FTE physician | 10,193 | 11,337 |
Gross charges per FTE physician | $514,964 | $531,396 |
Based on a comparison of the number of procedures done per full-time physician, hospital-based physicians are about 10% less productive than their private counterparts — 10,193 procedures vs. 11,337 per physician, says the MGMA.
However, the impact of that difference is exaggerated by a major difference in gross charges by the two groups, notes Woodcock. "Private groups enjoy an 18.25% higher charge structure because they can provide ancillary services. That means private groups automatically have 20% more business you can charge higher rates for than most hospital-owned practices."
As a result, "private physician offices are generally more diversified, which permits them to devote more of their time to activities that pay more," she contends. In contrast, because of the way they are often organized, hospital-owned groups focus on lower-paying office visits while the higher-paying medical activities are redirected to the hospital and counted in its revenue stream.
"When you force your physicians to just perform routine $54 office visits, no wonder the practice has trouble making money," says Woodcock.
Billing and collections also sap a hospital-owned practice’s bottom line, she says. The table at the top of p. 76 compares typical private and hospital-owned practice revenue streams and payment patterns.
Family Practice, Single-Specialty Revenue and Collection Sources | ||
Payer Mix | Hospital-Owned | Private |
Medicare | 21.60% | 17.56% |
Medicare and charity | 7.10% | 5.10% |
Commercial/self-pay and capitation | 63.70% | 63.00% |
Family Practice, Single-Specialty Collections and Receivables Management | ||
Hospital-Owned | Private | |
Gross fee-for-service collection rate | 73.41% | 74.82% |
Adjusted FFS collection rate | 95.44% | 97.78% |
Days in A/R | 71.67 | 53.74 |
Net medical revenue | $360,541 | $429,116 |
Difference in net medical revenue | + $68,575 |
Family Practice, Single-Specialty Nonprovider Costs | ||
Hospital-Owned | Private | |
Total FTE support staff per FTE physician | 4.15 | 4.99 |
Total support staff cost per FTE physician | $117,667 | $133,020 |
Total support staff cost (% of TMR) | 31.06% | 31.92% |
Total operating cost | $108,307 | $108,654 |
Total operating cost (% of TMR) | 32.28% | 25.55% |
Total overhead | $226,414 | $244,716 |
Total overhead (% of TMR) | 62.90% | 57.68% |
This difference in net medical revenue has no direct relationship to productivity, Woodcock contends. The difference is due to the fact most hospital-based practices have a lower-paying payer mix than the typical private practices. The main reason for the difference is that private-group physicians have more discretion over how much Medicare and charity care they will provide than hospitals do.
Also, be sure to consider that the money owed to hospital-owned practices stays on the books as an outstanding receivable for an average of 17.93% longer than is the case with private practices (see table, center left). "From a business perspective, there’s nothing wrong with that. But it is not right to then say the reason the group is not making more money is because its physicians are not working hard enough," she says.
On the expense side, Woodcock says, penny-pinching by hospital health systems often cuts a practice’s support staff, which often backfires by hampering physician productivity, which in turn reduces revenue. She says hospitals often do not see the consequences of such moves because they tend to focus just on the number of support staff or the total cost for staff.
Another way to go is to look at these costs as a percentage of total medical revenue (TMR). Data collected by the MGMA (see table, bottom left) showed that private practices are more efficient in their use of support staff.
Looking at the percentage of TMR, you see "even though private physicians pay more for support staff, they get more bang for their buck," she says. In short, investing in support staff helps you generate higher revenues because it permits physicians to spend more of their time on billable activities.
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