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    Hospitals employing physicians see greater losses

    A new report from Kentucky finds that the costs for hospitals to employ physicians is increasing

    The cost for a hospital to employ a physician is increasing, with a new report out of Kentucky revealing that 58% of hospitals reported annual per-physician losses of more than $100,000—an increase of 17% over the prior year.

    A bright spot, however, is that hospitals who hired primary care physicians incurred lower losses on average ($100,000 or less) compared with hospitalists or specialist physicians (more than $100,000). Specialists also accounted for the greatest losses across the board, representing the only physician provider type to incur more than $200,000 in losses per physician annually.

    RELATED COVERAGE: What physicians need to know when negotiating hospital contracts

    Larger hospital systems faced greater losses, as did larger hospitals, according to the report. Sixty-six percent of hospitals with more than 200 beds report losses between $100,000 and $200,000 per provider annually while 33% reported losses greater than $200,000. In smaller hospital systems and in hospitals with fewer than 200 beds, 88% reported losses less than $200,000, with 66% falling below the $100,000 mark for losses. Only 12% reported losses of greater than $200,000.

    Seasoned physicians also come at a higher price, according to the report. Many more-experienced physicians come from existing practice and may bring with them a mix of payment types that could lead to losses, according to the report. Only a third of survey respondents reporting gaining physicians through acquisition from an existing practice, and 75% of those recruits incurred annual losses between $100,000 and $200,000 each. Conversely, 42% reported that they are recruiting more heavily from medical schools than from existing practices, and report that 60% of these new graduates incur losses of more than $100,000, but less than their more experienced counterparts.

    READ MORE: Hospital facility fees pressuring physicians to talk costs with patients

    The increased employment of specialists, who incur greater losses, is also contributing to the upward trend in provider-related losses, but may be offset by the higher revenues and margins they contribute to hospitals, according to the report.

    The most common compensation model reported was the RVU productivity-based method, used by 67% of those surveyed, with 63% of those reporting losses of between $100,000 and $200,000 per physician.

    The majority of hospitals and healthcare organizations (64%) polled are starting to bundle physician compensation with performance metrics such as quality outcomes and patient satisfaction. Another 36% are tieing physician compensation to hospital and health system goals. While there doesn’t appear to be a link between bundling and losses, it is nevertheless a definite trend.

    In terms of addressing physician underperformance and loss, 20% of those polled terminated physicians with costly losses, 30% audited their documentation, 20% changed their compensation model, and 30% reduced the physician’s personal compensation.

    The study was commissioned by the Kentucky Hospital Association and performed by accounting and consulting firm Dean Dorton Allen Ford.

    Rachael Zimlich, RN
    Ms Zimlich is a freelance writer in Cleveland, Ohio. She writes regularly for Contemporary Pediatrics, Managed Healthcare Executive, and ...


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      What cannot go on, won't. The hospitals assumed that ACO model would hand them monopolies in geographic areas so they could afford physicians as a loss leader initially. The ACO model is a bust and hospitals are returning to reality. Hospitals will finally admit they are terrible at running physician practices and the layers of bureaucracy they impose on a practice comes at a price. In addition, employed physicians have no incentive to work that extra bit which turns the profit. In the next year or so, as more of Obamacare's nonsensical assumptions and plans turn out to be nonsense, we will start to see hospital's blame physicians for poor productivity, and disgruntled physicians leaving employment or just being fired. This is a good thing.

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