Physician Employment Losses - American Health …€¦ · Physician Employment Losses: ... Net Loss per FTE Physician ... *For 2008, Net income, practices without financial support

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Page 1February 9, 2012

Prepared for AHLA Physicians and Physician Organizations Law Institute

Physician Employment Losses:Alarming Trend or Misunderstood

Performance Metric?

Douglas K. Anning, Jon-David Deeson



Net Loss per FTE PhysicianHospital/IDS Owned – Multispecialty

2005 – 2010

Source: MGMA Cost Survey, 2011.*For 2008, Net income, practices without financial support was used to provide a more accurate data point.

1998 Loss per Physician = $83,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

2005 (n=105)

2006 (n=99)

2007 (n=97)

2008* (n=83)

2009 (n=242)

2010 (n=189)

Mean

Median

2



Net Loss per FTE Physician

Source: MGMA Cost Survey, 2011.

$500,000 $400,000 $300,000 $200,000 $100,000 $0 $100,000 $200,000 $300,000

Not Hospital/IDSOwned

Hospital/IDSOwned

25th %tile

10th %tile

Net Loss, 2000

90th %tile

75th %tile

Median

Standard Deviation

Mean

$189,910

Multispecialty



$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

10th %tile

Median

90th %tile



Eastern(n=39)

Midwest(n=41)

Southern(n=84)

Western(n=25)

Overall 10th %tile = $467,108

Overall Median = $189,910


Hospital/IDS Owned – MultispecialtyGeographic Section

3



$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

≤10 11-25 26-50 51-75 76-150 ≥151

Hospital/IDS Owned – Multispecialty Number of Physician FTEs

10th %tile

Median

90th %tile



(n=94) (n=22) (n=13) (n=24) (n=19)


Overall Median = $189,910


(n=17)



Alarming Trend or Misunderstood Performance Metric?

Payer Mix?

Physician Specialty?Capacity?

Culture?

4



Industry Response• Repeat of the 1990’s?

– “Practice losses increasingly untenable” – Health Care Advisory Board (1999)

– “Employment choices physicians make today may not be able to be undone” – NEJM, 2011

Problem versus predicament…

– Financial, operational, strategy and potentially legal matters to consider

– Leadership is critical



Hospital / IDS Owned Employment Trends

70%

30%

Yes

No

Does your hospital/system plan to employ a greater percentage of

physicians in the next 12-36 months?

HealthLeaders Intelligence Report

Top 5 Service Lines

Primary care

Hospitalists

General Surgery

Cardiology

Orthopaedics

71%

71%

51%

50%

39%Source: HealthLeaders Intelligence Report, September 2011

5



U.S. Physician Practice Ownership

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010

Hospital/IDS Owned

Physician Owned

42%

53%

10 Years Ago (2000)

MGMA

AMGA

76% 21%

54% 39%

Source: MGMA Cost Survey, 2006-2011.

Hospital/IDS: 51%

AMGA (2011)

Physicians: 40%



By the Numbers…


Median Data Hospital/IDS OwnedNot Hospital/IDS

Owned

Count 190 168

Total physician FTEs 11.10 34.90

Total non-physician provider FTEs 5.28 8.95

Number of branch clinics 14 5

Practice model characteristics are different

6



By the Numbers…

Source: MGMA Physician Compensation and Production Survey, 2011.

Card

FP

Hosp

IM

OB/GYN

Peds

Gen Surg

Ortho Surg

1

1Includes Urgent Care.

68%

Physician specialty does influence multispecialty data

Hospital/IDS Owned



Physician Compensationas a Percent of Collections

Source: MGMA Physician Compensation and Production, and Cost Survey, 2011.

0%

20%

40%

60%

80%

100%

120%

140%

Card FP IM Hosp OB/GYN Peds Gen Surg Ortho Surg

Hospital/IDSOwned


$83,800(n = 18)

$103,234(n = 299)

$226,823(n = 128)

$282,986(n = 68)

$185,861(n = 94)

$265,669(n = 38)

$21,833(n = 40)

$259,645(n = 44)

Net Loss per FTE MD:

Hospital/IDS

7



Per Physician Work RVU

*Note: Median physician benefits for Multispecialty Hospital / IDS Owned and Not Hospital / IDS Owned are reported as $6.22 and $6.21, respectively.


Median Data Multispec Fam Prac OB/GYN Gen Surg Card Ortho Surg

Hospital / IDS Owned

Total Med Rev $82.78 $80.49 $77.44 $57.90 $100.08 $72.19

Total Opg Cost $65.21 $60.92 $60.76 $42.41 $43.53 $47.79

Total Phys Cost* $52.44 $41.63 $47.23 $50.74 $62.44 $52.55

Not Hospital / IDS Owned

Total Med Rev $120.30 $94.85 $88.02 $75.18 $102.15 $91.19

Total Opg Cost $72.84 $56.06 $49.21 $32.97 $56.33 $41.88

Total Phys Cost* $46.21 $30.54 $34.74 $54.48 $40.99 $44.07



$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2000 2005 2010

Physician Practice Financial Performance


Medical RevenueOperating Costs$866,444

$498,265

Per FTE Physician, Multispecialty – Median Data

($368,180)

Medical Revenue Gap, 2010:Fam Prac ($185,684)OB/GYN ($385,409)Cardiology ($265,049)Gen Surg ($205,771)Ortho Surg ($507,526)

Medical revenue gap increased 138% during

10‐year period

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Operating Costs


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Mgmt Fee Bldg &Occup

Staff StaffBenefits

ProfLiability

Info Tech

Hospital/IDS Owned

Not Hospital/IDS Owned

Hosp/IDS: 72.99% (O/H)3.46 (FTEs)

Not Hosp: 63.67% (O/H)5.52 (FTEs)

Per FTE Physician, Multispecialty – Median Data

Overhead (O/H) and FTEs

1

1

1Per FTE support staff.



Physician Costs


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Total Cost Medical Revenue

Hospital/IDS Owned


As a Percent of, Multispecialty – Median Data

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Ancillary Services

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Clinical Lab/Pathology Diagnostic Radiology/Imaging

Not Hospital/IDS Owned

Hospital/IDS Owned

Proc./MD = 4,769GC/Pat. = $81.10

Proc./MD = 2,445GC/Pat. = $33.67

Note: Proc./MD = Procedures per Physician and GC/Pat. = Gross Charges per Patient

Proc./MD = 632GC/Pat. = $55.76

Proc./MD = 282GC/Pat. = $19.04


Gross Charges per FTE Physician, Multispecialty – Median Data



Surgical and Medical

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Surgery/AnesthesiaProcedures

Surgery/AnesthesiaProcedures

Medical Procedures Medical Procedures

Hospital/IDSOwned


(outside practice)(outside practice)

(inside practice)(inside practice)


Procedures/Physician

Gross Charges/Patient

Gross Charges per FTE Physician, Multispecialty – Median Data

183 166 227 350 629 497 4,325 5,788

$146.14 $94.50 $53.91 $44.73 $67.94 $42.21 $332.31 $371.82

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Key Performance Metrics

Source: MGMA Performance and Practices of Successful Medical Groups, 2010 and MGMA Cost Survey, 2011.

MultispecialtyMedian Data

Hospital/IDS OwnedNot Hospital/IDS

OwnedAll Owners –

Better Performers

120+ Days in A/R 24.91% 15.01% 10.23%

Days in A/R 49.53 34.79 30.56

Net Collection % 96.59% 98.32% 99.28%

Overhead % 72.99% 63.67% 61.97%

Payer Mix

Commercial 42.70% 46.39%

Medicare 24.08% 25.30%

Medicaid 9.16% 3.53%

Self-Pay 3.30% 2.80%

Financial performance and payer mix variances do exist



Better Performers

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

MedicalProcedures

MedicalProcedures

SurgicalProcedures

SurgicalProcedures

LabProcedures

RadiologyProcedures

Hospital/IDSOwned


(inside practice) (inside practice)(outside practice) (outside practice)

Source: MGMA Performance and Practices of Successful Medical Groups, 2010.

Activity Charges to Total Gross Charges Ratio, Multispecialty ≥ 50% Primary Care

15.46%8.62%

2.52%1.13%

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Better Performers

Multispecialty:Hospital/IDS Owned –BETTER Performers compared to…

Hospital/IDS Owned – Others

(Variance)

Not Hospital/IDS Owned –

Better Performers(Variance)

Not Hospital/IDS Owned – Others

(Variance)

Medical Revenue $113,049 ($270,172) ($188,449)

Overhead % -12.55% (4.63)% (1.19%)

Total RVUs 1,414 (3,950) (1,594)

Work RVUs 693 (1,797) (481)

Source: MGMA Performance and Practices of Successful Medical Groups, 2010.

Key Performance Indicators Gap Analysis

Better performers close the gap but not in all areas



Preliminary Focus Areas

Revenue, expense and physician compensation environment (both pre- and post-employment)

Performance variance explanations

Impact of post-employment performance on legal matters (e.g., FMV and Commercial Reas.)

Other unintended consequences

1

2

3

4

12



Alarming Trend orMisunderstood Performance

Metric?



Mitigating the Debate• Identify root causes*

– Uncontrollable – payer mix, JCAHO, etc.

– Accounting – system overhead, ancillary services

– Controllable – best practice targets, physician compensation impact

• Educate with a purpose of minimizing the impact on culture and finger pointing

• Establish integration process, trip wires

• Focus on realization of ROI – strategic value* Stopping the Bleed, Health Care Advisory Board, 1999

13



Mitigating the DebateUncontrollable

(System Induced)

Payer Mix

Strategic

Accounting

(System Induced)

Ancillary Services

Overhead

Controllable

Revenue, collections and A/R

Physician Comp

OverheadDo not neglect the importance of having a pre‐versus post‐employment financial analysis



Focusing on the Controllable

Strategy, Vision, Culture and Leadership

Integration Process

Compensation On Boarding

Revenue Expense

Return on Investment

[ “It All Matters” ]

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Designing a Disciplined Integration Process

ContinuousImprovement

Monitoring &Measurement

Goals &Budget

• Discuss values, culture and strategic goals

• Due diligence including financial analysis

• Terms of agreement

• FMV analysis

Planning &Partnering

Coordination & Integration

Management & Growth

Pre-Alignment Post-AlignmentOnboarding

Physician Integration Process

• Finalize agreement(s)

• Operational transition

• Work plans and checklists

120 to 360 days 90 to 180 days Effective Date +



Educating the Board

• Our strategy, vision and culture

• Anatomy of employed physician losses– Uncontrollable, accounting, controllable*

• Our financial performance

• Our integration process

• Our trip wires

* Employed losses have varied contributing factors; whatever the nomenclature, organizations should work to define them and explain them accordingly

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Take Home – Questionnaire • #1 – Mitigating the debate

• #2 – Building the culture

• #3 – Designing the integration process

• #4 – Targeting performance excellence

• #5 – Maximizing the ROIWhat is not showing up in the numbers?

– Differences in values and culture

– Lack of clarity and agreement on strategic goals

Documents

Physician Employment Losses - American Health …€¦ · Physician Employment Losses: ... Net Loss per FTE Physician ... *For 2008, Net income, practices without financial support