Financial benchmarks for hospitalist programs - The Hospitalist Movement

Physician Executive, Nov-Dec, 2002 by Cary Ward, Kent Reckewey, Barry Silbaugh, Theresa Lewis, Steve Burnham, Terry Rogers

IN THIS ARTICLE...

Learn how a hospitalist program can impact the bottom line.

IN A RECENT STUDY OF hospitalist programs, we attempted to create a model that describes expected costs and revenues for a hospitalist practice with a census that ranges from 30 to 100 patients. There are wide variations in the structures of hospitalist programs. However, there are two basic models.

With the "24-hour" model at least one physician is in-house throughout the day and night. This may be similar to emergency department staffing except physicians usually work in blocks of time to maintain continuity of care.

With the "traditional" model, physicians are in-house during the day but take call outside of the hospital at night. They return to the hospital after hours only when necessary. This model generally requires fewer physician hours.

We evaluated both models based upon physicians practicing inpatient medicine 100 percent of the time. Our figures are based on personal experience running an inpatient program, visiting and surveying numerous programs and models across the country, literature review and the recent National Association of Inpatient Physicians (NAIP) Survey of Hospitalist Productivity and Compensation.

The charts on the following pages show expected revenues and expenses associated with a census of 30, 50, 70 and 100 patients. The census refers to all patients seen in a 24-hour period including admissions, discharges, consults, etc.

Discussion

When solely viewing revenues and expenses, these models result in a loss and may require supplemental income. We want to emphasize that the numbers regarding staffing, LOS, revenue per visit, admissions and visits can be calculated by various methods and this is only one example.

Numerous staffing models are available through the NAIP resource center. The efficiency of hospitalist programs increases as they grow, so less support may be necessary as the census approaches 100 patients.

In fact, the NAIP survey indicated that only 22 percent of programs did not receive supplemental income. The average supplemental income was $295,000 or 30 percent of revenue.

Many programs can exceed these benchmarks. In many markets it is possible to generate more than $65 in net revenue per visit. Favorable contracts help as well as careful attention to coding and billing services specific to hospitalists.

Reading treadmills, ECGs, placing central lines or participating in pharmaceutical studies may generate additional income. Some programs are unable--or do not need--to pay $150,000 per year per physician FTE.

Some physicians may be able to see more than 18 patients per day and many see additional outpatients or use physician extenders to increase their efficiency.

Many worry that patient care may suffer when a physician begins to see more than 18 patients per day. LOS and costs may increase and patient satisfaction may decrease. Seeing more than 18 patients per day may result in poor job satisfaction and increased turnover, which will significantly increase the expenses of a hospitalist program.

The 24-hour in-house model is more expensive, especially in the early stages, but there are a multitude of reasons for a health care system to support this model. These include increased satisfaction among nurses, patients and referring physicians as well as a higher standard of care clue to the availability of physicians to promptly evaluate admissions or respond to acute problems.

Efficiencies are often greater with this model resulting in further reduction in costs and LOS. Many physicians who are uncertain about using a hospitalist service may be more likely to refer patients to physicians who are in house both day and night.

Any health care system that is considering a hospitalist program must not lose sight of the significant benefits beyond revenues minus expenses. A recent review of the literature ("The Hospitalist Movement Five Years Later," JAMA. 2002, Vol 287, No. 4) indicates that the average savings for hospitals with inpatient medicine programs is 13 percent with LOS reduction of 17 percent.

The review determined an average savings of $800 per admission. Hospital revenues related directly to decreased LOS would be contingent on hospital occupancy and payer mix. Hospitalists often experience increased referrals from rural physicians, local primary care physicians and specialists.

A service with a daily census of 50 patients might admit approximately 3,650 patients per year. Average savings of $600 per admission would provide total savings of $2,190,000. If admissions increased by five percent due to the presence of the hospitalist program, the hospital would admit an additional 183 patients.

If LOS was reduced by 17 percent, admissions could potentially increase by 17 percent or another 620 patients. If the hospital's profit was $1,000 per admission, these factors would provide additional revenue of $803,000.

Table 2, can be added to Table 1 to account for these factors. Admittedly the profit from increased admissions due to reduced lengths of stay is a "best case" scenario and the hospital would need to adjust these numbers based on the number of per diem contracts or contracts where reimbursement was based on charges or expenses.