The Number: What is the total amount a hospital pays to doctors on its medical staff?

John Nelson writes…

There is a growing amount of information about economic difficulties and successes in physician practice.  The December 15, 2008, issue of American Medical News had a front page article titled “Economy sends physicians to hospitals for help.”  It described a survey conducted by the American Hospital Association that asked hospital CEOs what doctors are seeking from them.  It found that most CEOs are being asked by doctors to pay more for on-call coverage, to employ the doctors, or to provide some other form of financial aid.  None of this should surprise anyone who has been involved in hospital care recently.

There is a long history of hospitals providing financial support to doctors.  The specialty of ER medicine was largely dependent on hospital support for its first 10 or 20 years, and since then ED practices in large hospitals have for the most part been weaned off of hospital support.  In a similar fashion, the growth of hospitalist practice has been fueled by, or even dependent on, hospital financial support.  But the last 2 – 5 years has seen an explosion in the number of specialties seeking, and in many cases getting, hospital dollars.  Where hospitalists once had little competition for the money hospitals could provide to physicians, the competition is now pretty fierce.

The most common arrangement appears to be hospitals paying for doctors in some specialties to take ED call.  Also common is for hospitals to offer to employ some physician groups, often with the intent of serving as a financial backup for the practice.

Some months ago I worked with a medium sized non-teaching hospital that added up all the money it was paying to doctors on its medical staff.  It came to a staggering $18 million annually.  This is a large portion of the hospital’s operating budget.  And that was before a significantly increased on-call stipend was negotiated by one of the specialties.

That got me thinking about how interesting it would be to know the total amount of payments every hospital makes to doctors on its medical staff and to track how it changes over time.  Call it “the number.”  As the number goes up or down, it may have a far reaching influence on healthcare economics and financing.  If the number gets big enough than payers, led by Medicare, might decide to bundle payment for physician (and other provider) professional fees for hospital care into the payment to the hospital.  Then it would be up to the hospital and the doctors to decide how to divide it up.  This is an idea that has been talked about for years, but could get closer to reality if “the number” gets big enough.

Just another reason why a high functioning hospitalist practice must know a lot about their own financial performance (even if they’re employees of the hospital) and that of their hospital.