Rural Hospitalists, Part Three: Examples of Hospitalist Models

In Part Two, I described two rural hospitals (fictionalized as Macys and Gimbels) and some of the tensions between them. Today, I'm going to show you three hospitalist programs at work in and around Rural. I know it seems ridiculous that a sparsely-populated rural area would need THREE hospitalist programs, but you might appreciate some of the subtleties after reading the following.

A couple of things you need to know about ALL hospitalist programs:

• A hospitalist program needs a large subsidy from its hospital. This usually comes as a surprise to a lot of laypeople and not a few hospital CEOs. Truth is, there is NO way a physician can make an adequate professional wage from billing for inpatient care alone. I know this because I am the CFO of my hospitalist group and I have crunched the numbers.
• There are a number of difficult-to-calculate benefits a hospitalist program provides to its hospital, including easier compliance with core measures and performance improvement criteria and making the hospital more attractive to potential new primary care hires who often don't want dual outpatient/inpatient responsibilities. Hence, even though a hospitalist program automatically costs every hospital money, it is often worthwhile to the hospital for staffing and compliance reasons.

PROGRAM #1: THE FEELGOOD MODEL

Feelgood Inc. runs the hospitalist service at Gimbels. Feelgood was started by Gimbels' ER doctors because they got sick of chasing primary care docs to get patients admitted to the hospital. The ER docs formed the corporation, recruited the 5 doctors who provide services, negotiated the initial contract with Gimbels administration, contracted with an accountant and a billing company, and landed agreements with two of the large clinic networks in and around Rural to pay for hospitalizing their patients. Once the hospitalist physicians were on board, the ER docs transferred the corporation to them.

The nuts-and-bolts of Feelgood's program:

• Feelgood sees all patients who are not covered by community doctors who prefer to take care of their own patients. They see a varied payor mix including Medicare, Medicaid, and private insurance.
• One hospitalist covers day shift (7am to 7pm), another covers nights (7pm to 7am)
• The hospitalist is not physically available at all times, but can respond within 20 minutes.
• Day hospitalist does all admits from midnight until 3pm. ER doc writes admit orders on stable patients from midnight until 7am.
• Night hospitalist is available to come in at 3pm in case the day hospitalist is swamped on rounds.
• Night hospitalist does admissions that come in between 3pm and 11:30pm.
• Night hospitalist keeps pager on all night to respond to floor calls.
• Current pay structure balances per diem (guaranteed income) against payment per patient encounter (incentive income): $600/shift, $38/encounter no matter what level E&M.
• Average daily patient load:  17, ranges 12-24.

Pros and cons of the Feelgood model:

• Pro: locally-owned and run.
• Pro: low cost to hospital, due to balance between guaranteed and incentive pay structure.
• Pro: pay structure promotes physician involvement in expanding the program and maximizing coding efficiency
• Con: hospitalists provide all the administrative services to run the program, which is essentially uncompensated time.
• Con: understaffed.
• Con: understaffing leads to a looseness in who is responsible for admissions, etc. For example, if the day hospitalist is extremely efficient, s/he can get done early, whereas the s/he is not so efficient, the night-time hospitalist will get dragged into doing rounds and admissions that wouldn't ordinarily fall under their shift responsibilities. This causes resentment.

PROGRAM #2: THE HOSPITALS-R-US MODEL

Hospitals-R-Us runs the main hospitalist program at Macys. The are part of a large national staffing company that also runs a locum tenens agency and billing company. They have managed to staff Macys with local doctors but can also draw upon physicians from their entire network in case of a shortfall in the schedule. They also provide an on-site administrative assistant and off-site legal/financial departments so their physicians don't have any administrative responsibilities.

Nuts-and-bolts:

• Same payor mix as Feelgood.
• Two hospitalists make rounds, accept consults and ER admits from 7am to 7pm.
• On very busy ER days, a third hospitalist (usually the site director) is available to do admissions.
• One hospitalist stays in-house all night long and does admissions and takes floor calls from 7pm to 7am, including those occurring after midnight.
• Pay structure is heavily tipped towards per diem (guaranteed) over RVU bonus (incentive): $85/hr base pay, $13.50/hr bonus paid quarterly if a physician achieves minimum RVUs, and a $25,000 annual stipend for full-time physicians (14 or more shifts/month) Overall, this would add up to about $1,330/shift for a full-time hospitalist.
• Average patient load: 25-40/day

Pros and cons of the Hospitals-R-Us model:

• Pro: all physicians have to do is show up and do the job, no worries about administration of the program.
• Pro: almost adequate coverage for the hospital's needs, including in-house hospitalist presence at night (hard on the night-time hospitalist, of course).
• Pro: Availability of fill-in staff in case of illness or other loss of local hospitalist physicians.
• Pro: Best compensation of all the models.
• Con: Run by a big corporation, no local control or involvement in decision-making.
• Con: Expensive for Macys hospital--large agency programs come with a premium for the ready-to-use administrative structure.

PROGRAM #3: THE REVENUE-KEEPERS MODEL

Revenue-Keepers runs a smaller hospitalist program at Macys. They cover for the Revenue-Keeper's group internal medicine practice, and this allows the corporation to keep the revenue from inpatient care within their group. RK is currently developing their program from a part-time arrangement to a full-time program. The following is the proposed model:

Nuts-and-bolts:

• Payor mix is mostly Medicare and private insurances.
• Same day/night shift arrangement as Feelgood.
• Pay structure is heavily tipped towards per diem (guaranteed) over incentive: $950/shift, with an unspecified incentive for more than 12 patients/shift for the day hospitalist.
• Average patient load: 8-12 at this time, although the program is hoping to expand.

Pros and cons of the Revenue-Keepers model:

• Pro: locally owned and run
• Pro: "cream of the crop" patient population drawn from a private group practice
• Con: currently understaffed, and therefore prone to the slippery-slope of assigning responsibilities the Feelgood group is currently suffering.
• Con: although payor mix is good and RK can collect a greater percentage of charges than the other two models, it is not clear whether the practice can maintain the per diem quoted above.
• Con: an ethical issue--by keeping their well-insured patients within their own practice, RK is not acting for the common good of the hospital. Contributing their favorable patients to the main hospitalist group might make a locally grown replacement to Hospitalists-R-Us possible, although I don't have the financial data to determine whether this would be true.

A few observations I have drawn from these three hospitalist programs:

• Cash-strapped rural areas benefit from locally-organized hospitalist programs, which minimize costs for the sponsoring hospital and keep the earnings from the program within the hospitalist group and hospital itself.
• Locally-run programs mean more work for staff physicians, who have to provide administrative services for the programs, unlike physicians who work for large agencies.
• Locally-run programs arise from different motives. Feelgood was developed in order to provide good care to Gimbels' patients, who used to get spotty attendance by busy community physicians who used to spend 10 minutes at the bedside before clinic. Revenue-Keepers was developed primarily in order to keep inpatient billings within the group practice. Of course, RK also preserves continuity of care for their patients by providing an in-house hospitalist service, and this is a bonus for the patients who are receiving something closer to an ideal model of care.
• Piecemealing a hospitalist program together is fraught with difficulties. For example, although Feelgood is technically fully staffed, they are functionally understaffed because they have a relatively poor solution to sudden increases in patient volume, namely bringing the night hospitalist in to work at 3pm to help round. This creates a potential 16 hour shift without additional reimbursement to the night shift person.

In Part Four of this post series, I'm going to examine the rise and fall of the Feelgood program in more detail. There are a number of lessons in Feelgood's story that are important for doctors involved in hospitalist management and for all doctors considering employment in general.

Comments

[The Happy Hospitalist]

Great article.

I might add that the national all comers data at the Society of Hospital Medicine suggested the average cash compensation for a full time (40 hours a week or about 2000 hours a years) hospitalist is now $193,000 a year. On an hourly basis, that is close to $97 an hour. That doesn't include all the benefits of health insurance, malpractice, retirement. It doesn't include overhead expenses, billing, nurse managers, secretaries etc. You can see that the total cash compensation benefits and overhead costs for a hospitalist can easily push upwards of $250,000-$300,000 a year. And that's 40 hours a week. And that's why hospitalist medicine has left the pool called Medicare part B and found their own friend in hospitals who see the value in their services.

At the SHM meeting, the survey suggested the average hospital subsidy for a FT hospitalist was about $100,000 a year. That is not chump change. The return on their investment can be millions. As Rural doc pointed out you can't sustain a hospitalist practice on billing alone and still keep your efficiency. The numbers simply don't add up.

Nationally, the average number of encounters for a FTE hospitalist was about 2,400 or less. In a 2000 hour work year (not including home call), that's about 1.25 encounters per hour. That may seem low, but that includes nights. I don't know about most hospitalist programs, but admitting 15 patients on a 12 hour night shift is quite rare for one hospitalist. The increased day shifts make up for the decreased night shift volume. Trust me, it all works out.

Your payor mix, which for hospitalist programs often include the unassigned (code word uninsured), the undesirable Medicaid's with no home, and all the rest, will determine how much your program can get in revenue. In combination with how well your hospitalists bill and code. Add to that the support staff such as nurse managers and billing and collecting fees and you can see why operating a hospitalist program is VERY expensive. BUT the return on investment for the hospital is impressive, both from financial and intangible measure.

To collect $300,000 on 2,400 would require revenue of $125 per encounter. Since a vast majority of hospitalist encounters ( about 50%) are follow up visits, A level 2 follow up visit in my state pays $60. A level 3 visit pays under 90. Using a split collection of $75 on a 100% medicare population, that comes out to $75 per visit. The only codes that pay anywhere near $125 per encounter are high level admissions/consults and critical care evaluations.

That's it. That's why a full service 24 hour/day in house hospitalist program requires a subsidy from the hospital.

Because your Medicare won't do it for your. Hospitalists exist entirely because Medicare doesn't have a clue.

[Theresa]

Dr. Happy sums up the industry standards much better than I can. It helps to attach a number to how much a FT hospitalist is "worth" to its subsidizing entity. Thanks for commenting in such length and useful detail.