Medscape recently posted an interesting piece that discussed Why Income May Drop if You Sell Your Practice to a Hospital: How to Correct These Problems. The article cites the collection results for a New England hospital that bought a stake in different practices that had a total physician count of 82. The decision was made to centralize billing operations under the control of the hospital's finance VP.
After about 15 months, the net collections for these doctors had decreased by 18 percent!
Their practices, once profitable, were losing money and placing the physician salaries at risk. The net collection percentage was 93.75%. This indicates that 6.25% of deductibles, co-pays and other fees did not get collected. Acceptable results are 95%. In fact, well run medical billing operations collect over 97% of charges minus contractual adjustments. Further study revealed three issues:
- The VP knew very little about the nuances of medical practice billing.
- The practices had been performing at an acceptable level regarding billing and collections prior to being acquired by the hospital.
- When the billing became centralized, the connection between front desk and billing staff, so essential to efficient billing, was non-existent.
Another factor that contributed to the sub-par results at this hospital was that the lack of dedicated practice billing and collection staff resulted in less involved doctors. This was seen in their diminished oversight, decreased coding responsibilities and the fact that the physicians felt more like employees.
Physicians Joining Hospitals
According to 2012 AHA statistics, hospitals employ about 20% of all physicians. Just five years ago, the estimation was that 80% of all doctors would be working for a hospital by 2012. The New England Journal of Medicine reported that a hospital employing a physician can count on losses of between $150,000 and $250,000 for the first three years. Plus, the MGMA (Medical Group Management Association) reported that hospital owned practices are 25% less productive than ones that are privately owned.
Physicians with practices they are considering selling to a hospital might want to discuss these issues with the hospital administration:
- Establishing an incentive system rewarding good financial results.
- Making sure the physicians are responsible for their practice's financial performance.
- Maintaining billing and collections at the practice level (as opposed to centralizing).
- Hiring coding consultants to perform audits. Then using the results as a base, ask them to conduct customized coding and documentation workshops to keep physicians, providers and billing staff sharp.