Financial benchmarks for hospitalist programs. (The Hospitalist Movement).

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.

The benefits of hospitalist programs to health care institutions go beyond decreased costs and LOS. Hospitalists should play an active role in numerous hospital functions including implementing order sets and pathways and sitting on pharmacy and therapeutics, infection control and quality improvement committees.

Hospitalists often provide care to unassigned patients, increase consistency of care and may reduce errors, complications, morbidity, mortality and readmission rates. Their presence should also help improve scores on quality measures. A well-run hospitalist program can significantly elevate the standard of care for an entire hospital.

It is our hope that these figures will help provide a foundation on which to build a successful hospitalist program and help existing programs evaluate their revenues and expenses.

Table 1

Census                 30                         50

Program Description    24-hour     Traditional  24-hour     Traditional
                       coverage    call         coverage    call
# of physician FTE's   5.1         3.2          6.8         5.3
# of Staff FTE's       1.0         1.0          1.5         1.5
Admissions/            2,190       2,190        3,650       3,650
Consultations
per year
Total Visits per year  10,951      10,951       18,250      18,250
Net Patient Service    $711,815    $711,815     $1,186,250  $1,186,250
Revenue
(based upon
$65/visit)

EXPENSES

Total Physician        $790,000    $505,000     $1,045,000  $820,000
Salary
Total Physician        $158,100    $99,200      $210,800    $164,300
Benefits
Total Physician        $948,100    $604,200     $1,255,800  $984,300
Salary & Benefits
Total Staff Salary     $28,304     $28,304      $42,456     $42,456
and Benefits
Total Gen. and         $41,591     $41,591      $68,313     $68,313
Admin Expense
Total Physical         $16,230     $11,360      $20,840     $18,890
Plant Expenses
Management Fees        $71,182     $71,182      $118,625    $118,625
(CBO)
(10% net rev)
Total Expenses         $1,105,40   $756,636     $1,506,034  $1,232,584
Net Income (Loss)      ($393,591)  ($44,821)    ($319,784)  ($46,334)
Per Physician FTE      ($77,175)   ($14,007)    ($47,027)   ($8,742)

Census                 70                         100

Program Description    24-hour     Traditional  24-hour     Traditional
                       coverage    call         coverage    call
# of physician FTE's   8.6         7.4          11.2        10.5
# of Staff FTE's       2.0         2.0          2.5         2.5
Admissions/            5,110       5,110        7,300       7,300
Consultations
per year
Total Visits per year  25,549      25,549       36,500      36,500
Net Patient Service    $1,660,685  $1,660,685   $2,372,500  $2,372,500
Revenue
(based upon
$65/visit)

EXPENSES

Total Physician        $1,315,000  $1,135,000   $1,705,000  $1,600,000
Salary
Total Physician        $266,600    $229,400     $347,200    $325,500
Benefits
Total Physician        $1,581,600  $1,364,400   $2,052,200  $1,925,500
Salary & Benefits
Total Staff Salary     $56,608     $56,608      $70,760     $70,760
and Benefits
Total Gen. and         $95,034     $95,034      $134,225    $134,225
Admin Expense
Total Physical         $25,580     $24,020      $31,360     $30,450
Plant Expenses
Management Fees        $166,069    $166,069     $237,250    $237,250
(CBO)
(10% net rev)
Total Expenses         $1,924,891  $1,706,131   $2,525,795  $2,398,185
Net Income (Loss)      ($264,206)  ($45,46)     ($153,295)  ($25,685)
Per Physician FTE      ($30,722)   ($6,141)     ($13,687)   ($2,446)

Table 2

Census            30                        50

Net Income
(Loss)(as above)  ($393,591)  ($44,821)   ($319,784)  ($46,334)
Hospitalization
Cost Reductions   $1,314,000  $1,314,000  $2,190,000  $2,190,000
Profit from
5% increase
in admissions      $109,500    $109,500    $182,500    $182,500
Profit from
17% increase
in admissions
due to lower LOS   $372,300    $372,300    $620,500    $620,500
Overall System
Financial Impact  $1,402,209  $1,750,979  $2,673,217  $2,946,667

Census            70                        100

Net Income
(Loss)(as above)  ($264,206)  ($45,446)   ($153,295)  ($25,685)
Hospitalization
Cost Reductions   $3,066,000  $3,066,000  $4,380,000  $4,380,000
Profit from
5% increase
in admissions      $255,500    $255,500    $365,000    $365,000
Profit from
17% increase
in admissions
due to lower LOS   $868,700    $868,700   $1,241,000  $1,241,000
Overall System
Financial Impact  $3,925,994  $4,144,754  $5,832,705  $5,960,315

RELATED ARTICLE: Physician staffing

24-hour in-house coverage

Calculations were based upon a physician rounding on 18 patients in a nine-hour period.

Example: Census of 50 patients, 50/18 patients per physician = 2.78 physicians working 9 hours each day. Night coverage, from 5 p.m. to 7 a.m., requires an additional 14 hours. Staffing is 39 hours a day or 14,235 hours per year. 14,235/2080 hours per full time equivalent (FTE) gives a need for 6.8 FTEs.

Traditional Call

As above, each physician would need nine hours to see 18 patients. They would then take call from home. They would need to return to the hospital for an additional three hours/night with a census of 30, five hours for 50, seven hours for 70 and 10 hours for 100.

Example: Census of 50, as above, 2.78 physicians are needed to round during the day. This requires 25 hours of physician time with a need for an additional five hours of coverage in the evening/night for total of 30 hours a day or 10,950 hours/year requiring 5.3 FTEs.

Expenses

The calculations are based on a physician salary of $150,000 for one FTE who would work 2,080 hours per year. Medical director fee of $25,000 is added. Benefits are $31,000. One office manager/secretary could manage up to five physicians. Further staffing would be proportional to the number of physicians. General and administrative expenses include recruiting, marketing, supplies and minor equipment expenses. Bad debt is included in this category and the goal is 5 percent of net revenue. Physical plant expenses include office space that is minimal, equipment rental and communication. Management fees (CBO) include posting, billing, collections, payer contracting credentialing, etc., at 10 percent of net revenue.

Productivity measures

Figures are based on an average length of stay (LOS) of four days. To clarify, if a patient is admitted on Monday and goes home on a Tuesday their LOS would be one day but they would have two visits. An average LOS of four days would result in an average of five visits per admission. Benchmark is $65 net revenue per visit. We have seen figures as high as $90, but $65 may be unachievable in some markets. The NAIP survey on compensation and productivity indicated an average of $81.

Cary Ward, MD, is director of the inpatient medicine services and chief medical officer at Saint Elizabeth Regional Medical Center Lincoln, Neb. He serves on the Catholic Health Initiatives' Practice Management Team and can be reached by phone at 402/489-7181 or by e-mail at [e-mail].

Kent Reckewey, MD, is chief medical officer, Saint Elizabeth Physician Network, Lincoln, Neb. And is the physician team leader for Catholic Health Initiatives' Practice Management Team.

Barry Silbaugh, MD, is vice president of medical operations for Denver-based Catholic Health Initiatives, which owns 70 hospitals and employees nearly 1,000 physicians nationwide. He can be reached by phone at 505/727-6876 or by e-mail at [e-mail].

Theresa Lewis, RN, MPA, is director of medical affairs and practice management for Catholic Health Initiatives.

Steve Burnham is a practice manager with the Catholic Health Initiatives' Practice Management and the regional administrator of Alegent Health Clinics, Omaba, Neb.

Terry Rogers is a practice manager with the Catholic Health Initiatives' practice management team and maintains operational/strategic responsibilities with Saint Elizabeth physician Network in Lincoln, Neb.