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Improving the Physician Enterprise Performance

Three months into 2023 and the theme of the year for health systems is continued cost reductions. As staffing costs, staffing variability, and inflation continue to rise, health systems are looking for avenues to reduce their overall expenses. One avenue to reduce expenses is to reduce the subsidy within the employed physician platform, given the high losses per physician, more than $200,000 per physician, at the health system level.


Here are five considerations to improve the physician enterprise financial performance.


1. Increase Productivity. Health system-employed physicians show lower productivity
than their counterparts in private practice groups when normalized by specialty and
geography. This lower productivity often results in poorer access to the community
and leaves the system scrambling for resources.


Health systems should evaluate the productivity of the physicians compared to
national benchmarks by specialty, geography, and ownership model (health system

private practice) and then drive future metrics for sustainability and access to care.
No question this is challenging work, but agreed upon schedules, calendars and
patient access is a solid place to start

2. Build Care Teams. Given physician shortages, adding different types of providers

to the care team will help wit patient access and reduce cost. According to APRN and

PA professional societies, APRNs can perform approximately 85% of primary care

physician tasks and PAs approximately 80% of primary care physician tasks.

That said, APRNs are not physicians, nor should they be expected to do exactly what

physicians do. Successful organizations will define the roles of the care providers and
how to
interact within the care team, likely led by the physician. Communication of
these roles
is critical as the health system evolves to a more multi-disciplinary care
team approach.


3. Consolidate for Scale Economies. Health systems must consolidate assets and

infrastructure to capture the optimal scale economies for the practices, including

staffing, physical space, and technology.


Evaluating physician groups suggests that the optimal practice size is between 6-8

providers (MDs and APPs). This takes into consideration the utilization of exam rooms,

the balance of MDs and APPs, the administrative staffing model, and the facility layout and flow for optimal patient and provider movement. Moving health systems towards greater economies will improve financial position over time.


4. Improve the Revenue cycle. Health systems must also look at their revenue cycle to ensure they are collecting the appropriate reimbursement. The 2019 MGMA study found that health system-owned practices have a 5% lower adjusted collection percentage on total billings.


This lower revenue and lower collections coupled with similar operating expenses per FTE results in health system-owned physician practices having higher overhead and ultimately higher operating losses when compared to private practice.


5. Offer Ancillaries at Market Competitive Rates. Health systems must account for the ancillary services that physicians recommend, regardless of the locations they are captured - either within the physician platform or somewhere else in the health system.


Specifically, radiology and laboratory services are often referred out of the group due to cost, availability, and service standards better outside of the group. Health systems need to bring these back inside but do so at competitive rates. In addition, when available, any Medicare provider-based billing must be used selectively and strategically.


As the health system optimizes these five areas, it can significantly reduce the total subsidy per physician.  Only at that point can the long-term economic and strategic value of the physician enterprise be realized.

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