Creating a Profitable Hospital Employed Physician Group

Creating a Profitable Hospital Employed Physician Group

Hospital employed physician groups lose between $150,000 - $250,000 per physician.

The loss is driven by declining reimbursement from third party payors and the increase in compensation needed to attract and retain physicians. But hospitals can operate employed physician groups that generate profit for the clinical enterprise by carefully managing the provider composition.  Two strategies can be deployed:

1. Integrating Advanced Practice Providers into the practice
2. Building a large primary care base to support profitable procedural specialists

Advanced Practice Providers

Advanced Practice Providers, APPs, are a cost-effective provider of primary care.

Typically, a primary care physician can supervise up to four advanced practice providers. APPs have been shown in multiple studies to provide high quality primary care with high patient satisfaction. As the supply of primary care physicians continues to decline, health systems need to focus on the team model of care to meet the community's health needs. 

Building a large primary care base to support profitable procedural specialists

Hospital owned groups' and physician owned groups' margin comes from procedural focused specialists including general surgery, cardiology, and orthopedics. Hospital-owned groups that generate a positive margin to the enterprise leverage referrals from their primary care providers to support procedural specialists and ancillary services.

The following table highlights the number of primary care providers needed to support a specialist. 

Hospital-employed groups can generate a significant margin for the enterprise by establishing a large base of primary care providers - both physicians and APPs - to ensure referrals are made to procedural specialists within the group. Internal processes and financial incentives need to be in place to prevent leakage.

To learn more about how to drive the profitability of your hospital employed group, read Integrated delivery: A 50-year case study of one IDN’s successful evolution.

To learn more or to request a complementary assessment, email Jeff directly at jpeters@luminahp.com or visit www.luminahp.com/medical-group-strategy.