Hospitals and Integrated Delivery Systems (IDS) are losing between $120,000 and $300,000 per employed physician. The major driver of the loss is low productivity. Hospital-employed physicians have lower collections and productivity than physician-employed practices according to the 2023 Medical Group Management Association Provider Compensation data.
The difference between hospital employed and physician is illustrated in the below table. The annual collections and encounters represent the variance.
| Specialty | Annual Collections | Annual Encounters |
| Primary Care | -$124,000 | -373 |
| Surgical Specialist | -$96,000 | -65 |
| Non-Surgical Specialist | -$172,000 | -185 |
Hospitals can reduce the loss of their employed physician practices by providing compensation and a practice culture similiar physician-owned groups.
Compensation Drives Practice Performance
Physician-owned groups have compensation systems with a strong productivity component, while most hospital employed groups' compensation models have a large salary component. Compensation drives practice performance. Physicians who see more patients or have better quality scores are rewarded financially.
After the first two years of practice, hospitals can reduce the loss on practices by employing a compensation model based on charges, collections, or RVUs depending on the practice setting.
Physicians in physician-owned practices also have incentives to keep referrals within the group and utilize practice-owned ancillary services which drive practice performance. Physicians in hospital-owned practices do not share in this revenue stream.
Culture Drives Practice Performance
Physicians drive the governance of physician-owned practices. Physicians control the board of directors and the practice's operating and policy committees. Physicians who have a say in how a practice operates feel valued and appreciated. Physicians have a voice in the selection of their staff and how the practice operates. Though it is hard to measure, this physician satisfaction drives productivity.
In contrast, hospital leaders drive the culture of its physician practices. Hospital leaders dominate the governance body and shape the operating and policy committees. Hospital leaders select practice staff and drive all decisions on how the practice operates. Hospital-employed physicians typically do not feel valued and appreciated and are not as motivated to drive practice productivity and performance.
Take Action
Hospitals can reduce the loss on employed physician practices by:
- Basing compensation models on productivity as measured by collections or Relative Value Units (RVUs)
- Providing compliant incentives to keep referrals within the practice and to utilize internal ancillary services.
- Ensuring that the practice governance is physician driven.
For additional insight into reducing the losses on employed physician practices, check out www.luminahp.com/medical-group-strategy.