Common wisdom holds that hiring physicians is likely to cripple a hospital's budget, but some health systems are pushing back against that notion, arguing that their finances were unchanged or, in some cases, improved after bringing on new docs.
Among the respondents to Modern Healthcare's annual Hospital Systems Survey who hired more physicians in 2017, 76% said the move didn't materially change their financial performance. Another 22% even said their finances improved after hiring more doctors, and just under 3% said their finances worsened.
Among the 47 health systems that participated in the survey, there is a decidedly more positive outlook than some industry experts expected.
The Medical Group Management Association last year estimated that hospitals' multispecialty physician groups lose nearly $185,000 per physician annually, and other industry groups have released similar estimates. The basic idea is that physician compensation and other expenses related to their practices exceed the amounts they bill for. But there's a big caveat to numbers like that: They don't provide a total picture of the revenue doctors generate for the health systems during their visits with patients, because they typically don't include ancillary services such as imaging and stress tests.
“It's not as bleak as it seems,” said Ken Hertz, a principal consultant with the MGMA's healthcare consulting group.
That's true for Vidant Health, an eight-hospital system based in Greenville, N.C. When Vidant compares its physicians' salaries with the revenue from the services they bill directly for, it looks like they operate at a deficit, said Craig Hepp, Vidant's senior administrator for population health.
“But that isn't the way it ends up being when you look at the other work they bring into the health system, whether it's labs or imaging,” he said.
The same physician practice can look like it's performing very well or very poorly depending on how a health system does its accounting. Typically, it's the surgeries and imaging that generate margins, not the physician practices themselves, Hepp said.
“There's a tendency to hold your hands up and go, 'Oh my god, look at all the money they're losing per provider and per physician,' ” MGMA's Hertz said. “But the reality is, it's not exactly what it seems.”
Vidant is awaiting regulatory approval on a merger between its medical group and East Carolina University Physicians, a deal that Hepp said would almost double the health system's employed physicians.