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3 Trends That Will Impact Physician Compensation in 2022, and Why Automating Creates a Good Pathway Forward

Let’s face it, 2021 was yet another challenging year for healthcare providers. Hospitals nationwide worked hard to provide for their patients in a very uncommon time, while trying to remain profitable and operationally sound. But what does 2022 have in store for hospitals, specifically when it comes to the increasingly complex world of physician contracts and physician compensation? Let’s take a look at three trends we expect to see in the new year and how hospitals can stay on top of them.

Trend #1: The dramatic increase in physician employment will continue.

In 2012, 58 percent of physicians were part of independent private practices. Going into 2022, the number of employed physicians has shot up to 70 percent. I think the biggest reason for such a rapid shift in employment is the increase in operating costs for independent practices, which continues to drive market consolidation. We’ll see this trend continue in 2022, and compounded by the on-going impact of the COVID-19 pandemic.

% Employed Physicians

67% Increase from 2012 levels

In percentages (%)
Source of Data: Healthcare Finance News, 2021

How can hospitals adjust to this trend?
Hospitals have to manage a far larger physician enterprise than they’ve ever had before which will only add to the heavy amount of strain on finance and physician compensation teams that oversee the administrative side of the compensation process. Strategies to handle the increased volume of work need to extend beyond adding FTEs and look harder at the process itself. Hospitals can help ease the administrative burden on both operational teams and doctors alike by leveraging payment automation technology. Streamlining the physician payment process and removing the manual nature of data collection, approvals and payments calculations is the best way for hospitals to adjust to the changing dynamic and ensure physicians are paid in an accurate, compliant and timely manner.

We found that 55% of physicians reported spending 1-3 hours a day on administrative work.

Trend #2: Physician burnout is here to stay…for now.

It’s no secret to anyone in the healthcare industry that physician burnout is a significant and constant issue. We conducted a randomized survey nationwide of doctors who work at hospitals, and not only did 60 percent say they have experienced burnout in the past year, but 68 percent said it was even worse in 2021. Expect 2022 to be similar.

But there’s good news here. Hospitals are working harder than ever to address these concerns and they’re starting to think outside the box to provide meaningful solutions that can impact this crisis. As it relates to our world of physician contracts and physician compensation, we tend to think about what’s being asked of physicians from an administrative or manual perspective, and how can we improve their experience by offloading some of the tasks that contribute to some of this burnout.

Going back to our physician survey, we found 55 percent of physicians reported spending from one to three hours a day on administrative work that’s unrelated to patient care or the EHR. And 70 percent of those physicians are really looking to their hospitals to help alleviate some of that burden.

How can hospitals adjust to this trend?
So, similar to my advice up above, hospitals should ask themselves this key question: When it comes to paying our doctors, how can my organization leverage automation to eliminate what might seem like small nuisances to physician teams? Starting with that can go a long way with improving physician satisfaction, while chipping away at the bigger but related crisis of burnout.

Trend #3: The regulatory environment will continue to get more complex, so managing the different data components will be crucial.

According to a recent Gallagher report, an overwhelming majority of providers made the decision to remain on the 2020 Medicare Physician Fee Schedule in 2021, which reflects COVID’s effects and other industry headwinds that made for a tumultuous year.  As a result, there was a delayed impact of the 2021 Medicare Physician Fee Schedule that we will feel into 2022. At the same time, Congress swooped in last month to halt the proposed Medicare cuts, which would have decreased Medicare fee-for-service payments by over $14B this year alone. Stark Law changes continue to emerge to address concerns around value-based care in an effort to make these programs more enticing for providers.

Hospital Survey: Which Fee Schedule Are You Using for 2021?

In percentages (%)
Source of Data: Gallagher, 2021
How can hospitals adjust to this trend?
Given the overall volatility of the aforementioned factors, it’s no wonder hospitals are having a tough time structuring their physician comp strategies. As always, profitability will be a major concern for hospitals in 2022 along with new cost-cutting measures. Consequently, anything to help hospitals manage physician compensation contracts – and more importantly – the details and data of those contractual arrangements, will continue to be vital for organizations to remain operationally sound. Contract management systems are a good start here, but often that functionality doesn’t go far enough. Once again, this is where payment automation can come into play, filling the gap between contract managements systems that house the “rules” of payments and the backend payroll or AP systems that issue the payments. Automating the ongoing execution of the payments themselves is the best way to improve the process at scale.

There’s much to be optimistic about in 2022 if you’re part of a hospital organization, but the challenges are clear. As it relates to physician compensation, hospitals that are prepared to address the above trends and their impacts will be best positioned to make this new year a successful one.

Did you miss our most recent webinar which discusses 2022 trends for hospitals? WATCH THE REPLAY

Want to learn more about this topic? Check out the trends webinar we did with health care experts from across the industry.

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