Hear Me Out: Why Physician Contracts Don’t Belong in a Contract Management System

It’s no secret that hospitals, on average, partner with thousands of vendors throughout the year to ensure their business runs smoothly. They contract with vendors to supply many items, from paper towels and paperclips to sutures and implants. A contract management system is used to keep all these individual contracts in order, so this technology essentially acts as large, digital “filing cabinet.” 

Somewhere along the way though, someone decided that physician partners are also vendors, and their contracts should be stored in these same systems. While it is true that physician contracts have similar data points, such as start and end dates, that is about all they have in common with other vendor contracts. 

Physician Contracts Have Many Complexities 
Let’s face it. Physician contracts are inherently complex. The physician may be an independent contractor or an employee of the hospital. Each arrangement covers a substantive amount of detail and financial data of a doctor’s specific salary, bonuses and other incentives, along with a pay rate that might go toward medical directorships, on-call shifts, locum tenens, PSAs and wRVUs, to name a few. 

But the reality is that contract management systems, despite storing key pieces of information about the contractual relationship, are very limited in terms of functionality. That is, they are not a silver bullet to the real issue most hospitals are faced with operationally with respect to their physician contracts: How to pay on those contracts accurately and better manage alignment. Plus, what physician wants to be called a “vendor” anyway?

‘Eyeballing It’ Every Month is a Risky Tactic
At Ludi, my marketing and communications department alone engages with multiple vendors on a weekly basis. In the past – and before we automated this process ourselves – when it came time to do the payables, we had to get the W-9 of each vendor to set them up in our financial system. Each invoice required that we match up their contract with the work performed (i.e., their invoice) and the rate they charged. So, this meant pulling out the agreement to review against every invoice. Then, we reviewed everything and sent it off to accounts payable for processing. We followed the same process every month, per vendor, so you can imagine how manual and time-consuming it was. Plus, before automation, we just hoped our “eyeballing” wouldn’t cause any payment errors.

Now, imagine you’re a busy hospital doing the same thing every single month for every physician partner you have, which is essentially what a contract management system forces you to do.

The Lifetime Relationship Between Doctor and Hospital
Ultimately, physicians have a symbiotic relationship with hospitals. They are the largest “customer” of the hospital and they’re also the main part of the supply chain for the organization to be able to deliver services. This is where a contract between the hospital and doctor comes in – as a form of legal and organizational alignment. And the last thing anyone wants to do is disrupt that alignment or make the physician feel like the relationship is purely transactional because, that’s not good business. 

Yet, when arrangements are placed into a contract management system – again, essentially just a large, web-based filing cabinet organized alphabetically – the contracts (and the nuances of that contractual relationship) just sit there. And it requires the contract team member to go into the system, pull up the contract and line up what’s being reported by the doctor (for example, a new time log) with the specifics of their contract scope, and compare the paper to the system every month. That’s a huge administrative burden on hospital teams and a compliance risk too when you consider everything that can go wrong when managing contracts and payments. And there’s a lot that can go wrong.

The Missing Link in a Contract Management System: A Focus on Physician Strategy
At the end of the day, the physician contract is a living, breathing document that can change over time. And it should be treated as such. It’s reflective of the on-going relationship the hospital has with that specific provider. Strategically, it should be evaluated frequently by asking questions such as:

  • How much are we spending on these contracts? 
  • What percent is employment verses partnerships with independent physicians do we have? 
  • How can we optimize these relationships based on our service-line needs, etc.?

Moreover, where contract management systems and payroll/HR tech fail, Excel spreadsheets are used. The hospital will extract information from contracts, store them in an Excel file, and comparisons are made to these files as payments are made. However, this is not providing the full “one source of truth” view a hospital needs to pay doctors correctly and optimize their alignment strategy at the same time. 

Financial Automation Offers a Much-Needed Boost
This is where automated financial management systems come into play (including our own DocTime Suite). Financial automation for physician contracts that has the hospital’s needs in mind can ensure all physician arrangements are paid properly, saving staff time and improving compliance. They can supplement a hospital’s current contract management system or fully replace it, and integrate with current payroll or other HR-based tech systems the hospital is leveraging. 

More than that though, an effective financial automation system can ensure physicians are not perceived as vendors, but rather the cherished partners they are that bring tremendous value to the healthcare provider organization. How do they do that? By becoming a trusted source for hospital teams that solves real business issues around an organization’s physician contract strategy. Here are a few ways financial automation for physician payments achieve this goal:  

  • Act as the one source of truth for all physician arrangements, providing real-time transparency and self-service data analysis
  • Accurately and automatically calculate physician payments, keeping payments within scope of each agreement (reducing compliance risk, etc.)
  • Streamline approval processes for submitted documentation (time logs, etc.) and approvals, eliminating the need for check requests and any running around teams have to do for approval sign-off
  • Reduce time log documentation errors and late submissions by digitally collecting time log
  • Integrate seamlessly with your AP or payroll processes, so there’s no disruption to legacy systems

These are just some of the critical aspects one should look for when shopping financial automation systems. But even just checking off the aforementioned list of benefits alone puts a hospital on the right path to finding an “all-in-one” solution for today’s physician payment complexities. And that’s a win-win for everyone.

Check out our guide on how to evaluate financial management software for physician contracts. 

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