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How to Set Up and Manage Hospital-Based PSA Contracts That Save Time and Money

In the world of hospital payments, PSA refers to a physician service agreement. These types of contracts are a form of alignment between hospitals and physicians, although the physician is not employed by the hospital. PSAs can be with an individual physician for something as simple as a medical directorship, or it might be with a group to cover an entire service (e.g., radiology services, etc.). The latter is what is often referred to as a hospital-based PSA contract.

PSAs offer the most flexible way for hospitals to contract physician partners and provide services they couldn’t necessarily offer otherwise, but they also come with their challenges.

What are some challenges for managing PSAs?

PSAs are sometimes used as a “catch all” and become fragmented or “one-off” deals between hospitals and physician groups. Furthermore, there are lots of stakeholders involved in PSAs, which can cause these agreements to come off the rails when aligning to larger organizational goals.

There are many components contained within PSAs and they often require complex payment calculations. If your hospital’s payment processes not streamlined, it is difficult to keep track of these calculations in real time. Too often these agreements are never looked at again until renegotiation or renewal. It’s understandable though, since administrators are busy, and the agreements may be tucked away in a file folder or cabinet. However, this reality makes it difficult for hospitals to see the financial big picture of what they’re spending. This bucket of business is also a great location to focus on both quality improvement and cost reduction.

How to streamline PSA payments

In working with hundreds of clients nationwide, we’ve developed a list of best practices to follow for PSA contracts and payments, in terms of setting them up and on-going management. 

Setting up PSAs:

Step #1

Standardize content and processes of entering into PSAs by using templates that provide options for market demands and accountability. We realize these agreements involve many physicians and diverse services. Break it down into smaller categories and try to standardize each aspect of the service agreement (e.g., ask for administrative time to be submitted monthly). True up bonus calculations in a consistent fashion across all services. Automation is easier when you’re using standardized terms across different contracts.

Step #2

Align PSAs with market and organizational priorities. This can be challenging considering there are so many players at table in negotiating agreements, but it’s important to keep larger priorities in view while setting up any contract. Go to market every few years to make sure you have the right group, the right outcomes and a true partnership.

Step #3

Keep track of all payments made to the group in a database or automated solution. These agreements are complex, and it is important to have a top-level view of the total deal.

Managing PSAs:

Step #1

Ensure each payment is calculated correctly with an eye toward your contract maximums. One way to do this is by using automation software. Humans make errors, software doesn’t.

Step #2

Stay on top of compliance. The best way to minimize the risk of contract and Stark Law non-compliance is to leverage software that not only manages your contracts but also provides physician time tracking.

Step #3

Review each contract periodically.

Step #4

Keep track of fair market value (FMV) assumptions and keep them available. Often contracts are redone every 2-3 years, but it’s easy to lose track of the parameters used for FMV studies. This makes it difficult to understand why something was done a certain way or how a contract was calculated.

Step #5

Streamline payment processes with automation. Calculations are more accurate, time log collection is consistent and review is easier when your contracts are in an automated solution.

PSAs and related payments can be complex and often overlooked after setup. Take a hard look at all these agreements in management operating reviews at a minimum semi-annually, quarterly preferred. It is an important part of the delivery of your service and an important investment. 

Automation can save you time, money and reduce your compliance risk. Ludi is the market leader in physician payment automation. We are the only single-source solution for automating all physician payments. That means we can automate your medical directorship as well as your PSAs. We’re trusted by hundreds of hospitals nationwide, including some of the nation’s largest health systems.

Learn more about our solution for PSA contracts.

Want to learn more about this topic? Check out a case study from one of our CFO clients that optimized his hospital's physician compensation processes with automation.

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