Once a Year, Twice a Year, Never… How Often Should You Audit Your Physician Contracts?

“You can’t manage what you don’t measure.” This is not a new business axiom. And, it rings particularly true for hospitals when it comes to physician administrative contracts.

Getting the data you need to manage these contracts can be a cumbersome task, one many people simply want to avoid, especially if the contracts are still managed with a paper-based system. Hospitals can spend millions each year on their physician administrative contracts. So, it’s safe to say that tracking this data is well worth your time.

I understand that not everyone is eager to delve into data. But, I like data. It tells fun stories and gives us useful information. It allows us to recognize and address problems that we wouldn’t otherwise be able to see. Auditing physician contracts is one major step in gathering data.

I know you get it. Of course you NEED to audit your physician contracts. It sounds obvious. But let me tell you why you WANT to make the effort:

Am I getting what I’m paying for?

Once upon a time, your organization spent a lot of time, and thus money, to create a beautiful, perfect contract that spelled out exactly what you wanted from your physician and how much you plan to pay for this work. But how do you know if you’re getting what you paid for if you don’t audit the contract? How do you know, for example, if your physician is spending all of his time in meetings rather than actually working towards helping your organization reach its goals? Or, is your physician getting paid a monthly stipend without actually working the required hours each month? Enquiring minds want to know!

Am I working with the right people?

Let’s say that you have two physicians who would both make great program directors for the same program. You made the hard choice, and went with Physician A. But is he actually meeting the expectations outlined in the contract? Should you have chosen Physician B instead? Perhaps the job is more than one person can do. Perhaps it’s time for a shared role or co-management agreement, or maybe time to end the agreement altogether.

How much am I spending?

If you don’t have an automated system for tracking physician time, you may have no idea of your potential annual spend. And even if you do utilize an automated system, that helps you know the potential, do you know how much you’re actually spending? Are your physicians working the hours you offered? And do you know when you’re paying for it during the year?

At Ludi, we often see clients who put annual spending maximums on their contracts. It makes sense from a compliance perspective because it allows flexibility by month without a concern of overpayments. Unfortunately, it also means that your physician could work all of her hours in the first month. If that’s happening, it may be time to revisit how the contract is written.

Are you keeping your promises?

I frequently see contracts that refer to changing compensation. It may be a reference to staying within Fair Market Value (FMV), it could be a merit increase, or just an offer to revisit compensation at a pre-determined interval. If your contract says that you’re going to do something, you should do it – that’s what you expect of your physicians.

I think I made my point. You need to audit your contracts. So how often? That’s between you, your compliance team and your lawyer. But here’s my $.02: do it annually. Ideally, it would be timed for before a contract renewal or the end of a contract year. That would give you time to make changes to contracts without extra paperwork or more complicated calculations (Trust me – calculating annual payments when you have agreements starting at odd times can be hard!). Yes, this can be challenging to manage – especially if you handle your contracts manually. This is another reason why it is critical to automate your physician administrative contracts. Set a goal to review all of your contracts once a year – and stick to it. The data you find will be invaluable for ensuring your hospital’s physician administrative contract strategy is giving you the best ROI.

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