Physician Spend: What You Are Ignoring Will Bite You

It’s a dance we all do. Too many issues, so little time, and a bit of numbness takes over in all of our lives. If you are at the helm of a
large health care system, ignoring issues can see like the only way to
survive. Let’s just say that strategic placement of a business issue towards the BACK of the priority list continues to be en vogue. We all in know in life and business, what you ignore, sidestep, rationalize, bury, underestimate….will bite you.

At Ludi, we have found a missing category of health care business that is an imperative, yet largely ignored. The category is called Physician Spend. So, what does that even mean? It means measuring every dollar the health system pays on their physician contracts. This can include employment, bonuses and incentives.

It can also include administrative payment for medical directorships, on call agreements, research and co-management agreements. Not only has this category been largely ignored, but it is also heavily fragmented within a hospital infrastructure.

Who Owns It?

Let’s talk fragmentation first. For example, how hospitals begin to
create an economic relationship to pay physicians for their oversight
for an ICU can start with a Chief Medical Officer, Chief Executive
Officer or Chief Nursing Officer. In large systems, who owns strategic
physician relationship development, is a crap shoot. It can be anyone.
Hence, we begin the dance of fragmentation of ownership. The contractual documentation is off to legal, compliance, and finance, resulting in more fraying of ownership. Piles and piles later….ignored until someone has a question or a gripe.

Fragmentation means no one owns it. Smart health care systems are
putting together an infrastructure to manage this process, as it
represents millions in spending that no one is yet measuring. The
payment for physicians is still largely on paper with many hands in it
and electronically filed….somewhere…lacking the needed oversight on
accrued spend. This process is ripe for trouble. Many systems have
created the “great art of auto-pay and ever greens” to be a seemingly
effective mode of handling physician administrative payments. What never
stops won’t hurt you? Does anyone else have gastric pangs?

No One is Watching

Trouble can manifest from this blind spot for health care systems in
the terms of a cranky, needed physician partner, legal counsel,
compliance, finance teams, the Feds, the DOJ or the health care board.
This area is rife with complexities – when paying physicians, you must
strictly follow the law so it’s not misconstrued as bribery.

Plus, hospitals can no longer afford to not measure and benchmark
their physician partners’ pay. This is the last bucket of hospital spend
that hasn’t been worked over with LEAN and intense scrutiny. Most of
the reason for this blind spot is because the process is hidden all over
a healthcare system and hard to track– because it is still a manual

Hospitals can no longer afford to ignore this issue that is touched
by so many, and owned by none. Teams need a repository that optimizes
daily, weekly, and monthly physician spend. They need it to be easy to
manage, track, audit and measure. With all the problems and headaches
that health care teams have and struggle to solve, this new emerging
category of tracking physician spend doesn’t need to be one of them.

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We partnered with HFMA to survey financial leaders nationwide about their physician compensation practices.