Note: This is the first in a two-part series on improving profitability from the JHD Group. Need to know how to implement these ideas? Get started with a complimentary conversation today.
How Much for That Physician?
What does a physician cost a hospital organization per year? Typical thinking has it somewhere between $100,000 and $200,000 per physician per year. But it’s just that kind of “typical thinking” that has healthcare systems losing money each year. Rather than focusing on cost, smart organizations are looking at long-term value with methods that support, enrich, and enable physicians to be a profitable piece of your business.
One organization decided that it was done losing money in its large physician group and, in a period of two years, went from a loss to a profit. This physician network was completely able to reverse its group’s losses and generate a profit for the 243-member physician organization, now positioning itself as “Accountable Care Capable.”
How did this happen? Is it the kind of change you need to substantially improve profitability and operational effectiveness for your own healthcare organization? Here is a prescription for long-term health that starts with steps any organization can take to go from seeing red to being in the black. To start making change for your group, consider these tips:
1. Take a picture. Get a good look at your organization. Take a high assessment of the physician group — look at the financial piece and familiarize yourself with the methodology for compensating physicians. Ask yourself these questions: does it meet fair market value, is it incentive-driven so docs have skin in the game?, or are they just getting a salary. Is there pressure on them to perform? If you’re creating an environment for physicians to focus on patient care, the expectation should be that they can do that as well as they can.
2. Create a system of equality and transparency. Physicians have to feel like they’re being treated fairly, with ethics and integrity across the group. Apply the same rules to everybody. For example, in regards to compensation, pay the physicians fair market value for his or her specialty. While different models can exist within the same compensation plan, special deals should not be created to recruit specific specialties. Showing favoritism toward one immediately creates tension with others — and you want all specialties to be as invested in your business as you are.
3. Carefully evaluate additions to your system. If you are considering acquiring an established practice, you really need to evaluate that practice on several fronts: How many more years do those physicians want to practice? How many patients will they be bringing with them? What is that physician’s future plans for growth? Does that physician fit well within the established group’s dynamic? Things like this need to be considered before making decisions around adding to your system.
4. Communicate, communicate, communicate. From compensation plans to growth strategies to policies and procedures, you simply can not over-communicate to physicians. Operate on the assumption that the message has not been heard by everybody, and continue communicating. Remember that they are not only on the front lines of your business, seeing patients, but are also an important part of your business’s overall strategy.