Executing a primary care strategy that provides the right number of primary care providers is critical to the success of your employed provider network.
Traditional physician manpower planning models are often used to assess primary care demand. These models are based on population ratios and can provide effective information regarding the right number of primary care providers for your market. However, it’s critically important to combine the output from these models with financial projections to properly craft a primary care strategy. We recommend considering two key questions when evaluating the financial impact of your primary care strategy:
- Which markets and service lines have the potential to generate incremental operating revenue?
- How many additional primary care physicians do you need to generate enough incremental revenue to ensure financial sustainability?
Which markets and service lines have the potential to generate incremental operating revenue?
Properly answering this question will allow you to understand where additional patient volume can be captured and how much revenue can be generated by capturing it. We routinely help clients answer this question by performing market share analysis for key service lines. By studying market share trends by zip code, it is possible to identify services for which volume can be increased. Additional information can be gleaned by overlaying pertinent data for each physician in a given zip code, such as specialty, affiliation, age, or downstream revenue. Based on this analysis, you will be able to develop attainable revenue targets for key service lines.
How many additional primary care physicians do you need to generate enough incremental revenue to ensure financial sustainability?
Once you’ve established your revenue targets, you must consider the number of incremental primary care providers required to reach them. If, for example, you wish to increase hospital orthopedic volume in a given zip code, you must ensure a sufficient distribution of primary care providers to refer patients to your loyal orthopedic surgeons. To determine the correct number of incremental providers, you must consider both direct and indirect downstream revenue they will generate. A primary care physician, for example, will directly generate $1,566,165 in downstream revenue. This number includes all hospital revenue including labs, imaging, and hospital admissions (direct or through a hospitalist program). Primary care providers will also generate indirect hospital revenue through referrals to loyal specialists. Five to ten percent of all primary care visits result in a specialist referral. Of these, GI, orthopedics, physical therapy, dermatology, and ENT are the most common. By studying direct revenue generated by each of these services and applying specific referral ratios, you can calculate the indirect revenue impact of an incremental primary care provider.
When considering downstream revenue, remember that a solid primary care base is and will continue to be a cornerstone to the success of your provider network. A strong focus on primary care will pay dividends twofold. First, a properly aligned primary care base will provide a reliable referral network for your employed specialists, and thus contribute to success under the current fee-for-service payment models. Second, an efficient primary network will provide sufficient foundation through which to begin addressing population management and alternative payment models.
- MERRIT HAWKINS:
- Trends in Physician Referrals in the United States 1999-2009. Barnett, et al. Arch Intern Med. 2012.
- The Value of Understanding Patient Referral Flow. Ashleigh Finley. HFMA Magazine. Aug 2013.