Case Study: Cutting Physician Network Losses

Background

The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. For most of these communities, the system was the sole source of care. Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture. Operating subsidies for the physician network were unsustainable and losses had reached $13 million a year. The hospital system was committed to reducing operating losses and melding the physicians into a more cohesive group practice.

Solution

HSG developed a 36-month performance improvement plan to achieve the following objectives:

• Reduce practice operating losses to $50,000 per physician
• Renegotiate existing physician contracts
• Align physician compensation with productivity
• Assess each clinic’s fit with the system’s organizational goals
• Hardwire “best practices” for practice operations and back office functions

The performance improvement plan included:

• Assessing the current level of operating performance for each clinic;
• Evaluating the clinic administrators’ effectiveness;
• Reviewing existing physician compensation compared to productivity; and
• Evaluating each clinic’s fit and performance against its support of the mission and vision of the system.

Results

HSG employed a variety of tactics to help the system achieve its financial and group culture goals, including:

• Focusing on fundamentals: front desk, scheduling, charge capture, and revenue cycle;
• Establishing best practice performance targets for these key operating functions;
• Renegotiating physician contracts that were not aligned with productivity;
• Re-engaging physicians to help manage the practices;
• Building a group culture and physician accountability;
• Developing structured dashboards to keep physicians apprised of operating results;
• Divesting two clinics deemed inconsistent with system objectives; and
• Standardizing parameters for physician employment and on-boarding

The net results:

• Reduced operating losses from $13 million to $4.9 million in three years
• Compensation was aligned with productivity
• The foundation for a group culture was laid
• Identified and nurtured physician leaders
• Optimized number and specialty mix of physician complement

 

To discuss network performance improvement, contact Neal Barker, Partner, at NBarker@HSGadvisors.com or (502) 814-1189.