How Much Are YOU Actually Worth?

[NinerNiner999]

This is a long read, but I hope well worth the time it will take. For the average physician who grinds it out every day, and comes home exhausted from running to make metrics and satisfaction scores, this is a must read. As we go along in this thread, I'll give additional follow-ups and track the progress of a small democratic group as it goes from start-up, to growth, to buyout, to CMG affiliate...

After reading several posts about CMG acquisitions, SDG buyouts, and ranting and raving about hourly rates, it is surprising to me how little we as emergency physicians truly know about our revenue and how our incomes are derived. More worrisome, is how much we are truly being taken advantage of.

What you are about to read is not confidential, but true. My background as an employee, medical director, and managing partner in a "CMG" should suffice as one who truly knows the big picture of emergency medicine economics. If you are going to post about your hourly rate, bicker about $20-30 or $100 per hour differences in regional pay, or expound upon the virtues and rewards of locums work, please don't do so here. This is a true thread about the REAL profit and loss of emergency practice. The actual nuts and bolts that you will not know unless you are the one writing the check for the doctors and owners in your group.

First, if you are the owner, CEO, President, or Managing Partner of a CMG and you follow this website, please make your presence known and provide your input. Seriously. The floor is yours. Having been a member of this board for 12 years and counting, your input is welcome. Since the vast majority of the members on this board are pit docs, new attendings, or residents, I'm willing to bet this call out will go unanswered, but truly hope you chime in. For the rest of you who read this, please learn from it and soak in the details. This is your income, livelihood, and the future of your speciality.

To begin, there is really only one number that you need to know. $150. That's right, $150. This is the average amount of money COLLECTED per patient across the board, across the country. Not billed, not in accounts receivable, not cash only, ACROSS THE BOARD for ALL PATIENTS. Remember this number. This is after 1/3 of your patients (self pay) don't ever pay you, 1/3 of your medicare and medicaid patients pay you at reduced rates, and 1/3 of those with private insurance pay you what they decide to pay you. Payor mix (the ratio of these three components) may vary from place to place, but $150 averaged per patient is fairly reliable.

The average emergency physician works around 1400 hours per year, and sees around 2 patients per hour. Some work more, some work less. Some are faster, some slower. In addition, the average physician that supervises midlevel providers may see an additional 1 patient per hour depending on volume or staffing. None of these numbers matter in this example. None of the scheduling patterns matter for the first part of this thread. The only thing that matters is the volume of patients you see at your facility. Period. If you don't know how many patients you see at your facility, you don't know how "fair" your pay is. In reality, your pay is so unfairly low that the word "fair" should not be mentioned in this thread either.

A small emergency department that sees 15,000 patients annually is a contract worth $2,250,000 annually. a large emergency department that sees 100,000 patients annually is a contract worth $15,000,000 annually. For basic math, every 10,000 patients seen in a department is worth $1,500,000 of revenue.

Lets use an average community hospital and a small democratic group (SDG) as an example for EMGA - Emergency Medicine Group A - a fictitious company used to demonstrate where money flows. EMGA staffs a hospital that sees 40,000 visit annually and has a gross operating income of $6,000,000. The hospital is a local community hospital, not for profit, and has been serving the community for over 40 years. The group owners grew up in the community and know the CEO personally. The community has an average income demographic, and the hospital enjoys annual community donations to its programs for growth and expansion.

The group took out a loan for $1,000,000 to open its doors, buy office equipment and furniture, hire staff, and cover physician salary for 4 months until billed accounts receivable began to come in. Also, as is common practice, the group asked the hospital to partner with them as a business, and were given a $1,000,000 annual stipend as part of their contract.

Since ED staffing models are fairly uniform, and follow a common hourly distribution nationwide, the group decides to staff 5 physicians daily, with overlapping shifts during the peak hours of the day, and single coverage at night. Coverage in this example is not related to income or profit margin, but simply a model chosen by the group members to provide a "lifestyle" instead of a maximized profit. In order to accommodate each provider working 1/2 of the month (15 shifts), the group hires 10 physicians to staff their model. These 10 physicians have become the first units of overhead for the group. They are paid as 1099 independent contractors. For ease of tracking, I will leave the remaining profit margin as a header below between paragraphs. Assuming 10 physicians are each earning an annual salary of $300,000, their overhead to the practice is $3M, or 50% of the gross operating margin of the group.

$3,000,000

Where does the remaining $3M in profit go?
Malpractice insurance varies by provider and group policy, but as a rough number, is around $25,000 per provider per year. It costs $250,000 annually to insure 10 physicians.

$2,750,000

Taking away the biggest cost to operate EMGA, there is a remaining operating budget of $2.75M. Billing and Coding is an additional cost most groups spend. Outsourcing your billing and coding provides a layer of protection between payers and providers, and holds another entity accountable for investigation such as fraudulent billing, claim denials, etc. These rates can vary, but are typically 2% per chart, or 2% of the gross operating budget ($120,000). Lets deduct this from our gross profit.

$2,630,000

EMGA has adopted a lean operating model, and uses hospital EMR and IT for charting. Medical Records are held by the hospital and billing records are kept by the coding company. They have hired an insurance adjuster to ensure regular collections are provided and to fight claim denials with the billing company and patient insurance carriers. The annual salary for this position is $85,000. In addition, the company provides health insurance, holiday pay, and other basic benefits including a 401(k) match for this employee worth an additional $10,000 annually, making the total cost of this employee $95,000. The group has also hired one of their providers to serve as a medical director. Her role is to interface with the hospital, attend critical hospital meetings, meet with hospital administration, perform data analysis for the group's quality metrics, provide feedback to physicians, and run monthly department meetings to communicate hospital needs and manage physician needs with the hospital. The Medical Director has opted to receive a stipend as part of her 1099 income, and will not be paid benefits. This costs the group $200,000. The Medical Director will also pick up shifts at salaried rate. Finally, the final component of the lean operating model is to hire an administrative assistant, who serves as the contact for the group, secretary, and scheduler for the physicians. This cost including benefits is $55,000 per year. The total employee/salary cost for EMGA is $350,000.

$2,280,000

Finally, the group has decided to rent an office for its employees, and also has regular ongoing costs to operate (accountant, lawyer, copier, maintenance, coffee, paper, computers and IT service, etc). These are lumped together as general and administrative expenses (G&A), and cost around $125,000 per year. In addition, the group devised a 10-year repayment plan for its startup loan, and will spend an additional $110,000 annually to repay their bank.

$2,045,000

After everyone as been paid, overhead has been met, and all of the bills are satisfied, EMGA has a gross profit of $2,045,000. In addition, the group had negotiated a stipend from the hospital, and receives $1,000,000 annually based on patient volume, and tied to metrics and satisfaction. The hospital made good on their payment to the group this year, adding to the group's income.

$3,045,000

Where does the rest of this money go? Over 50% of the total group income is left over annually. The group structured their business as an LLC, which has some business and provider protection, and also has a relative tax obligation. The physicians opted to create an annual bonus pool to share equally as partners at the end of the year, and have their accountant determine the most effective tax structure for that year before they distribute their bonuses. This year, the accountant determined that the group would need to pay 27% of its profit as taxes (including the payroll taxes for the office staff). This left $2,222,850 to share between the 10 doctors. The physicians opted to leave $250,000 in an interest-bearing management account to accommodate for tax changes or unexpected expenses, and divided the remaining amount between themselves, each taking a bonus of ($2,222,850 - $250,000)/10 or $197,285.00 for the year.

Each physician in the group earned a base salary of $300,000 and bonused $197,285, for a total equal partner compensation of $497,285.00. This means that after taxes, loan payments, salaries, benefits, and all business overhead, physician salaries were 83% of the group's gross income, and their average combined clinical and partnership hourly rate was $355.20/hr.

This is a fairly typical example of how a true democratic group is structured. There are some variations, such as designating certain members of the group to hold additional duties such as group president, treasurer, etc, which may reduce overhead by a small margin, and also change the ratio that partners are bonused (i.e. president may take 20%, treasurer may take 15%, etc). The take home point is that the overall dollar amount to share remains the same, the group, minus the $250,000 is places into a reserve fund, runs a zero balance at the end of its fiscal year

What happens over the next few years will blow your mind...

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[FreddieH]

Thanks so much for the transparency Niner

This is a long read, but I hope well worth the time it will take. For the average physician who grinds it out every day, and comes home exhausted from running to make metrics and satisfaction scores, this is a must read. As we go along in this thread, I'll give additional follow-ups and track the progress of a small democratic group as it goes from start-up, to growth, to buyout, to CMG affiliate...

After reading several posts about CMG acquisitions, SDG buyouts, and ranting and raving about hourly rates, it is surprising to me how little we as emergency physicians truly know about our revenue and how our incomes are derived. More worrisome, is how much we are truly being taken advantage of.

What you are about to read is not confidential, but true. My background as an employee, medical director, and managing partner in a "CMG" should suffice as one who truly knows the big picture of emergency medicine economics. If you are going to post about your hourly rate, bicker about $20-30 or $100 per hour differences in regional pay, or expound upon the virtues and rewards of locums work, please don't do so here. This is a true thread about the REAL profit and loss of emergency practice. The actual nuts and bolts that you will not know unless you are the one writing the check for the doctors and owners in your group.

First, if you are the owner, CEO, President, or Managing Partner of a CMG and you follow this website, please make your presence known and provide your input. Seriously. The floor is yours. Having been a member of this board for 12 years and counting, your input is welcome. Since the vast majority of the members on this board are pit docs, new attendings, or residents, I'm willing to bet this call out will go unanswered, but truly hope you chime in. For the rest of you who read this, please learn from it and soak in the details. This is your income, livelihood, and the future of your speciality.

To begin, there is really only one number that you need to know. $150. That's right, $150. This is the average amount of money COLLECTED per patient across the board, across the country. Not billed, not in accounts receivable, not cash only, ACROSS THE BOARD for ALL PATIENTS. Remember this number. This is after 1/3 of your patients (self pay) don't ever pay you, 1/3 of your medicare and medicaid patients pay you at reduced rates, and 1/3 of those with private insurance pay you what they decide to pay you. Payor mix (the ratio of these three components) may vary from place to place, but $150 averaged per patient is fairly reliable.

The average emergency physician works around 1400 hours per year, and sees around 2 patients per hour. Some work more, some work less. Some are faster, some slower. In addition, the average physician that supervises midlevel providers may see an additional 1 patient per hour depending on volume or staffing. None of these numbers matter in this example. None of the scheduling patterns matter for the first part of this thread. The only thing that matters is the volume of patients you see at your facility. Period. If you don't know how many patients you see at your facility, you don't know how "fair" your pay is. In reality, your pay is so unfairly low that the word "fair" should not be mentioned in this thread either.

A small emergency department that sees 15,000 patients annually is a contract worth $2,250,000 annually. a large emergency department that sees 100,000 patients annually is a contract worth $15,000,000 annually. For basic math, every 10,000 patients seen in a department is worth $1,500,000 of revenue.

Lets use an average community hospital and a small democratic group (SDG) as an example for EMGA - Emergency Medicine Group A - a fictitious company used to demonstrate where money flows. EMGA staffs a hospital that sees 40,000 visit annually and has a gross operating income of $6,000,000. The hospital is a local community hospital, not for profit, and has been serving the community for over 40 years. The group owners grew up in the community and know the CEO personally. The community has an average income demographic, and the hospital enjoys annual community donations to its programs for growth and expansion.

The group took out a loan for $1,000,000 to open its doors, buy office equipment and furniture, hire staff, and cover physician salary for 4 months until billed accounts receivable began to come in. Also, as is common practice, the group asked the hospital to partner with them as a business, and were given a $1,000,000 annual stipend as part of their contract.

Since ED staffing models are fairly uniform, and follow a common hourly distribution nationwide, the group decides to staff 5 physicians daily, with overlapping shifts during the peak hours of the day, and single coverage at night. Coverage in this example is not related to income or profit margin, but simply a model chosen by the group members to provide a "lifestyle" instead of a maximized profit. In order to accommodate each provider working 1/2 of the month (15 shifts), the group hires 10 physicians to staff their model. These 10 physicians have become the first units of overhead for the group. They are paid as 1099 independent contractors. For ease of tracking, I will leave the remaining profit margin as a header below between paragraphs. Assuming 10 physicians are each earning an annual salary of $300,000, their overhead to the practice is $3M, or 50% of the gross operating margin of the group.

$3,000,000

Where does the remaining $3M in profit go?
Malpractice insurance varies by provider and group policy, but as a rough number, is around $25,000 per provider per year. It costs $250,000 annually to insure 10 physicians.

$2,750,000

Taking away the biggest cost to operate EMGA, there is a remaining operating budget of $2.75M. Billing and Coding is an additional cost most groups spend. Outsourcing your billing and coding provides a layer of protection between payers and providers, and holds another entity accountable for investigation such as fraudulent billing, claim denials, etc. These rates can vary, but are typically 2% per chart, or 2% of the gross operating budget ($120,000). Lets deduct this from our gross profit.

$2,630,000

EMGA has adopted a lean operating model, and uses hospital EMR and IT for charting. Medical Records are held by the hospital and billing records are kept by the coding company. They have hired an insurance adjuster to ensure regular collections are provided and to fight claim denials with the billing company and patient insurance carriers. The annual salary for this position is $85,000. In addition, the company provides health insurance, holiday pay, and other basic benefits including a 401(k) match for this employee worth an additional $10,000 annually, making the total cost of this employee $95,000. The group has also hired one of their providers to serve as a medical director. Her role is to interface with the hospital, attend critical hospital meetings, meet with hospital administration, perform data analysis for the group's quality metrics, provide feedback to physicians, and run monthly department meetings to communicate hospital needs and manage physician needs with the hospital. The Medical Director has opted to receive a stipend as part of her 1099 income, and will not be paid benefits. This costs the group $200,000. The Medical Director will also pick up shifts at salaried rate. Finally, the final component of the lean operating model is to hire an administrative assistant, who serves as the contact for the group, secretary, and scheduler for the physicians. This cost including benefits is $55,000 per year. The total employee/salary cost for EMGA is $350,000.

$2,280,000

Finally, the group has decided to rent an office for its employees, and also has regular ongoing costs to operate (accountant, lawyer, copier, maintenance, coffee, paper, computers and IT service, etc). These are lumped together as general and administrative expenses (G&A), and cost around $125,000 per year. In addition, the group devised a 10-year repayment plan for its startup loan, and will spend an additional $110,000 annually to repay their bank.

$2,045,000

After everyone as been paid, overhead has been met, and all of the bills are satisfied, EMGA has a gross profit of $2,045,000. In addition, the group had negotiated a stipend from the hospital, and receives $1,000,000 annually based on patient volume, and tied to metrics and satisfaction. The hospital made good on their payment to the group this year, adding to the group's income.

$3,045,000

Where does the rest of this money go? Over 50% of the total group income is left over annually. The group structured their business as an LLC, which has some business and provider protection, and also has a relative tax obligation. The physicians opted to create an annual bonus pool to share equally as partners at the end of the year, and have their accountant determine the most effective tax structure for that year before they distribute their bonuses. This year, the accountant determined that the group would need to pay 27% of its profit as taxes (including the payroll taxes for the office staff). This left $2,222,850 to share between the 10 doctors. The physicians opted to leave $250,000 in an interest-bearing management account to accommodate for tax changes or unexpected expenses, and divided the remaining amount between themselves, each taking a bonus of ($2,222,850 - $250,000)/10 or $197,285.00 for the year.

Each physician in the group earned a base salary of $300,000 and bonused $197,285, for a total equal partner compensation of $497,285.00. This means that after taxes, loan payments, salaries, benefits, and all business overhead, physician salaries were 83% of the group's gross income, and their average combined clinical and partnership hourly rate was $355.20/hr.

This is a fairly typical example of how a true democratic group is structured. There are some variations, such as designating certain members of the group to hold additional duties such as group president, treasurer, etc, which may reduce overhead by a small margin, and also change the ratio that partners are bonused (i.e. president may take 20%, treasurer may take 15%, etc). The take home point is that the overall dollar amount to share remains the same, the group, minus the $250,000 is places into a reserve fund, runs a zero balance at the end of its fiscal year

What happens over the next few years will blow your mind...

Thanks so much for the transparency Niner! This is certainly a peak behind the curtain most of us don't have the luxury of having. As someone who has been in the game a while, in your opinion, what is driving consolidation away from SDG's toward CMG's?

Thanks again for the post!

 

[NinerNiner999]

Thanks so much for the transparency Niner


Thanks so much for the transparency Niner! This is certainly a peak behind the curtain most of us don't have the luxury of having. As someone who has been in the game a while, in your opinion, what is driving consolidation away from SDG's toward CMG's?

Thanks again for the post!

I think the answer is your question. Consolidation is the driving force of CMG buyouts. Stay tuned to this thread for for hopefully more comments and questions.

 

[bravotwozero]

Aren't there antitrust laws to control consolidations ? or do I have no clue what antitrust is?


Sent from my iPhone using Tapatalk

 

[NinerNiner999]

Great question. Antitrust laws are in place to prohibit limits to competition in a market. They are also essentially designed to prevent a monopoly by a single entity. This is a grey area and currently, believe it or not, small democratic groups still compose a large percentage of all contracts in the country. Actually, a little larger than the sum of all CMGs. Every contract given to a CMG in a specific market (i.e. City of Dallas) comes with a noncompete clause, which prevents competition between different hospitals, and also ensures that if the agreement is broken, the group will no longer hold contract at the original hospital. It is in a sense self-regulating. SDGs are not prohibited from competing for contracts.

 

[emergentmd]

I have been a partner with intimate knowledge of what OP has stated and he is spot on. A Big take away point is 300/hr is what each EM doc should make (I dont believe most EM groups get any stipend). When I was partner at my CMG, I made about 300/hr accounting for benefits. More if you are fast, less if you are slow. So if you are making 200/hr somewhere in the NE or Cali, then this is where the CMGs profit is coming from.

Also, I am not aware of any hospital paying an ED group a stipend. They know how much EM makes and understand that there is no need to stipend us.

 

[NinerNiner999]

Thanks for the input emergentmd!

Believe it or not, most SDGs set up 10 years ago or more do receive some form of stipend from an evergreen (automatically renewing) contract. The example in this thread is from a CEO of a non-profit hospital who is friends with the group owners. I totally agree that nowadays stipends for EM only contracts are definitely a minority, but still common- especially in difficult to staff locations.

Wait as the story above evolves...

 

[da8s0859q]

This thread should be stickied.

 

[LChristmas]

MS2 here. Thank you for taking the time to share some of your knowledge & experience. I am really interested in the business side of medicine, and it is pretty hard to get any information like this while in school. I wouldn't even know how to start these conversations. Threads like this show the true value of SDN.

To my peers, people will always try to get as much out of you as possible; that's business. Know your value. We work too long, too hard, and give up too much of our youth to let people take advantage of our knowledge and skills.

 

[NinerNiner999]

It's my pleasure and the future of our speciality. Remember this- as long as someone can take financial advantage of you, they will! As this thread evolves, keep things in perspective. Practicing medicine and the business of medicine have always been one in the same, no matter how big or small the "group" is. Even to the single provider.

 

[EctopicFetus]

For the sake of the discussion and I dont think it changes your numbers much but the avg self pay nationally is 16%. Also, there is "profit" from using MLPs.

IMO if you are an SDG and you arent making $300/hr then either you arent working hard, your payer mix sucks extremely bad, or you have trash contracts.

 

[Uranium678]

Why is there so much geographic variability in pay? For example in NYC or New England where there are not less insured people but the pay is soo low. Is it all supply- demand?

Can't wait for part two

Should be a sticky

 

[Waterskier15]

So are docs working for CMG's able to negotiate for a pay rate similar to their SDG counterparts? I guess this questions stems from the fact that their have been a lot of threads on here lately about takeovers by CMG's and everyone seems to be saying negative things about pay when working for a CMG.

 

[two guys]

Good thread, thanks.

Those numbers all fit with what I've seen ($150 per patient, etc).

I wish AAEM or someone would publish a study that we could quote for this. If we could make it common (and verifiable) knowledge that the average collection is $150/patient I think some folks would be able to see what they're giving up.

I work for a CMG. I collect right on $100/patient. I have an above average payor mix. We don't have a subsidy. I know I'm giving up $40-$50/patient. Problem is, this is the best job in a 90 mile radius. Add that to the fact that NONE of my colleagues know what they're giving up and I have a poor negotiating position. If we (AAEM) could make it common knowledge what the average collection is per patient, the CMGs would have a lot harder time exploiting the grunt physician.

This is where the AAEM physicians group could really help. Together, they represent more billing than all of the CMGs combined. If they pooled their data and published it, this would form a representative sample that we could all use to argue our case.

I agree to not turn this into a SDG vs CMG thread, just an informed vs uninformed thread. My decision to work at a CMG is solely due to it being the very best option within a large geographic area that I chose to be limited to. The particular SDGs close to me have lower payor mixes and it would take me about 10 years to break even after the sweat equity. Obviously, this is different in every location and each particular SDG vs CMG situation. In other words, my decision is informed - but I'm still getting screwed.

______________
To answer the question above. If everything is equal (payer mix, subsidy, billing practices, malpractice, etc) you will always make more at a SDG. The profit is not being shared with any MBAs, paid to ACEP parties, private jets ,etc.

CMGs will argue that things aren't equal and due to economies of scale they can reduce overhead due to cheaper malpractice and centralized billing. They also have more power to negotiate with payers (private health insurance) due to their consolidation. While I think they have a point, these are relatively small components of the overhead and I don't personally think they make up for the costs associated with CMGs.

However, this does not mean that you will always make more at a SDG than a CMG. Those other factors (payer mix, subsidy, billing costs, malpractice) really matter. In my particular situation, I do better at a CMG than the SDGs available to me. In my situation, this is primarily due to payor mix.

To reiterate, if you know your value (we're saying about $150/patient), then you can see for yourself whether you're being exploited (regardless of SDG or CMG).

 

[NinerNiner999]

So are docs working for CMG's able to negotiate for a pay rate similar to their SDG counterparts? I guess this questions stems from the fact that their have been a lot of threads on here lately about takeovers by CMG's and everyone seems to be saying negative things about pay when working for a CMG.

Nope - negotiations with CMG's are limited. Read on.

 

[coachB]

To begin, there is really only one number that you need to know. $150. That's right, $150. This is the average amount of money COLLECTED per patient across the board, across the country. Not billed, not in accounts receivable, not cash only, ACROSS THE BOARD for ALL PATIENTS. Remember this number. This is after 1/3 of your patients (self pay) don't ever pay you, 1/3 of your medicare and medicaid patients pay you at reduced rates, and 1/3 of those with private insurance pay you what they decide to pay you. Payor mix (the ratio of these three components) may vary from place to place, but $150 averaged per patient is fairly reliable.

Excellent post. I would caution people that the $150/patient is an average. I don't have any great data, but I think there is significant variability and that needs to be taken into account when evaluating any specific situation. Any idea what the standard deviation is? I would guess at least $20-30/patient. As mentioned above, more data would be helpful.

 

[NinerNiner999]

...And the tale continues with EMGA. They have been in good position with the hospital for 5 years, and many things have changed over this short time period. The group, taking advantage of consistently growing volumes has prospered, and a few changes in its composition took place. Volumes have increased steadily from year to year, and they are currently seeing 45,000 patients annually. The hospital is pleased with the volume growth, and also pleased because since the adoption of the ACA, more of their patients are insured. This has lead to an increase in the volume of admitted patients as well, and caused the hospital to begin to feel strained. As a result, the hospital has had to take a closer look at its staffing and length of stay for admitted patients.

This next post will be divided into the various parts of Emergency Medicine group management that a successful group needs to navigate to stay viable, and is designed to give the reader perspective into how difficult maintaining an ED contract can be. I will list each category in the LEFT margin for you to reference, and also provide a summary of the issues effecting the group. This part is not all economic, and as you will read, has many different compounding factors happening simultaneously in real time.

WHOLE HOUSE POLITICS

2 years ago, in anticipation of government holdbacks for throughput times and penalties for core measures not being met, the hospital approached a local group of physicians to serve as a default hospitalist group for unassigned admissions, which compose a large percentage of the hospitals admission volume. They have struggled recently and the hospital is concerned that they may not get the job done. To complicate matters, the cardiologists feel the pressure of LOS, and feel that the hospitalists are placing metrics above their patient care. They also feel like the hospitalists are dumping on them, and consulting them for every patient who has chest pain. They have impressed upon the CEO that the doctors in the hospitalist group are not good quality, and the CEO is considering outsourcing the hospitalist group. The hospitalist group, in turn, has voiced concerns that the ED group is admitting too many chest pain patients. The ED group is able to demonstrate that, while their admission volume has increased, it has increased proportionally to the additional 5,000 patients it now sees. They have been able to deflect the allegations from the current hospitalist group, and the cardiologists have voiced to the CEO that they do not have any issues with the ED care.

In the last 5 years, the community hospital has also seen 2 new orthopedic surgeons move to the area, and have expanded their STEMI and Stroke programs to begin line with their core measures. In addition, in an effort to market their investments, they have sought accreditation from the AHA for their Stroke Program, and the CPCA for their chest pain center. They have worked with the ED group to aggressively pursue EMS routing patterns in favor of their new designation to outcompete a similar-sized competing hospital 15 miles down the road. They note that their efforts are working, and likely part of the volume increase the ED has seen. They have enjoyed healthy returns from increased admission volumes, and are also seeing an uptick in donations from their local community. The new orthopedic surgeons have discussed joining together and creating a joint center in the hospital. The CEO has been working with the medical staff leaders to plan expansion of both the chest pain center, and the orthopedic center, seeing a huge increase opportunity in revenue. Patient satisfaction scores for the hospital are mediocre at best, and inpatient scores are in the 45th percentile, with physicians coming in near the bottom scorers. The CEO is trying to get a 4 star rating for his hospital - up from a 3 star rating - and is relying on advertising and expansion to reach his goal.

The nurses have not responded well to throughput initiatives, and the hospital is finding that staffing their current hospital is difficult. They have not increased nursing wages for several years, and several nurses are leaving to take traveling shifts for a higher rate, retiring, or going back to school to become nurse practitioners. To combat this, the CEO has taken annual staff satisfaction surveys to identify areas of improvement. The ED ranked lowest in nursing satisfaction because they felt there was too little staff and the pay was low. They also complained about the physical state of the department, which has not been renovated in over 20 years. The CEO is weighing adding the ED to its list of costs as a renovation in next year's budget.

One of the neurologists left the hospital 3 years ago after being involved in an ugly malpractice suit. He left his practice partner and moved to another city as part of a structured settlement. This left the hospital with half of the neurologic coverage it once had, and the hospital has noticed that its transfer volume has increased for stroke patients because the admitting hospitalists do not feel comfortable admitting patients without neurology evaluation. This cause the CEO to contract with a tele neurology company to provide these examinations. The hospitalist saw their stroke volume increase as a result of accreditation as a stroke center, but saw that their leakage (transferring to other facilities) was canceling the volume increase - especially for tPA patients. The ED group has a strong group of providers and administers tPA as indicated, but finds that they are transferring these patients because they won't be admitted by the hospitalists.

Elective surgical cases have remained flat, and length of stay for surgical patients who are admitted appears to be increasing. The general surgeons are frustrated because half of them are hospital employees, and they hospital is unable to pay them their contracted rate for volume growth because there is no volume to grow. They feel the hospital is not holding up their end of the bargain by marketing their OR services. The hospital invested in a DaVinci robot for surgery 4 years ago and marketed themselves as the first robotic center in the county. This ended being little more than a marketing ploy because the hospital-based surgeons who went for training certification on the Robot found themselves having a hard time getting credentialed to use the robot. It turns out that the hospital credentials committee is composed of two surgeons who are private surgeons in the community, and have been scheduling themselves for DaVinci procedures. The hospital-based surgeons have threatened to go to the other hospital unless the CEO changes things, and currently, the CEO is preparing a proposal to the hospital board to look at the surgeons salary structure.

GROUP POLITICS

EMGA is not on the CEO's list of issues at this time, and the medical staff continues to enjoy its relationship with the medical director and the ED physicians. Four of the 10 physicians have voiced concerns that the extra 5K volume is causing them to become tired, and are concerned that this is hurting their ability to make safe decisions in lieu of metrics, which are a constant pressure. The hospital does not track ED physician satisfaction, but the medical director is concerned that the ED group may be negatively impacting admitted patient scores because of numerous factors. At a recent group meeting, the group decided to add 2 midlevel providers per day to help defray the lower acuity volume, and it was well-received. They hired 5 PA's to staff the group. A few of the PA's have had a rough start with some of the medical staff, and a few providers refuse to accept admission from the PA's. This has caused some added stress with the doctors because they feel they are required to work in harder by supervising the midlevels and presenting their cases. An unexpected pregnancy took one of the doctors away from the group for 4 months, and covering her shifts has left the doctors even more tired. Another one of the doctors left the group. They considered hiring a full time night provider to reduce the number of night shifts needed to be covered and voted at a recent meeting to hire a recruiter and fill the position with an added night differential. One of the other doctors in the group took the other full time night position.

THE LOCAL COMPETITION

The hospital down the road is owned by a large hospital corporation, and despite its lower volume, has blown away our hospital in all metrics. They enjoy 95th percentile satisfaction scores, and are now potentially taking surgical volume away from us. The CEO is constantly looking for ways to outcompete market share. To make matters worse, the neurologist is considering moving to the the other hospital, and rumor is that his partner may be moving back into town. The CEO of our hospital is worried that this may impact his neurology service line and is putting pressure on the ED group and the hospitalists to retain as much stroke volume as possible. The local rumor is that the competing hospital may be awarded a 4-star rating next year, which is really making the CEO concerned.

MARKET SHARE

As part of a growth and recruitment campaign, the CEO has asked the ED medical director to visit local physician practices to influence volume in his favor. During these visits, the doctors are supportive of the ED group and care given, but cite numerous reasons that they don't send their patients to the hospital. Most of these reasons are the appearance of the hospital, the shortage of nursing staff, and the lack of subspecialty services compared to the other hospital. The CEO expects the ED group to serve as a strong representative of his hospital, and demonstrate excellent physician relationships.

GROUP FINANCES

Current Operating Income (45,000 x $150) = $6,750,000
New Expenses
5 employed PA's with annual salary and benefits $120,000) = -$600,000.00
Night Doctor Differential ($50/hr for 1400 hours) = -$70,000.00
Recruiting Company Fees (15% of total clinical comp for night doctor [$370,000]) = -$55,000
Depreciation of Office Equipment Value = -$25,000

Partner Bonus Pool after expenses, taxes, and reserve contribution = $1,972,850.00

The group has not changed it's compensation structure, and the partner bonus and pay remains the same. However, the hospital CEO notified the group that the stipend will be under review next year.

As you can see, the group has become fairly stable, has a good position with the hospital and the medical staff, and has done well to maintain its operations and budget. In addition, after saving $250k annually as a reserve for the past 5 years, they have 1.25M in their reserve account. They are in an excellent position.

Keep reading this thread and continue to give your feedback about EMGA....

 

[GeneralVeers]

What we are worth is more complex than just the net remainder after costs.

We are worth more in hard to staff areas, nights, weekends, and holidays. We are worth more when a group or hospital has lost providers and has a shortage. In short, we are worth whatever the market is willing to bear.

 

[Frazier]

Wonderful thread. Nicely done, OP.

 

[emergentmd]

...And the tale continues with EMGA. They have been in good position with the hospital for 5 years, and many things have changed over this short time period. The group, taking advantage of consistently growing volumes has prospered, and a few changes in its composition took place. Volumes have increased steadily from year to year, and they are currently seeing 45,000 patients annually. The hospital is pleased with the volume growth, and also pleased because since the adoption of the ACA, more of their patients are insured. This has lead to an increase in the volume of admitted patients as well, and caused the hospital to begin to feel strained. As a result, the hospital has had to take a closer look at its staffing and length of stay for admitted patients.

This next post will be divided into the various parts of Emergency Medicine group management that a successful group needs to navigate to stay viable, and is designed to give the reader perspective into how difficult maintaining an ED contract can be. I will list each category in the LEFT margin for you to reference, and also provide a summary of the issues effecting the group. This part is not all economic, and as you will read, has many different compounding factors happening simultaneously in real time.

WHOLE HOUSE POLITICS

2 years ago, in anticipation of government holdbacks for throughput times and penalties for core measures not being met, the hospital approached a local group of physicians to serve as a default hospitalist group for unassigned admissions, which compose a large percentage of the hospitals admission volume. They have struggled recently and the hospital is concerned that they may not get the job done. To complicate matters, the cardiologists feel the pressure of LOS, and feel that the hospitalists are placing metrics above their patient care. They also feel like the hospitalists are dumping on them, and consulting them for every patient who has chest pain. They have impressed upon the CEO that the doctors in the hospitalist group are not good quality, and the CEO is considering outsourcing the hospitalist group. The hospitalist group, in turn, has voiced concerns that the ED group is admitting too many chest pain patients. The ED group is able to demonstrate that, while their admission volume has increased, it has increased proportionally to the additional 5,000 patients it now sees. They have been able to deflect the allegations from the current hospitalist group, and the cardiologists have voiced to the CEO that they do not have any issues with the ED care.

In the last 5 years, the community hospital has also seen 2 new orthopedic surgeons move to the area, and have expanded their STEMI and Stroke programs to begin line with their core measures. In addition, in an effort to market their investments, they have sought accreditation from the AHA for their Stroke Program, and the CPCA for their chest pain center. They have worked with the ED group to aggressively pursue EMS routing patterns in favor of their new designation to outcompete a similar-sized competing hospital 15 miles down the road. They note that their efforts are working, and likely part of the volume increase the ED has seen. They have enjoyed healthy returns from increased admission volumes, and are also seeing an uptick in donations from their local community. The new orthopedic surgeons have discussed joining together and creating a joint center in the hospital. The CEO has been working with the medical staff leaders to plan expansion of both the chest pain center, and the orthopedic center, seeing a huge increase opportunity in revenue. Patient satisfaction scores for the hospital are mediocre at best, and inpatient scores are in the 45th percentile, with physicians coming in near the bottom scorers. The CEO is trying to get a 4 star rating for his hospital - up from a 3 star rating - and is relying on advertising and expansion to reach his goal.

The nurses have not responded well to throughput initiatives, and the hospital is finding that staffing their current hospital is difficult. They have not increased nursing wages for several years, and several nurses are leaving to take traveling shifts for a higher rate, retiring, or going back to school to become nurse practitioners. To combat this, the CEO has taken annual staff satisfaction surveys to identify areas of improvement. The ED ranked lowest in nursing satisfaction because they felt there was too little staff and the pay was low. They also complained about the physical state of the department, which has not been renovated in over 20 years. The CEO is weighing adding the ED to its list of costs as a renovation in next year's budget.

One of the neurologists left the hospital 3 years ago after being involved in an ugly malpractice suit. He left his practice partner and moved to another city as part of a structured settlement. This left the hospital with half of the neurologic coverage it once had, and the hospital has noticed that its transfer volume has increased for stroke patients because the admitting hospitalists do not feel comfortable admitting patients without neurology evaluation. This cause the CEO to contract with a tele neurology company to provide these examinations. The hospitalist saw their stroke volume increase as a result of accreditation as a stroke center, but saw that their leakage (transferring to other facilities) was canceling the volume increase - especially for tPA patients. The ED group has a strong group of providers and administers tPA as indicated, but finds that they are transferring these patients because they won't be admitted by the hospitalists.

Elective surgical cases have remained flat, and length of stay for surgical patients who are admitted appears to be increasing. The general surgeons are frustrated because half of them are hospital employees, and they hospital is unable to pay them their contracted rate for volume growth because there is no volume to grow. They feel the hospital is not holding up their end of the bargain by marketing their OR services. The hospital invested in a DaVinci robot for surgery 4 years ago and marketed themselves as the first robotic center in the county. This ended being little more than a marketing ploy because the hospital-based surgeons who went for training certification on the Robot found themselves having a hard time getting credentialed to use the robot. It turns out that the hospital credentials committee is composed of two surgeons who are private surgeons in the community, and have been scheduling themselves for DaVinci procedures. The hospital-based surgeons have threatened to go to the other hospital unless the CEO changes things, and currently, the CEO is preparing a proposal to the hospital board to look at the surgeons salary structure.

GROUP POLITICS

EMGA is not on the CEO's list of issues at this time, and the medical staff continues to enjoy its relationship with the medical director and the ED physicians. Four of the 10 physicians have voiced concerns that the extra 5K volume is causing them to become tired, and are concerned that this is hurting their ability to make safe decisions in lieu of metrics, which are a constant pressure. The hospital does not track ED physician satisfaction, but the medical director is concerned that the ED group may be negatively impacting admitted patient scores because of numerous factors. At a recent group meeting, the group decided to add 2 midlevel providers per day to help defray the lower acuity volume, and it was well-received. They hired 5 PA's to staff the group. A few of the PA's have had a rough start with some of the medical staff, and a few providers refuse to accept admission from the PA's. This has caused some added stress with the doctors because they feel they are required to work in harder by supervising the midlevels and presenting their cases. An unexpected pregnancy took one of the doctors away from the group for 4 months, and covering her shifts has left the doctors even more tired. Another one of the doctors left the group. They considered hiring a full time night provider to reduce the number of night shifts needed to be covered and voted at a recent meeting to hire a recruiter and fill the position with an added night differential. One of the other doctors in the group took the other full time night position.

THE LOCAL COMPETITION

The hospital down the road is owned by a large hospital corporation, and despite its lower volume, has blown away our hospital in all metrics. They enjoy 95th percentile satisfaction scores, and are now potentially taking surgical volume away from us. The CEO is constantly looking for ways to outcompete market share. To make matters worse, the neurologist is considering moving to the the other hospital, and rumor is that his partner may be moving back into town. The CEO of our hospital is worried that this may impact his neurology service line and is putting pressure on the ED group and the hospitalists to retain as much stroke volume as possible. The local rumor is that the competing hospital may be awarded a 4-star rating next year, which is really making the CEO concerned.

MARKET SHARE

As part of a growth and recruitment campaign, the CEO has asked the ED medical director to visit local physician practices to influence volume in his favor. During these visits, the doctors are supportive of the ED group and care given, but cite numerous reasons that they don't send their patients to the hospital. Most of these reasons are the appearance of the hospital, the shortage of nursing staff, and the lack of subspecialty services compared to the other hospital. The CEO expects the ED group to serve as a strong representative of his hospital, and demonstrate excellent physician relationships.

GROUP FINANCES

Current Operating Income (45,000 x $150) = $6,750,000
New Expenses
5 employed PA's with annual salary and benefits $120,000) = -$600,000.00
Night Doctor Differential ($50/hr for 1400 hours) = -$70,000.00
Recruiting Company Fees (15% of total clinical comp for night doctor [$370,000]) = -$55,000
Depreciation of Office Equipment Value = -$25,000

Partner Bonus Pool after expenses, taxes, and reserve contribution = $1,972,850.00

The group has not changed it's compensation structure, and the partner bonus and pay remains the same. However, the hospital CEO notified the group that the stipend will be under review next year.

As you can see, the group has become fairly stable, has a good position with the hospital and the medical staff, and has done well to maintain its operations and budget. In addition, after saving $250k annually as a reserve for the past 5 years, they have 1.25M in their reserve account. They are in an excellent position.

Keep reading this thread and continue to give your feedback about EMGA....

Ill Play.

EMGA has had a long tenure at the hospital, done everything the hospital wanted, provided good care with good metrics. Nothing a CEO would want to change. Overall easy to work with. But finances have been squeezed by a multitude of reasons and now the CEO's boss is putting pressure to increase profit. Stakeholders/Shareholders are frustrated that volume has gone up but profit has fallen.

Now he has to find revenue somewhere and its easier to pick the low lying fruit. The first will be the EMGA 1mil stipend. CEO's friends from other hospitals have told him that they got rid of stipends and the ED group have done fine. He immediately tells the EMGA that he is pulling the stipends unless he sees EMGAs books to show that a stipend is needed.

EMGA knows that they are doing at market without the stipend and have no footing to want a stipend as this is the trend in the country. EMGA also knows that if they do not budge on the stipend, CMG A & B will do the contract without a stipend.

Therefore EMGA backs down and has their stipend taken away.

That was $1 mil into the CEO's pocket but he still needs to find 10 mil in profit somewhere. He knows he can't touch the specialists very easily b/c they will leave as they have options. He starts to squeeze all hospital based groups and gets rid of all the stipends from the Gas, Rad, etc...

He now knows he needs another $5 mil somewhere and again, specialists are too hard to squeeze for obvious reasons.

Time to squeeze money from the low lying fruit. When contract negotiations come up with all hospital based groups, its time to negotiate with the EM group. He knows the CEOs of CMG A&B well who would love to take over the contract. He has been in "informal" talks for years. He has been told that they will take over the contract without a stipend, staff all of the upcoming poor performing facilities, and take over the Hospitalists as they have a hospitalist wing. CMG A&B knows that they will still turn a profit and they public value goes up as their income/profit grows.

EMGA now has a choice of selling out, being taken over, or take over the hospitalist group. What do ED docs know about running a hospitalist group.

SO SDG, what would you do? Choice seems very easy for me. You did everything right but forces out of your control has put you in a position without a good choice.

 

[emergentmd]

Oh did I tell you that the CEO have constantly told EMGA how much they love the group and has no intention of taking away the contract? Also, every new EMGA hire has been told that their contract is solid and the 2 yr sweat equity buy in is solid. Ask every partner...

 

[GonnaBeADoc2222]

Excuse my ignorance please, but could someone help me clarify how an ED contract holder collects its revenue? To my limited understanding, the hospital collects facility fees and the contract holder collects for services provided. Also, could someone expand on the concept of a "stipend" being provided to the contract holder? Thanks!

Loving this post BTW.

 

[bikERdoc]

Really appreciate this thread, seeing as we get pretty much minimal (ok zero) education on these aspects of EM in residency. OP, what's your business background? Any suggestions for getting more acquainted with the financial components of an EM group? Books, MBA (blah), etc?

Predictions for EMGA. Further squeezing over the next 5, 10, 15 years. The CEO has placed greater emphasis at meetings on PG scores and overall patient satisfaction. EMGA has done ok with it, but now the pressure is on. Monthly EMGA meetings have become a revolving record of how to improve patient satisfaction, and less about how to practice decent medicine. There will be videos made involving fake patient interactions and how to talk to your patients like you are a robot. There will be gimmicks like writing wait times on a white board and handing out your business card at the end of an interaction. It's all about the patient experience.

Eventually CMGA, who has been probing the market for years, finally gets one of the local competitors to join forces. This causes a HUGE local reaction of oh $hit****s. Will EMGA be around in ten years? Can they sustain the competition? What will happen when they can't get insurance and malpractice companies to compete at a reasonable rate? EMGA starts thinking about entertaining offers... Better to be bought out than to fade away.

 

[bikERdoc]

Excuse my ignorance please, but could someone help me clarify how an ED contract holder collects its revenue? To my limited understanding, the hospital collects facility fees and the contract holder collects for services provided. Also, could someone expand on the concept of a "stipend" being provided to the contract holder? Thanks!

Loving this post BTW.

As I understand it, there are 2 bills generated per patient encounter. One is the facility fee, the other is the provider fee. Two completely separate billing entities. One goes to pay the overhead and nursing, the other the physician group. As for the stipend, I think there is pretty good explanation above if you read through the thread. I had never heard of it before.

 

[bravotwozero]

I think the big money loser for SDGs is the freestanding EDs that are owned by the hospital but staffed by the SDG. Hospital gets the big facility fee, and the SDG has to eat up the costs while living off of patient insurance payments - at best they break even. Of course, none of the hospitals want to do a joint venture, and CMGs are more than happy to take them over


Sent from my iPhone using Tapatalk

 

[NinerNiner999]

Ill Play.

EMGA has had a long tenure at the hospital, done everything the hospital wanted, provided good care with good metrics. Nothing a CEO would want to change. Overall easy to work with. But finances have been squeezed by a multitude of reasons and now the CEO's boss is putting pressure to increase profit. Stakeholders/Shareholders are frustrated that volume has gone up but profit has fallen.

Now he has to find revenue somewhere and its easier to pick the low lying fruit. The first will be the EMGA 1mil stipend. CEO's friends from other hospitals have told him that they got rid of stipends and the ED group have done fine. He immediately tells the EMGA that he is pulling the stipends unless he sees EMGAs books to show that a stipend is needed.

EMGA knows that they are doing at market without the stipend and have no footing to want a stipend as this is the trend in the country. EMGA also knows that if they do not budge on the stipend, CMG A & B will do the contract without a stipend.

Therefore EMGA backs down and has their stipend taken away.

That was $1 mil into the CEO's pocket but he still needs to find 10 mil in profit somewhere. He knows he can't touch the specialists very easily b/c they will leave as they have options. He starts to squeeze all hospital based groups and gets rid of all the stipends from the Gas, Rad, etc...

He now knows he needs another $5 mil somewhere and again, specialists are too hard to squeeze for obvious reasons.

Time to squeeze money from the low lying fruit. When contract negotiations come up with all hospital based groups, its time to negotiate with the EM group. He knows the CEOs of CMG A&B well who would love to take over the contract. He has been in "informal" talks for years. He has been told that they will take over the contract without a stipend, staff all of the upcoming poor performing facilities, and take over the Hospitalists as they have a hospitalist wing. CMG A&B knows that they will still turn a profit and they public value goes up as their income/profit grows.

EMGA now has a choice of selling out, being taken over, or take over the hospitalist group. What do ED docs know about running a hospitalist group.

SO SDG, what would you do? Choice seems very easy for me. You did everything right but forces out of your control has put you in a position without a good choice.

Well played so far, but this group still has a few tricks up its sleeves. So does the hospital...

 

[NinerNiner999]

Oh did I tell you that the CEO have constantly told EMGA how much they love the group and has no intention of taking away the contract? Also, every new EMGA hire has been told that their contract is solid and the 2 yr sweat equity buy in is solid. Ask every partner...

EMGA is structured as an equity partnership day 1. No buy in required. There was only one new hire in 5 years - the new night doctor. I think I've been in the group you are referring to though LOL.

 

[NinerNiner999]

Really appreciate this thread, seeing as we get pretty much minimal (ok zero) education on these aspects of EM in residency. OP, what's your business background? Any suggestions for getting more acquainted with the financial components of an EM group? Books, MBA (blah), etc?

Predictions for EMGA. Further squeezing over the next 5, 10, 15 years. The CEO has placed greater emphasis at meetings on PG scores and overall patient satisfaction. EMGA has done ok with it, but now the pressure is on. Monthly EMGA meetings have become a revolving record of how to improve patient satisfaction, and less about how to practice decent medicine. There will be videos made involving fake patient interactions and how to talk to your patients like you are a robot. There will be gimmicks like writing wait times on a white board and handing out your business card at the end of an interaction. It's all about the patient experience.

Eventually CMGA, who has been probing the market for years, finally gets one of the local competitors to join forces. This causes a HUGE local reaction of oh $hit****s. Will EMGA be around in ten years? Can they sustain the competition? What will happen when they can't get insurance and malpractice companies to compete at a reasonable rate? EMGA starts thinking about entertaining offers... Better to be bought out than to fade away.

Stay tuned...

 

[The White Coat Investor]

Ill Play.

EMGA has had a long tenure at the hospital, done everything the hospital wanted, provided good care with good metrics. Nothing a CEO would want to change. Overall easy to work with. But finances have been squeezed by a multitude of reasons and now the CEO's boss is putting pressure to increase profit. Stakeholders/Shareholders are frustrated that volume has gone up but profit has fallen.

Now he has to find revenue somewhere and its easier to pick the low lying fruit. The first will be the EMGA 1mil stipend. CEO's friends from other hospitals have told him that they got rid of stipends and the ED group have done fine. He immediately tells the EMGA that he is pulling the stipends unless he sees EMGAs books to show that a stipend is needed.

EMGA knows that they are doing at market without the stipend and have no footing to want a stipend as this is the trend in the country. EMGA also knows that if they do not budge on the stipend, CMG A & B will do the contract without a stipend.

Therefore EMGA backs down and has their stipend taken away.

That was $1 mil into the CEO's pocket but he still needs to find 10 mil in profit somewhere. He knows he can't touch the specialists very easily b/c they will leave as they have options. He starts to squeeze all hospital based groups and gets rid of all the stipends from the Gas, Rad, etc...

He now knows he needs another $5 mil somewhere and again, specialists are too hard to squeeze for obvious reasons.

Time to squeeze money from the low lying fruit. When contract negotiations come up with all hospital based groups, its time to negotiate with the EM group. He knows the CEOs of CMG A&B well who would love to take over the contract. He has been in "informal" talks for years. He has been told that they will take over the contract without a stipend, staff all of the upcoming poor performing facilities, and take over the Hospitalists as they have a hospitalist wing. CMG A&B knows that they will still turn a profit and they public value goes up as their income/profit grows.

EMGA now has a choice of selling out, being taken over, or take over the hospitalist group. What do ED docs know about running a hospitalist group.

SO SDG, what would you do? Choice seems very easy for me. You did everything right but forces out of your control has put you in a position without a good choice.

You either take over or subsidize the hospitalist group. It sucks but it beats the other two choices.

 

[NinerNiner999]

I think the big money loser for SDGs is the freestanding EDs that are owned by the hospital but staffed by the SDG. Hospital gets the big facility fee, and the SDG has to eat up the costs while living off of patient insurance payments - at best they break even. Of course, none of the hospitals want to do a joint venture, and CMGs are more than happy to take them over


Sent from my iPhone using Tapatalk

Many of the regulations covering FSED's are state dependent, and most require a hospital affiliation, meaning their hospital must own or take the majority of ownership, of the property.

 

[bravotwozero]

Not the case in Texas, where I work. The hospitals didn't wanna give that up because it's too lucrative from the facility fee alone. I got this straight from the horses mouth - our groups owner, whose been trying unsuccessfully for years for our hospital to do a joint venture.


Sent from my iPhone using Tapatalk

 

[deleted109597]

Yep. CON is simply government disallowance of private practice of hospital medicine. Good or bad, it limits physicians being in control. In Texas, if you own a hospital, you can't work there. Makes an odd situation. At least we can own outpatient departments (surgery, GI, radiology, and ERs)

 

[emergentmd]

EMGA is structured as an equity partnership day 1. No buy in required. There was only one new hire in 5 years - the new night doctor. I think I've been in the group you are referring to though LOL.

I have never heard of a first day partner without buy in. I thought we were keeping this real

 

[Arcan57]

Niner, awesome posts. Thank you for taking the time to break contract retention down.

As WCI identified, the hospitalist group is the biggest threat. Bad hospitalists are going to hose all of your ED metrics. Any contract that isn't subsidy free with all hospital based service lines performing strongly is potentially at risk for takeover. It's similar to the bundle of communications services. I may be fine with Xfinity cable but their Hi-Speed Internet is underperforming. AT&T promises me fiber speeds for about what I'm paying for 100 Mb/s but only if I bundle with DirectTv. Do I like DirectTV over Xfinity? Not especially, but I'm willing to put up with some initial hassle to a previously working service for a promise of roughly equivalent long term results in order to fix a problem area.

Also, everyone's talking about how EMGA is doing great with the contract but that's from a staffing/quality standpoint. In EM, having your shifts filled and never making mistakes that impact the patient are taken as baseline performance. You get no points in the C-suite because of those attributes. It's like an anesthesia group touting it's ability to intubate, it's just expected. While I'm sure EMGA's docs are great and enjoy a good relationship with the rest of the medical staff, their PG sucks (in a market where that isn't universal) and their metrics are sliding. In addition, the stability of the hospital as a whole is shaky (bad hospitalists, hemorrhaging nurses, losing profitable specialty coverage, flat profits, aging infrastructure) which means a great relation with the current CEO may not be protective as the CEO is at risk for being replaced. Their metrics are going to get worse if the ED undergoes renovation, and the cost associated with construction is going to remove any slack in the line in terms of operational budgets. Without a dynamic ED nursing director, this increased austerity will translate directly to your best nursing staff leaving. This exodus will exacerbate metrics issues as well as end up costing more as you start a revolving door of new grad nurses that last just long enough to be oriented and gain enough experience to move on to a better job.

The ED nursing director will be under a microscope as their retention plummets. Since retention is a number reported to the C-suite, they will lose the ability to fire bad nurses. Terminations on top of the existing migration of top performers would drop them below target for retention. Additionally, their ability to discipline nurses will drop since C-suite will be conducting employee sat surveys to determine why retention is poor. Nurses that have just been written up for cleaning an IV site by licking it don't tend to return favorable surveys. Eventually the ED nursing management will crack under the pressure from c-suite and start pointing fingers at the doc group.

Plenty of groups have been in worse positions and held onto their contracts but EMGA needs to sit down with the hospitalists to figure out ways of shoring up the LOS metrics, sit down with cards to develop some sort of rapid rule-out so they're not clogging the hospital with 36hr LOS low risk CP pts, and figure out a way to get one of the group to marry the ED nursing director.

As emergentMD points out, they're also completely hosed if the hospital decides that it's salvation is going to be putting up low-volume (7-20 pts/day) FSEDs to expand its referral base.

While it's not there yet, at some point calling in a CMG and trying to negotiate a buy-out where the CMG has some realistic hope that the docs will stay would be reasonable. Right now EMGA has an asset that has value and a small enough group that obtaining some kind of consensus is practical.

 

[emergentmd]

You either take over or subsidize the hospitalist group. It sucks but it beats the other two choices.

This is not a Choice in many instances. Rates for Hospitalist have been going up b/c there just are a shortage. SO their pay is not related to their revenue in many cases and thus lose money b/c they can't recruit doctors on RVU only. There are too many choices where they are paid a higher flat rate than they make from RVUs.

If our group decided to take over the hospitalist group, we would have had to stipend them the $2 Mil + a yr that they were asking for. We would essentially have lost 1/2 of our dividends. And you know what will happen in the future when payments continue to decrease for the hospitalists? They will ask for a bigger stipend. We likely would be giving all of our EM profits to float the hospitalists.

Also, if we take over the group, they would likely want to be partners eventually and no way would I want to show the hospitalists our books.

 

[MSmentor018]

I have never heard of a first day partner without buy in. I thought we were keeping this real

oh there is, at least that's how it's advertised. "you have skin in the game, you own stock, it's your company so everyone's a partner!"

 

[Groove]

Fantastic thread with wonderful insight. Much appreciated.

 

[deleted109597]

Niner, awesome posts. Thank you for taking the time to break contract retention down...

It's uncanny how accurate this is. I can't possibly wonder what actual c-suites think when they read this.

 

[TooMuchResearch]

oh there is, at least that's how it's advertised. "you have skin in the game, you own stock, it's your company so everyone's a partner!"

I interviewed with a group like this. I was not convinced.

 

[emergentmd]

oh there is, at least that's how it's advertised. "you have skin in the game, you own stock, it's your company so everyone's a partner!"

This group must have unequal partners or not worth being a partner in.

 

[BAM!]

So why don't the hospitals use the higher paying subspecialties to subsidize hospitalist groups? Couldn't this work in desirable locations where lots of new grad subspecialists want to live?

 

[bravotwozero]

Because they don't have to? Plenty of hospitals have been able to get away with not subsidizing anything and letting the ED and hospitalist group eat their losses.


Sent from my iPhone using Tapatalk

 

[BoardingDoc]

oh there is, at least that's how it's advertised. "you have skin in the game, you own stock, it's your company so everyone's a partner!"

I interviewed with a group like this. I was not convinced.

It's literally the pitch I got when I interviewed with a USACS site.

Did not take the job.

 

[NYYk9005]

Great insight but if it's $150 per patient, and assuming you see 2 an hour, how can cerain institutions afford paying a 2 pph physician >$300/hr?

 

[deleted109597]

Great insight but if it's $150 per patient, and assuming you see 2 an hour, how can cerain institutions afford paying a 2 pph physician >$300/hr?

Because they have to. The law requires a physician, and if they don't have one, then they need to pay enough that one shows up. You can't force physicians to work at gunpoint. It has to be with money.

 

[BAM!]

Great insight but if it's $150 per patient, and assuming you see 2 an hour, how can certain institutions afford paying a 2 pph physician >$300/hr?

Key point: Single Hospital Groups don't have the bargaining power of Large Multi-Hospital Conglomerate Groups.

Ex. CMGA holds 100 different hospital contracts. They want to expand further. They want WEALTHY HOSPITAL A as part of their group. WHA has a great payor mix. Well above $150/pt. WHA is part of a network with POOR HOSPITAL B. PHB has had trouble staffing because of the poor payor mix. Much below $150/pt. Plus it's not a desirable place to live. PHB does not wish to supplement the ED group with a stipend to keep the hourly rate competitive.

So the hospital network says to CMGA, "You can have WHA, but you must also take PHB."

CMGA say, "OK, we'll take them both. We'll take some of the extra money from WHA, and supplement PHB. And we'll take a cut for management fees and our shareholders."

With a large CMG, you can see how money can be skimmed from desirable payor mixes to bring undesirable ED's above $300/hr.

Consolidation helps PHB, but hurts WHA. Is this a good thing? You could argue both ways. The problem is, these CMGs aren't just redistributing the wealth among the physicians who are taking all the liability. They are redistributing huge chunks for administrative positions of little value and investors/shareholders/private equity firms.

It's hard to feel happy about this when you're working your tush off at 3am, losing sleep, your family life is suffering as a result of your weird hours, and meanwhile some 9-5'er with weekends and holidays off is making more than you without assuming any liability. Or worse, some wealthy fat cat private investor is skimming off millions of passive income without lifting a finger.

 

[GeneralVeers]

Great insight but if it's $150 per patient, and assuming you see 2 an hour, how can cerain institutions afford paying a 2 pph physician >$300/hr?

With midlevel numbers that get attributed to us, my RVUS can be 18-21 RVU/hour. That translates to collections of $700/hour assuming $35/RVU. If my salary is $300 and the PA is $75 that leaves $325 leftover.

 

[NinerNiner999]

...And the saga continues for two more years

The hospital CEO and his board of directors have met to review finances and service lines. Their main focus for the past two years has been market share and volume growth, which are both competitive needs for the hospital. After approving the expansion of major service lines and overhaul of physical building need to appease the providers, they approved and spent $15 million to modernize their cardiology cath labs and hired a new cath lab director and chest pain director. They also spent $5M on a pair of new c-arms for the orthopods to use for joint surgeries. In addition to their growth expansion in these areas, the board approved a review of the hospital's trauma capabilities, and hired a consultant to evaluate for designation as a level II trauma center. This designation, if awarded, would solve several problems related to volume, maximize use of the new orthopedic suite, and attract more physicians to the hospital. It would also bring in potential state funding for other capital improvements. It would also bring in a predicted influx of uninsured trauma patients requiring high cost procedures and hospital stays.

As part of this readiness assessment, the ED leadership and hospitalist leadership were polled and gave favorable support for expansion of the hospital's capabilities. The ED medical director asked for a review and assessment of the physical ED size, and used the opportunity to get the department of surgery involved so they could lobby for better space for trauma patients, which would allow for justification of expansion. Sadly, the surgeon's morale has been less than stellar, and the CEO has considered hiring locums surgeons to help cover the call schedule. The CEO is aware that without employed surgeons on staff, depending on local community surgeons to cover trauma call would be an impossibility, so he has focused his search on surgeons who are capable and comfortable managing trauma. This has served to be somewhat of a challenge to the private surgeons, who are concerned that momentum toward a trauma center may cause their revenue to go down as they assume care for uninsured patients while taking call. They have formally requested that, if designation is approved, a separate call for "Trauma" be created, which the CEO happily agreed to accommodate with support of the medical staff. This put the CEO in the driver's seat for trauma designation, and also increased the budgetary needs for surgical coverage by paying for locums services. The Hospitalist group was recently bought by CMGB (a second contract management group now in the area), and has, for the most part, improved its length of stay issues.

After review of the trauma assessment, it was determined that the hospital would be capable of providing level II support, and the state approved designation as a level II trauma center. As part of a grant, the hospital was given $15M to apply towards trauma services needed for the hospital. Several meetings were held with key stakeholders (EM, Trauma surgery, Orthopedics, General Surgery, Plant Operations) and it was decided that the ED needed to expand space to accommodate the new traffic and volumes. The ED was going to get its much needed expansion, but also planned to suffer volume loss during renovation. They were tasked with staffing an ED that would drastically shift its payor mix during construction, likely decreasing the walk-in volume that previously paid in private insurance, and replacing them with ED trauma volume, that may or may not be insured. As a result, the ED group had to look at it's current coverage and realized that they had a few choices - 1) reduce coverage to maintain revenue stream, but work harder given the complexity of trauma care, or 2) Negotiate with the trauma surgeons to give them control over the trauma domain (minimize the ED physician management of trauma) and reduce coverage for main ED patients, which would remove them from trauma care altogether, or 3) maintain current coverage and take a few years of short term loss while renovations are completed.

EMGA met and decided as equal partners that they would eat the short term loss for several reasons.

1) With their reserve accounts, they had amassed over $2,000,000 as a company over the past 7 years with interest included, which they felt could be used as a bucket to draw for additional bonus pay and compensation,
2) They felt it would give them enough buffer to buy time, literally let the dust from construction settle, and put them in a strategic position to retain staff and renegotiate a stipend if payor mix did in fact drop due to trauma services. They gave themselves 2 years of reduced bonus pay as an investment to hopefully regain more revenue in the long run.
3) They considered the locums surgeons in their decision, but felt that the hospital cost for these services would be short term, and the designation of level II status would attract full-time trauma surgeons to be hired. They also planned to have the renovation performed in stages, which would leave 75% of the main ED open at all times during construction, and would be scheduled to be completed in 18 months. They felt a 6 month buffer to allow for constructions delays would be sufficient.
4) The group was close and had a strong core, agreed together, and all felt they could weather the storm.
5) The group estimates that their non-trauma volume will take a 10% hit for the next two years, then rebound higher after construction.

In an effort to prevent loss of shifts and income, and the potential loss of group coverage by providers taking locums shifts to recoup income, the group added a non-compete clause to their individual contracts. This prevented each physician from working in any other ED within 30 miles of their hospital, and also prevented them from continuing to work at the hospital for 2 years in the event their contract was terminated or sold. The group's attorney was given the authority to enforce this non-compete on behalf of the EMGA corporation in the event group members violated the non-compete clause. In addition, the group agreed to forfeit their portion of the group's bonus if they left. The group was also smart enough to know that the hospital would be placed in a tough position if they had their contract terminated/not renewed because their providers would likely leave.

Finally, sensing the degree of changes in the market, and considering the changes that would inevitably take place within the hospital politics themselves, the group voted to designate a president to serve as the business leader of the group, and gave each other the formal title of board of directors. It was designed as a budget neutral model, and the president would be elected annually by the board of directors. EMGA was became more sophisticated with their business decisions, and also positioned themselves well for future growth.

GROUP PROFIT/LOSS (P&L) CHANGES

After making the above changes and losing their stipend the group's bottom line changed as follows:

Current Operating Income (45,000 x $150) = $6,750,000 MINUS 10% volume drop = $6,075,000

Partner Bonus Pool after expenses, taxes, and reserve contribution = $1,297,850.00 MINUS STIPEND = $297,850 PLUS 1/2 reserve = $1,297,850

Annual physician bonus for the next 2 years per provider: $129,785
Total Physician Compensation: $300,000 + $129,785 = $429,785

Despite losing a $1M stipend and suffering a 10% drop in direct volume revenue, the physicians have managed to maintain their base salaries, but taken a hit in their bonus structure from $197,285 annually to $129,785 annually. Their total hourly rate went from $355.20 to $306.99.

This is a great example of how macroeconomics at the contract level can severely impact microeconomics at the physician level. The group lost their stipend and 10% of their volume, or a combined 25% of their practice growth income, but due to smart use of their reserve fund and planning with a reasonable time horizon, have only individually taken a 14% reduction in individual revenue. They have, however, lost corporate equity by liquidating part of their reserve fund.

In summary, EMGA has made smart decisions at a group level, continues to successsfuly navigate hospital politics, and has prepared themselves for future growth.

I hope at the minimum, this thread so far has really put your faith into your own local medical director - regardless of the group you are in - because they are often completely misunderstood in the severity of their role from the local group, and completely under appreciated at the hospital level.

Keep posted because things are about to heat up...

 

[emergentmd]

The squeeze is starting. Average income for partners are now $306/hr ($206/hr not including bonus). The partner salary and the local CMGs salary are getting dangerously close. The CMG down the road now is paying $225/hr with benefits.

New hires offered a 2 yr partner track given a decent deal with only a $50/hr sweat equity decrease. Therefore, new hires start at $$156/hr. Staffing becomes very difficult to convince any decent boarded EM doc to work for $156/hr when the CMG down the road is paying $70/hr more.

What are partners to do? No one is signing up for $156/hr. Partners are unhappy as their income has plummeted. Because of the shortage, EMGA is continually understaffed, and partners all are averaging 140hr/mo instead of the usualy 120hr/mo. This increased shortage has decreased their overall work rate to about $275/hr.

Partners are staring squarely at having to increase new doctor rates to atleast $200/hr to fill multiple open spots but money can only come from profit.

What is EMGA to do? After doing everything efficiently and accommodating all Hospital requests, there is just no more room to cut income.

Oh BTW, the hospital is planning to open a FSED this year and hopefully 5 total in the next 5 yrs in outlying BFE to capture more admissions for the mother ship. They are asking EMGA to staff it and there is just no money for stipends. These FSEDs have to be staffed by EM boarded docs and likely will have volume of about 10 pts/dy. Hospital making alot of profit on Facility fees and admissions. Doctor Pay is $175/hr x 24 hrs = $4200/dy. Income is $150x10 = $1500. That is a loss of $985K the 1st yr the first FSED opens up.

Distribution next yr will be very close to ZERO.

EMGA has been approached by CMGA and CMGB for many years for a buy out.

What is EMGA to do? The writing is on the wall...... and all new hires are never told that they have been in "informal" discussions.

 

[NinerNiner999]

Not so fast- EMGA actually is well staffed and their partners are resolute. Their only squeeze is temporary and they aren't looking for any new hires. Stay tuned...