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Be aware of your ‘value’ to the health care system
The future of health care services and reimbursement is shifting from a procedural-based, fee-for-service model to a value-based alternative payment or bundled payment model. As part of this process, it has been challenging to find agreement among various parties as to what defines “value.” The government, insurance companies, third-party payers and physicians offer definitions and criteria for care that should be valued with population health care management.
The government’s mandate, based on the Affordable Care Act and subsequent directives, has led to numerous requirements for physicians to compile information that often does not have any direct correlation to the care they provide, thereby adding significant financial burdens to the delivery of health care.
Increasing challenges
To comply with the required data management, including the use of sophisticated electronic medical records (EMR) systems, U.S. physicians are estimated to spend more than $15.4 billion per year to provide required reporting of quality health measures. Overall, the average practice spends 15 hours per week per physician to comply with quality health measure reporting. The time to enter data and maintain EMRs is estimated to cost approximately $30,000 per year for orthopedic surgeons. Even more disappointing is many quality health measures may be valuable to a primary care physician’s practice, but are not as valuable for an orthopedic surgeon’s practice.
Anthony A. Romeo
As orthopedic surgeons are confronted with ever-increasing external, administrative, government and insurance-based burdens, there is an increasing desire to become part of a larger health care system or hospital-based practice. Institutions can afford the continuous upgrades of the EMR systems required to collect the data necessary to receive appropriate reimbursement for services rendered. Accepting a system whereby services are provided before payment is received creates a disadvantage for physicians. Without sophisticated EMR systems, not only is quality reporting difficult or impossible, but also the tracking, confirmation and dispute resolution of reimbursement is an overwhelming administrative burden.
Individual value
Many orthopedic surgeons are challenged with determining their individual value to their health care system or hospital. When an orthopedic surgeon is in a private practice and has access to the practice’s full accounting ledger, it is possible to make an accurate determination of the surgeons’ contribution to the practice’s revenue and expenses. Contributions to a modern practice include ancillary services, such as radiographs, CT scans, MRIs, physical therapy, occupational therapy, durable medical equipment and ambulatory surgery centers, which all can be calculated. This transparency can lead to better or fairer methods for compensation and support of the practice.
Transparency of accounting is rarely a part of the employment for orthopedic surgeons who join large health care systems or hospitals. The ability to accurately define contributions is often lost by the surgeon and is not supported by the health care system. Furthermore, many arrangements minimize or eliminate the accounting for ancillary services given by the orthopedic surgeon. The services may not exist or be financially sound investments for the institution if these did not have the commitment of the orthopedic surgeon.
Merritt Hawkins and Associates, a physician search and consulting firm, released 2016 results of a survey of hospital chief financial officers about the value orthopedic surgeons provide for health care systems or hospitals. Among the 18 specialties evaluated, orthopedic surgeons generated the highest revenue, almost double that of primary care physicians, and outpaced any other surgical subspecialties. A full-time orthopedic surgeon generated an average of $2.7 million dollars of revenue for the affiliated hospital, which may not include all ancillary and other services enlisted in the care of patients. From a hospital administrator’s investment viewpoint, this can be interpreted as a full-time orthopedic surgeon is worth a 500% return on investment, as salaries of orthopedic surgeons in an employed environment are typically one-fifth of the revenue generated. However, hospital administrators and department chairs often use data from the Medical Group Management Association Academic Practice Compensation and Production Report for faculty. The total compensation reported in this setting is about half of what is reported by Merritt Hawkins, although the average for a department chair is similar. Any differences are a form of creative accounting, as this system typically fails to take into account necessary ancillary services and differences in various insurance reimbursements, opting to consider the Medicare fee scale for all patients.
Future discussions
Providing salary and physician compensation not related to actual revenue generated can be a profitable arrangement. Although many factors go into an institution’s revenue stream, having employees who generate five- to 10-times their salary and benefits certainly supports a healthy bottom line. Whether just finishing a fellowship or making a change in their practice environment, orthopedic surgeons need to be aware of their value to their health care systems.
As the stakes are high and our market value is substantial, we may one day adopt the culture of professional athletes and have agents negotiate salaries and benefits without emotional distractions. The basis of the discussions would be on a clear understanding of the contributions we provide to the health care system.
As the government and third-party payers continue to drive surgeons into large health care systems, there may come a day when a critical mass of physicians will no longer accept the disconnect between hospital and institutional revenues as an appropriate paradigm. This could lead to a collective method of bargaining, such as a physician or surgeon union. For now, the current environment fosters innovative alternatives, such as vertical integration of multispecialty orthopedic practices, which includes ownership and administration of a health care institution or hospital, thus leading to a fairer method of recognizing the value of orthopedic surgeons.
- References:
- Casalino LP, et al. Health Aff. 2016;doi:10.1377/hlthaff.2015.1258.
- www.merritthawkins.com/compensation-surveys.aspx
- www.merritthawkins.com/uploadedFiles/MerrittHawkins/Pdf/2016%20Merritt%20Hawkins%20-%20Inpatient-Outpatient%20Revenue-%20Press%20Release.pdf
- For more information:
- Anthony A. Romeo, MD, is the Chief Medical Editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Rd., Thorofare, NJ 08086; email: orthopedics@healio.com.
Disclosure: Romeo reports he receives royalties, is on the speaker’s bureau and a consultant for Arthrex; does contracted research for Arthrex and DJO Surgical; receives institutional grants from AANA and MLB; and receives institutional research support from Arthrex, Ossur, Smith & Nephew, ConMed Linvatec, Athletico and Miomed.