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Friday May 17, 2013

The Bargaining Chip We've Been Looking For

There is a David-versus-Goliath perception that makes many primary care physicians dealing with giant hospitals and health care systems feel disadvantaged during payment negotiations, but the truth is that every health system needs a strong primary care base.

Now, more than ever, we can prove it.

Merritt Hawkins, the national physician search firm, periodically surveys hospital chief financial officers about how much revenue physicians in 18 different specialties generate for their affiliated hospitals each year. For the first time since the survey started in 2002, the CFOs indicated in a report released this month that primary care physicians generate more revenue, on average, than subspecialists.

Specifically, the report says primary care physicians (family medicine, general internal medicine and pediatrics) generated a combined average of $1.6 million for their affiliated hospitals in 2012, compared to $1.4 million for physicians in 15 other specialties.

In fact, family medicine's average in the overall list ranked third at $2.1 million, trailing only orthopedic surgery ($2.7 million) and invasive cardiology ($2.2 million). It's also worth noting that family medicine's revenue average increased more than 20 percent from the previous report while the overall average for subspecialists declined.

Merritt Hawkins president Mark Smith called it a "seismic shift" away from subspecialists and toward primary care physicians, who are "taking a greater role in driving both the delivery of care and the flow of health care dollars."

What the report also tells hospitals and other employers is that they should be spending more money on our salaries. Family medicine ranks third in generating money for hospitals, but we rank last (tied with pediatrics) in average salaries at $189,000.

To look at it another way, physicians in nine specialties make an average of at least $100,000  more than the average family physician while generating anywhere from $207,000 (general surgeon) to $1.2 million (otolaryngology) less revenue for their hospitals.

Family physicians negotiating contracts should be aware of this report, be empowered by it and make sure that the people on the other side of the table are informed, as well.

The report validates what I've experienced here in Indiana, where I am chief medical officer of Community Health Network, a system with eight hospitals.

In the mid-1990s there was a national trend of hiring primary care physicians, but hospitals tended to know a lot more about inpatient care than outpatient care. And after being disappointed with the financial results, many health systems divested from primary care.

Fortunately, we saw the value of our primary care practices, and today, roughly 200 of Community Health Network's 600 employed physicians are primary care physicians. We have such a strong primary care base that subspecialists have sought employment here based, in part, on the fact that they want to be associated with that primary care base, have the opportunity to prove themselves to our primary care physicians and earn their referrals.

Now the trend toward hiring primary care physicians is back. More than 60 percent of AAFP members are employed, and that figure is expected to top 70 percent within five years.

Merritt Hawkins speculates that the surge in employed physicians is one of the reasons for the increase in revenue generated by primary care physicians. Simply put, employed physicians are more likely to keep tests, referrals and other services in house.

But there could be more to it than that. The report also theorizes that the patient-centered medical home is a factor, and as more primary care physicians become directors of medical teams, they gain "more control of how patients access the system and how revenue streams are directed."

In our current fee-for-service world, where volume trumps value in the eyes of many, this is important information to know. But the system is transitioning, albeit slowly, to one that will be value based. So we should continue to strive to provide the right care at the right time while also knowing and being empowered by the value of the services we provide.

Clif Knight, M.D.is a member of the AAFP Board of Directors.


For many years before leaving my hospital owned practice,I along with a few of my colleagues,would let management know how much primary care contributed to the bottom line of the hospital. We were repeatedly unsuccessful,being paid by RVU,told we were losing money and considered a "cost center". The AAFP will have to be a little more proactive for this "bargaining chip" idea to work.

Posted by Louis Spikol on May 20, 2013 at 07:04 AM CDT #

Agree with Dr. Spikol. Also, the answers from hospital administrators when these same arguments were made in the 80's were that the revenue from FP's is largely referral based, so the patient was indeed free to go elsewhere, whether the family physician was employed or not, so not losing money on an employed physician was NOT as good as having an independent physician in a town with the right location and demographics. Trying to attach incentives to alignment is illegal, though there are ways around that, and ACA and the current environment are a real challenge to independent small practice. Some argued that the revenue would come to the hospital anyway if the FP weren't there, through the ER or hospitals clinics (if available.) The fact that the literature shows the economics of a small practice are not good means that hiring and employing FP's is a defensive maneuver - to keep them in town and hopefully garner the patients to the owner systems. Payment reform of some kind, causing redistribution of the total spend, making primary care offices revenue centers instead of cost centers is the ultimate solution. ACO's may do that - but credit has to be given where the work is done, not absorbed into hospital overhead.

Posted by Gus Geraci, MD on May 20, 2013 at 01:10 PM CDT #

The key words are at the begining of the article, Primary care generated for the hospitals. How much did they manage to generate for themselves in the process. Plus our bargainng chip is pale since states are allowing NP to practce in stand alone clinics without MD supervision. Some enterprising FP MD's are not even in their own practices anymore. They only "supervise" several NP at various locations, most not even in their own general areas. Lets outlaw NP seeing pt without on site MD supervision is the only way to save primary care MDs. I know of one that is "based" about 100 miles from my location that "supervises" I know of at least 6 NP not in the same town I don't believe that it is possible for her to make it to all of the locations once a week each. What she has to be doing is logging on and electronically signing 20% of the charts.

Posted by Fields on May 23, 2013 at 09:41 AM CDT #

The increased "value" of family physicians looks good at first glance! However, we don't know what methodology the hospital CFO's used in their calculus, and what assumptions of attributions were made. We also don't know whether all of the hospitals surveyed even used the same methodology! There is also the possibility of the sword cutting in unintended ways. Hospitals and large healthcare organizations have deep pockets, which can absorb, at least for a time, the gap between a new-and-improved salary versus startup earned income. Private practice physicians seeking a new family physician associate will become even less able to compete with hospitals hiring for residency graduates since the gap between salary and earnings must come out of her/his take-home pay. Perhaps this is why Dr. Knight estimates that soon the percentage of AAFP members who are employed will rise from 60% to 70%.

Posted by Dennis Saver on May 23, 2013 at 10:35 AM CDT #

I would be interested to know if Community Hospital of Indianapolis is actually living up to suggested base average income of $189,000 as a guarantee to family physicians because according to my calculations if income based on wRVUS assuming around 1wRVU per visit and assuming working around 188 days per year (4 -10 hour y work weeks), one would require between 24 visits per day at $40/wRVU to 28 visits per day at $35/wRVU . With the EMR implementation slowing productivity down by 20 -30% I am doubtful these numbers can be attained without some "padding". The salary might be attainable by working more days or paying a larger amount per wRVU. It is obvious to me after practicing for 35 years that most new doctors are not going to work longer hours because most have a much better perspective on what is important in life unlike us oldsters. The point is that family practitioners need to be paid more per wRVU or the wRVU systems needs to be ditched completely and guarantee FP's a salary that they deserve because of the income that they are generating for the hospitals.

Posted by whaehl on May 23, 2013 at 05:14 PM CDT #

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