1

Measuring the Financial Health of Your

Physician Contracting Program February 19, 2015

2

Outline:

• Introducing MD Ranger

• Elements of physician contracting programs

• Why financial health is important

• Key questions to answer

• Essential metrics and reports

• Benchmarking your organization

3

MD Ranger

MD Ranger is a market data company that collects non-employed

physician contract data directly from hospitals. Our approach to

capturing all contract data from an organization allows us to not

only determine what to pay, but also when to pay.

We help hospitals analyze their internal physician contracting costs

to enable negotiation of competitive rates with physicians, and

documentation of FMV and compliance with Stark.

4

MD Ranger includes:

• A secure, web-based Data Tool to collect and organize contract

data (uploads via Excel available, too)

• Web-based Analytic Tools to benchmark a hospital’s individual

contracts, identify compliance issues, and analyze where dollars

are spent

• Benchmarks, available as full reports and online queries, with

market data for call, medical direction, leadership and other

services, hospital-based services, uncompensated care

programs, and diagnostic testing services

• Contract Reports to document FMV compliance and assist in

audits

• Consultations with our experts

Our benchmarks:

• 80+ administrative services: hours, hourly and annual rates

• Includes hard to find data on: • Committee and meeting attendance

• Quality initiatives

• EHR and IT initiatives

• Department chairs and section chiefs

• Medical staff officers and leadership

• 50+ emergency call coverage services, including

uncompensated care rates

• 15 hospital-based services (pathology, hospitalists, etc.) • Stipends

• Methods of payment

• Incentives

• Diagnostic and testing services: EEG, EKG, stress, autopsy, etc.

• Key contract terms: payment type, scope of service, incentives

5

Introducing me

6

• Eight years experience in

healthcare consulting and

technology; specializing in

physician marketing,

recruitment, engagement,

compensation, negotiations

• Helps MD Ranger subscribers

leverage data, analyze internal

costs and structure physician

contract compliance programs

Elements of Physician Contracting

Programs

7

The Essentials:

• Executive oversight

• Contract management

• Compliance management

• Financial oversight

• Rigorous, consistent process for determining FMV

8

Executive Oversight

• Designate an executive at your organization to take

responsibility for physician contract approvals • The buck stops with her

• All exceptions for contracts go through her

• Rates are set with her guidance

• The daily physician contracting director/manager reports directly to

this person (ideally)

• Involve your compliance committee on a quarterly or

half-yearly basis

• Many hospitals require all physician contracts to be

reviewed by the board finance committee 9

Contract Management

• Have a contract for all financial arrangements (even

non-monetary ones)

• Organize your contracts

• Alert your team to expiring contracts

• Renewal process • Updated or new contract

• Checking the rate

• Negotiation

• Sign-off

• Strategic contract management

10

Compliance Management

• Mandatory Stark training for all staff involved in the

process

• Understanding “fair market value”

• Creating a consistent, rigorous system for

determining FMV

• Deciding how you are documenting the compliance of

every arrangement

11

Process to Determine FMV

• Discuss what’s most relevant for your organization

• Research various approaches (pros and cons)

• Document your organization’s philosophy and

approach to FMV

• Record step by step the process you’ll use to

document FMV

12

Need more help?

www.mdranger.com/resources

13

Financial Management of

Physician Contracting

14

Financial Management: Questions

• Are all contracts commercially reasonable?

• What benchmark do you aim for in individual (or

group) arrangements?

• How much are you spending, in aggregate, on

physician administrative services, call arrangements,

and hospital-based service contracts? • Is this comparable to peers?

• Is this sustainable within the context of overall financial

performance and goals?

15

Physician contract expenditures as a

percentage of operating budget

16

Physicians are powerful allies for your

organization’s success

• Physicians make critical decisions that impact your

organization’s bottom line daily

• Quality and outcomes are increasingly important, and

require significant physician engagement

• Well-designed physician contracts can enhance the

financial health of your organization and maintain

contractual relationships with physicians

• Preserving relationships with the medical staff is key

to your success

17

Different Approaches

18

Contract by contract management

• Good financial management begins at the contract level

• All physician agreements and payments must be

commercially reasonable

• All physician contracts should be paid at fair market

value

• Compliance with contract terms should be audited

annually and re-assessed prior to renewal to ensure the

agreement is being properly administered and that the

services are still necessary and advantageous

19

Overall financial management

• Top to bottom approach (high level analysis)

• Understanding contracting as a percentage of total

budget

• Does this fit within the organization’s overall financial

strategy, goals, and needs?

• Does this fit within the organization’s overall

physician strategy? Think of initiatives like clinical

integration, EHR implementation, achieving quality

metrics, and physician employment.

20

A delicate balance

21

Reluctant

Payer

Proactive

Buyer

Overall financial and service goals

that guide policies and procedures

Optimal Contract

Terms

Key Questions

22

Your physicians

• What is the relationship between my facility and the

medical staff?

• Do we have a physician relationship strategy?

• What percentage of my operating budget is physician

contract expenditures?

• What is the relationship between my facility and the

health system in which we belong? What is the

system-wide approach towards physician contract

management? What is the broader physician

strategy?

23

Your contracts

• Have we thoroughly reviewed all physician contracts

to ensure each one is necessary to our business?

• Are we confident that every negotiated contract is

both commercially reasonable and within fair market

value for the service and specialty?

• Do we have sufficient documentation for every

agreement?

24

The future

• Can we anticipate significant changes to our

physician contracting strategy in the next 3-5 years?

• Does our current contracting strategy match our

growth plan?

• Are we planning and budgeting appropriately for

physician costs in the future, given new programs or

acquisitions?

25

Metrics and Reports

26

Total Spending

• Across facilities

• Across services or service lines

• Across types of contracts

• Assess percentage total for each metric

27

Spending across facilities

• Part of a system? Understand how your facility

compares to others within the organization, adjusting

for differences like size, payer mix, market, services,

and trauma status. Look for: • Are there differences in payment rates for the same services across

the organization without reason?

• Why do some facilities have significantly more contracts?

• Opportunities for multi-facility contracts

• Facilities who spend less as a percentage of total operating margin

28

Comparing facilities

29

Spending across services or service

lines

• Some services and service lines have higher costs

than others. Are resources being spent wisely?

• Are top spending specialties what you expected?

Are there surprises when you compare services or

service lines?

• Is there a significant difference in the number of paid

positions for a given service?

30

Comparing services

31

Spending across contract types

• Measure how much your organization spends on emergency

coverage, physician administrative roles (including leadership

and medical staff officers), and hospital-based services

(stipends, collection guarantees, etc.).

• Understand the percentage of the physician contracting budget

for each contract type.

• Hospitals typically spend more for call coverage, followed by

administrative costs. Don’t underestimate hospital-based

service costs, however, if your organization pays groups a

premium to cover services like anesthesia, critical care,

pathology, etc.

32

Comparing contract types

33

Contract Metrics

• Number of Positions

• Payment Types

34

Number of positions

• Count all administrative positions for each specialty

• Use MD Ranger “Number of Administrative Positions”

report to understand the market

• Some specialties typically have more administrative

positions and support; others do not

35

Payment types

36

• Review contracts and segment to determine payment

types

• Compare to benchmarks

• Consider opportunities for efficiency, payment

reductions, etc.

Reports

• Sortable contract reports

• Distribution of contracts by benchmark

• Distribution of paid and unpaid contracts

37

Sortable contract reports

• Incredibly useful for prioritizing, uncovering red flags,

compliance and financial management, etc.

• Sort by contract value to prioritize high risk contracts

• Sort by benchmark range to reveal contracts that

could be considered outside fair market value

38

Prioritization

39

Distribution by benchmark

40

• Divide your contracts by market range to identify high

risk contracts or reveal trends in overpayment

Benchmarking Your Organization

41

Why benchmarks are useful

42

• Determine performance over time through internal

benchmarking

• Compare facilities of similar size, complexity for

performance

• Demonstrate where initiatives are paying off

• Highlight areas for improvement

• Determine if “trouble areas” are common industry-

wide or specific to your organization

Best financial benchmarks

43

• Total spending, physician contracts

• Spending across services or service lines

• Distribution of paid vs. unpaid contracts

• Total spending by facility

• Total spending within facilities for services or service

lines

• Number of administrative positions

Integrating benchmarks into financial

management

44

• Set aside time yearly to review financial metrics for

physician contracts as a whole

• Compare aggregated amounts across your

organization to see how facilities perform in

comparison to one another

• Review benchmarks from other organizations’ data to

determine if your spending is on par with peers

Could we help?

45

Could your organization use tools to help manage financial

oversight of physician contracting?

MD Ranger helps hospitals better understand physician

expenditures and become more strategic with contracting

decisions.

Reach out to us: we can help.

apullins@mdranger.com or 650-692-8873