There's More To The Story Than $268

Dr Wes opined about his interpretation of the benefit of hospitalist programs.  Here, I hope to set a few of his opinions straight and explain that the reality is not all that meets the eye.

Dr Wes, let me clarify several things as I see them from a hospitalist "in the trenches"

When you present $268 as the "bottom line", you miss out on a whole lot of other "lines" that hospitalists bring to the table. 

But lets start with that $268. Let assume that a 300 bed hospital is always full. Lets assume the average hospital stay is 5 days long. How many admissions (ie DRG's, diagnosis related groups) can a hospital collect from in a year? Well, a 300 bed hospital at maximum load will have 109,5000 patient days. If the average length of stay is 5 days. That represents 21,900 admissions (DRGs). 

Now imagine if of those 21,900 DRG's, all were taken care of by internists. And the next year, all of them were taken care of by hospitalists. The savings? $268 * 21,900 or 5,869,000 dollars. In one year, if all medical admissions once cared for by community internists were instead cared for by hospitalists. Obviously in a hospital, not all admissions are handled by internists. Some are surgical, some are observation, some are family practice, so the benefit in direct resource utilization is not quite so high.

Lets take my group for example. Lets use a daily census of 75 as an example. If you plug in this same data, and assume a LOS of 5 days, then our group will see on average 5475 DRG's a year. If all were previously admitted by community internists, that $268 just became 1.5 million dollars a year in direct costs savings from resource utilization. So what may seem like chump change, is in fact a huge chunk of change in the tight margins of hospital economics.

Now, this $268, is actually the smallest benefit (by far) to the hospital. Imagine a full hospital system. If your hospital is at maximum capacity and payment is based on DRG, then the quicker you get them out, the more room you have to admit other patients, such as money making heart bypass and total joint replacements, the kind of stuff I have blogged about incessently in the last two months. The reason it pays to get medical patients out as quick as safely possible, is because for the exact reason that they don't pay. Medical admissions, generally loose money to a hospital system. So even $268 per DRG is a WIN-WIN.

But lets go back to the length of stay (LOS)benefit of 0.4 days. Lets dissect that number. Because it is HUGE

Imagine again our 300 bed hospital at maximum load. Lets again imagine a LOS of 5 days. That gives 109,500 patient bed days. If the average LOS is 5 days, that gives 21,900 DRG payments. Hospitals are paid on diagnosis related groups (DRG's), so if you are in the hospital for 2 days or 20, they get paid the same (with some minor adjustments). Lets just use a DRG payment of $5000 for simplicity.

Revenue for that hospital for the year would be 21,900 * $5000. Or $109,500,000, without the hospitalist.

Now lets imagine if the hospitalist admitted every single patient to the hospital and was able to shave just 0.4 days off the hospital stay. How many DRG's could a hospital collect in that year?

Well, at a LOS of 4.6 days instead of 5, at a 300 bed hospital, at full capacity, that equates to 23, 804 DRG's, an increase of 1904 DRG's. Lets use that $5,000 average DRG payment (which would actually go up as better paying procedural admissions were made possible with open beds) and you see that a hospital can collect an additional $9,520,000 in DRG's based solely on a decrease length of stay of less than 1/2 day per patient, if a hospitalist had their mittens on every patient brought into the hospital.

This is where the actual direct costs savings come into play. By allowing the hospital to optimize their staffing (the nurse will get paid the same whether there are 21K or 23K DRG's, every additional DRG is pure profit to the hospital. Making beds available for those elective total knees and bypass surgeries. The stuff that drives profit. While getting the money losers out of the system (my patients).

All of this is the result of The Medicare National Banks fantasy land economics and has resulted in skewed incentives for the development of specialty procedural hospitals which can, in the long run improve quality and decrease costs. Unfortunately, it also puts an unfair burdon on full service hospitals which require the skewed economies/DRG reimbursement of procedures to make up for my money losing pneumonias.

$10 million dollars a year. Incredible. for a 300 bed hospital. Almost 10% increase in revenue.

If you imagined a hospitalist group getting 4 million dollars a year in support to see all 300 patients every day in the hospital (at maximum efficiency that would require a group of about 40 docs ), the yearly return on investment of 4 million dollars is 250%, starting at year one. The per doc support would be about $100,000.

Can you think of any other business decisions that result in immediate 250% ROI? I can't.

(By the way, none of this represents my data for my group, which I am contractually obligated not to discuss, ever. So my numbers are just that, numbers.)

That's why hospitalists are in demand and why their salaries are soaring.

This is a simple run down on financially, why a hospitalist program makes sense, and why administrations that get it are willing to pony up the money.  And why hospitalist salaries have been soaring in the last 5 years.

The benefits don't stop at money.  I can't tell you how many times I have had nursing staff tell us they are so glad we are here.  We are accessable,  immediately in emergencies,  quickly for routine floor stuff. We are there to talk with families,  all day long.  The ER loves us because we are there to decompress their ER.  The specialists love us because we are an easy way to do the floor consults for routine management of medical problems like diabetes, hypertension  and to evaluate quickly the decompensating surgical patient or other specialist patients.

The primary care docs, whom we technically work for, love us because we see their patients for them, we do a great job, and we allow them to increase their office practice with 100% paying customers.

Families love us because we have time to talk to them and to give them the time of day.

Our satisfaction survey's are routinely higher  from all comers.  

Your point about changing doctors weekly is well taken.  But I must also remind you that this fragmentation of care occurs among all specialists that we work with as well.  Every week the ID, the cardiologist (sometimes daily), the GI, the nephrologist, even the surgeon changes.  They go through their week of hospital rotation and then their partner comes on.  

To single out hospitalists is in, my book, unfair.  It is universal in hospitalized patients.  

As far as "bonuses and production",  the last time I checked,  salary compensation based on length of stay was illegal.  Most hospital employeed salary programs (my program is private practice)  offer bonuses based on production.  

If you think about it,  this is actually counter intuitive, and the opposite of what you suggest.   The longer you hold onto patients,  the more RVU's you will generate and therefore more production and more money.  But also less benefit of the length of stay, and therefore less benefit of the program in general.  That's why I am a staunch believer in a well run private practice hospitalist program (like mine) where the administration understands the value hospitalists bring to the table.

Let the private practice sort out the details reimbursment/staffing/bonuses/benefits.  The hospital's only job is should be to  ensure that their hospitalist group survives and thrives.  The benefits will come to the bottom line and to all those around it.

One could make a similar analogy to private practice (industry control) vs employee (government control) and it's easy to see why I believe that putting industry (capitalism) in  control of the details makes for vastly superior products.  Let the government (hospitals) fund it, but realize my survival depends on me doing a job good enough to bring value in the eyes of the funding (the hospital)

I can assure you in my 5 years of private practice,  there has never been one patient I have ever discharged where I felt it was based on any type of financial reward to me.  

I discharge a patient when I feel they are medically stable.  My malpractice risk doesn't afford me to practice any other way.

In a well run program the limitations are mostly overcome.  The transfer of information is quick, between hand offs, between hospitalist and primary care doc. 

The one  trade off of having a hospitalist vs primary care doc?  Well,  we are not their outpatient doc.  You have correctly stated that fact.  But we are highly professional doctors who can efficiently care for very sick people.  And do so quickly 

I once had a consult at midnight on a surgical patient for "high blood pressure."  It was presented to me as non urgent, but when I saw the patient,  that night,  it became quite clear to me the patient was in florid alcohol withdrawal.  

I had, in fact had the patient intubated that night.  There is nothing that compares to the bed side evaluation,  something outpatient doctors are not available to do at all hours of the day.

So the trade offs are all relative.

I am very proud of our program.  We have grown from 5 docs to 18 docs in 5 short years.    I practice medicine in a WIN-WIN situation, where I honestly can't think of a single loser.

In fact, I am so proud of how well our group functions, that I think our model of care should be exported out to all hospitalist groups in this country.  I hear stories all the time about how hospitalist programs fail, and the problem often times is not with the doctors themselves, but with the way the program was established, the unmanaged expectations and the lack of administrative support, financial or otherwise.  

I'm sure if any groups out there were interested in seeing how we do things,  a consulting relationship could be established with our group so that our WIN-WIN financial, social, and work experience model could be exported to other groups around this country.  

So Dr Wes,  While I may not be your doctor, but rather just a doctor, I am a doctor who comes with untold benefits both seen and unseen.  And I can assure you when I am taking care of a patient, I am in control.