Beware the bait-and-switch when it comes to HM program contracts

By: Mihir Patel, MD | CEO, Hospital Medicine 

If you’re a hospital or healthcare system executive looking for a hospital medicine partner to serve your community, it’s fair to say there are a multitude of factors that influence your decision. Still, we know that sometimes the final decision comes down to a single factor: cost.  

While we’ve earned our reputation over the decades for our clinical excellence in hospital medicine, we’ve also earned — somewhat unfairly — a reputation for being more expensive than our competitors. On the face of things this may seem true, but I’d like to show you why we’re actually the most sustainable when it comes to your bottom line.  

Not all contracts are created equal

As CEO for Hospital Medicine, I’ve heard a version of this story time and again. Rightly concerned about cost, hospital leadership makes the decision to go with the program whose initial contract is the least expensive, all other things seemingly equal. The challenge with this approach is that comparing total cost doesn’t always provide the complete picture.  

What I hear on the other side of their decision is that hospital executives wish they’d known what to look for — how to really compare apples to apples — before moving forward with what seemed like the obvious choice.  

Steady costs pay off in the long run

When you look at program costs over the span of five years, we’re proud to say that ours stay steady. Compared with industry-standard annual subsidy increases of between 4.2 percent and 5.7 percent, our average increase over five years is just 0.5 percent annually. This steady state reflects savings for our partners of hundreds of thousands — if not millions — of dollars. 

Why the gap? Other medical groups may, over the course of your contract, increase physician compensation at intervals, increase program management fees, and put risk back on you when it comes to retention, turnover, quality metrics, and revenue projections. 

How, then, is Sound able to keep costs flat if our competitors can’t? These are some of the essential ways we commit to your program’s stability: 

• We take on risk across all aspects of our practice. We take on significant financial risk across temp labor, clinical performance, clinician quality, payer collection, and fluctuation in volume. This ensures our team — from medical director to clinician — has skin in the game. 

• Physician compensation is tied to quality of care. Between 15 percent and 20 percent of our clinician compensation is tied to care quality and patient outcome metrics that are designed in partnership with your hospital or health system’s key performance indicators and goals. 

• We’re better at predicting revenue cycle projection. With our national scale and experience working with payers at the local, regional, and national levels, we’re better at predicting collections projections based on your program’s volume and payer mix. 

• We know how to manage temp labor costs with internal resources. Our internal pool of at-the-ready clinicians can deploy to programs in transition and help ramp up the practice while we hire full-time, permanent clinicians. We’re consistently recruiting around 90 percent of our full-time clinicians.  

Practice your due diligence

Many of the hospital executives and clinical leaders we’ve talked with believed they were doing their due diligence in comparing programs. They were asking the right questions — just not all of them. When comparing contracts, here’s what I recommend looking for: 

• Always ask to see: 
  • Subsidy/encounter
  • Matching volume/encounters
  • Total compensation and benefits details

• Does the contract include: 
  • Transition costs (buyouts, training and development fees)
  • Temp labor protection
  • Recruiting fee arrangements
  • The list of services included in the program management fee

• Look for the risk-to-benefit ratio:
  Is your prospective medical group partner taking risk on:
  • Retention
  • Turnover
  • Quality metrics
  • Revenue projections
  • Temp labor

• Look at the costs associated with individual line items:  
  • Physician compensation and benefits
  • Malpractice
  • Staffing model/mix
  • Payer collection
  • Comparing just the total cost might not provide a full picture

Pick the right partner

Sound has always been known, first and foremost, for its hospital medicine program. Our reputation is well-deserved and we work hard to keep it. In today’s healthcare world, cost has to be a consideration, and we’re always looking at ways we can demonstrate sustainability in this area without compromising clinical excellence. 

But our partnerships with hospitals and health systems across the country are built on so much more that contributes to long-term stability and sustainability: strong physician leadership, well-supported medical directors who know their local community and work to meet the specific needs of the people who live there, and teams of physicians, advanced practice providers, and clinical performance nurses who work in tandem to bring better process, performance, and overall experience to our patients and partners. 

Consider me a resource — I’m here to answer your questions, hear your concerns, and provide perspective on the landscape of hospital medicine.

Reach out to mihir.patel@soundphysicians.com.