PEDIATRICS Vol. 108 No. 1 July 2001, pp. 79-84
From the Department of Pediatrics, University of
Washington School of Medicine and Children's Hospital and Regional
Medical Center, Seattle, Washington.
Objectives. In many children's
hospitals, inpatient attending physician services are provided by
academic faculty who function as part-time inpatient specialists or
hospitalists. Although some have claimed that hospitalist care can
reduce length of stay and total hospital resource use and expenses,
there are few benchmarks or data regarding physician productivity or
the characteristics and financial performance of these programs. The
resource-based relative value scale (RBRVS) is a valuable tool for
developing national benchmarks and comparing the financial performance
of inpatient programs at varying daily census and reimbursement levels.
The objectives of this study were to 1) describe physician productivity
on an inpatient service as measured by total relative value units
(TRVUs) and professional charges, 2) determine whether inpatient
collections were adequate to support faculty salaries for the time
spent attending, and 3) develop a model to evaluate financial
performance of inpatient programs at varying census and TRVU
reimbursement levels.
Methods. A retrospective review of hospital discharge and
faculty practice billing data between June 1997 and July 1998 was
conducted in a general medical service in a regional, 208-bed,
university-affiliated children's hospital in the Pacific Northwest.
Results. Of 4113 patients who were admitted to the
children's hospital general medical service during a 12-month period,
faculty part-time hospitalists (N = 28) served as
the attending physician for 1738 (42%). On an annual basis, faculty
attended for an average of 29.1 days (median: 21.0; range: 7.0-97.0),
with an average daily patient census (ADC) of 7.2 (median: 6.5; range:
2.8-12.0). Inpatient attendings billed for 1738 initial visits and
3957 subsequent visits. Total physician productivity for the inpatient
attending group during 1 year included 12 085 TRVUs and gross
professional charges of $777 743. The average payment, or conversion
factor (CF), was $24.46/TRVU (71% of Medicare CF). The cash collection rate was 38%, reflecting a payor mix that included 54% Medicaid, 28%
commercial payors, 12% health maintenance organization, and 6% other
payors. On a weekly basis, physicians generated an average of 109 TRVUs
and collected $2665 in cash. The average salary cost per RVU was
$23.40, and weekly faculty salary and benefit expenses were $2550.
After operating expenses and academic taxes totaling 24% were deducted
($5.87/TRVU), RBRVS-based payments and cash collections covered 79% of
average faculty weekly salaries. Financial modeling showed that either
an average CF of $31/TRVU or an ADC of 9 patients per day on the
inpatient service would be required to generate sufficient revenue to
support physician salaries and operating expenses.
Conclusions. For a faculty inpatient attending service in
a children's hospital with an ADC of 7, a $24.46 RBRVS-based CF
payment is inadequate to support faculty salaries and operating
expenses for the time spent attending. Inpatient services in similar
payor environments with comparable expenses and staffed by faculty who
care for fewer than 9 patients per day will not cover typical faculty
salary costs and operating expenses.
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ABSTRACT
Top
Abstract
Methods
Results
Discussion
References
Historically, in nonrural hospitals, children have been
cared for by community pediatricians or by academic pediatric faculty who serve as inpatient physicians. Recently, declining pediatric inpatient hospitalization rates, decreasing experience of community physicians with hospital care,1 capitation contracts, and
increasing productivity demands have led pediatricians to develop
alternative models for inpatient care. In response to physician
concerns and competitive pressures, many children's and community
hospitals have considered programs that provide inpatient attending
services by a designated cadre of physicians.2-4 Physicians who staff these programs may be community-based
"hospitalists," commonly defined as physicians who spend at least
25% of their time based in a hospital setting, or academic faculty who
serve as part-time hospitalists to provide inpatient care on a rotating basis.
Proponents argue that hospitalists enhance quality and efficiency
because care is provided by physicians who are experienced in the care
of hospitalized children.2 Hospitalist programs also may
control resource use and decrease costs of care and length of stay when
compared with traditional attending models,5 in part
because of enhanced availability and communication with referring
physicians.6 In markets where inpatient services that are
paid at a diagnosis-related group (DRG)-based per case rate or
paid per diem represent a significant portion of payments, such expense
control takes on increased importance.
Hospitalist programs also are promoted as a mechanism for hospital
marketing and to increase market share. In competitive health care
environments, some hospitals may view pediatric hospitalists as a way
to attract more pediatric patients by supporting local pediatricians
and surgeons who refer to the hospital but choose not to care for their
own inpatients and by providing a broader scope of pediatric services
on the inpatient unit, emergency department, delivery room, and
nursery.
Although there is a growing literature describing the clinical,
organizational, and financial aspects of inpatient programs that serve
adult patients,7-9 there is a paucity of information
regarding pediatric hospitalists, inpatient attending programs, and the
physician productivity and payment rates needed to support the salaries
of hospitalist physicians. Nonetheless, some have raised concerns that
these programs are not a cost-effective way to provide 24-hour care,
especially without concurrent resident physician
coverage.10
Development of inpatient productivity and financial benchmarks has been
hampered by the lack of a standardized financial reporting format.
Presentation of program financial performance and physician productivity in terms of gross charges, "usual, customary, and reasonable" fees, or local collection rates is insufficient to allow
programs in different payor environments to compare their financial
experience. The Health Care Financing Administration (HCFA)
resource-based relative value scale (RBRVS) represents a uniform
national benchmark for physician payment and as such is a valuable tool
that facilitates such comparison.11 This fee schedule,
developed initially for reimbursement in the Medicare program but now
in increasing use in pediatrics,12 provides an objective
measure of physician work and may be used to describe and compare
physician productivity in different clinical settings. The RBRVS system
also is used to standardize reimbursement by assigning relative value
units (RVUs) to each current procedural terminology (CPT) code. The
most commonly used RVU measure is "total RVUs" (TRVUs), which take
into account the physician work, practice expenses, and professional
liability that are associated with specific CPT codes. The TRVU in turn
is adjusted further for specific regional variations in health care
costs through the use of a geographic practice cost index. Under the
RBRVS system, payment is determined by applying a conversion factor
(CF) The Medicare CF used nationally is set annually by the Congress as part
of the Medicare budget process. Among other payors that use the RVU
system, wide variation exists in CFs that are used to establish
payments. This state-by-state variation is particularly striking within
the Medicaid program. Conversion of payments by health plans into RVUs
not only provides a method to evaluate and negotiate contracts but also
is an effective tool to describe and contrast payments in health care
environments that are characterized by differences in payor mix and
reimbursement rates.
In this study, we describe the characteristics and financial outcomes
of a pediatric inpatient attending service that is staffed by faculty
who serve as part-time hospitalists. Specifically, we report on the
physician productivity and financial performance of the inpatient
service using both the RBRVS system and more traditional measures,
including patient visits, professional charges, and collection rates.
We determine whether inpatient collections were adequate to support
faculty salaries for the time spent attending and present a financial
model to explore the volume and payor conditions under which revenues
that are generated by inpatient attending services would be sufficient
to support faculty salaries for time spent attending.
Inpatient Practice Characteristics
We analyzed the general medical service of a regional, 208-bed,
university-affiliated, freestanding children's hospital in Seattle,
Washington, with more than 11 000 annual discharges. The inpatient
service was divided during the year into 2 or 3 teams, each with a
single attending. Approximately 95% of the attending rotations were
staffed by faculty attendings; community physicians served as inpatient
attendings during the remaining rotations. Faculty inpatient workload
was calculated from a review of inpatient attending schedules for July
1997 to June 1998. CPT codes, charges, and collections were obtained
from faculty practice billing records. Faculty salaries and benefits
were obtained from the Department of Pediatrics annual budget.
Calculation of TRVUs and CF
TRVUs were determined for each of the initial and subsequent
hospital care CPT codes used by the inpatient attending group, according to 1999 standard HCFA methodology.13,14 The TRVU
value is derived by combining an assignment of a standard, HCFA-determined numeric value for physician work, practice
expenses, and malpractice expenses for each CPT code. The TRVU values
then were adjusted for each component of the TRVU with the use of the HCFA geographic practice cost index. The CF per TRVU for the inpatient service was calculated by dividing the total cash collections by TRVUs.
Financial Performance of the Inpatient Service
Financial performance of the faculty inpatient service at
varying daily census was calculated with the use of standard
profit/loss accounting methods. In the cash flow model, revenues were
projected with the use of calculated ratios of revenues per patient at
different volumes, and expenses were based on actual salary, benefits,
and operating expense rates. In the RVU-based model, revenues were projected with the use of calculated values for daily TRVU/patient at
specific CF payment levels.
Of 4113 pediatric patients who were admitted to the
children's hospital general medical service during the 1-year study
period, faculty part-time hospitalists (N = 28) served
as inpatient attendings for 1738 patients (42%). The faculty
hospitalist group included 13 general pediatricians and 15 pediatric
specialists: neurodevelopmental (5), infectious disease (4),
rheumatology/immunology (4), genetics (1), and nephrology (1). Fourteen
(50%) were associate professors, 7 were professors, 5 assistant
professors, and 2 were instructors.
Practice Characteristics of the Inpatient Attendings
Faculty members served as inpatient physicians on the inpatient
teams for a total of 814 days during the year-long study period, with a
mean of 29.1 days per physician on service (median: 21.0; range:
7.0-97.0). The average daily census (ADC) on the faculty service was
7.2 patients per attending per day (Table
1). Inpatient physicians billed for 5695 inpatient visits, including 1738 (31%) initial visits using CPT codes
99221 to 99223 and 3957 (69%) subsequent visits using CPT codes 99231 to 99233 (Table 2). Among initial and
subsequent visit codes (Fig 1), most were
of intermediate complexity (61% and 66%, respectively), whereas 34%
of initial visit codes and 9% of subsequent visits were of high
complexity.
TABLE 1 TABLE 2
a value that converts the TRVU into payment amounts for
reimbursing physicians.
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METHODS
Top
Abstract
Methods
Results
Discussion
References
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RESULTS
Top
Abstract
Methods
Results
Discussion
References
Inpatient Attending Service Physician Productivity and Expenses
Inpatient Attending Service CPT Codes, RVUs, Charges, and Billable Time

View larger version (38K):
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Fig. 1.
Distribution of CPT codes for initial and subsequent hospital care.
Physician Productivity, Revenues, and Expenses
Total physician productivity for the inpatient attending group during the 1-year period included 12 085 TRVUs and gross professional charges of $777 743. On a weekly basis, physicians generated an average of 109 TRVUs and $7014 in gross billings. The overall collection rate on professional charges was 38%, reflecting deductions from revenue, including contractual allowances on government contracts, negotiated discounts from payors, bad debt, and free or partial-pay care, leaving only $295 595 for salary and benefit distribution. The payor mix included 54% Medicaid, 28% commercial, 12% health maintenance organization, and 6% other payors. Average weekly net collections were $2665 per physician, and the average CF payment was $24.46/TRVU (71% of Medicare). For 48 weeks per year (1.0 full-time equivalent [FTE]) of inpatient attending, the net revenue (before operating expenses) was $127 920. After operating expenses, medical school dean, and departmental taxes totaling 24% ($5.87/TRVU) of collections were deducted, net revenue was $18.58/TRVU. Weekly faculty salary and benefit expenses were $2550, and average salary cost per RVU was $23.40. Weekly cash collections thus covered 79% of average faculty weekly salaries.
Using the typical time spent for each CPT code as described in the CPT manual, we calculated the total and daily physician work effort devoted to inpatient care (Table 2). The 12 085 RVUs generated 3163.3 hours, or 3.9 hours of billable work per day, during the 814 days of faculty inpatient attending time. Physicians generated 3.8 RVUs per hour, and with the use of our actual conversion factor of $24.46, this resulted in a reimbursement rate of $93/hour of billable time. With the assumption that a single 40-hour FTE employed physician works 44 weeks or 1760 hours, a total of 1.79 FTEs dedicated to inpatient care would be required to cover the clinical (nonteaching) physician work on this inpatient service.
Financial Performance of the Faculty Inpatient Practice
Using a cash flow model including actual salaries and daily
revenues, we calculated the projected profit/loss of the hospitalist service at varying ADC volumes (Table 3).
At an ADC of 7 patients (the actual ADC during this study), the weekly
deficit was $525, or $27 300 annually. This deficit decreased to $235 per week with an average inpatient census of 8. An ADC of 9 patients per day on the inpatient service provided sufficient revenues to
support the average physician weekly salaries and operating expenses
that is, it became revenue neutral.
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The financial performance of the program at different ADCs and CFs was modeled. For salary costs of $2550/wk ($365/d) and operating costs of 24% of cash collections, a conversion factor of $31 would be required at an ADC of 7 to provide sufficient revenue to cover faculty costs. Alternatively, assuming a CF of $25, an ADC of 9 patients per day on the inpatient service would be required to generate sufficient revenue to support physician salaries and operating expenses. These results were extrapolated to provide a simple calculation of collections per week at varying ADC and RVU conversion rates (Table 4). For example, an inpatient program with physician salary costs and operating expenses of $2800/wk would generate sufficient revenue to cover its costs with an ADC of 5 and a CF of $36. However, in a less favorable payor environment with an average CF of only $28, an ADC of 7 patients would be required to achieve the same financial result.
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DISCUSSION |
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Using an RBRVS-based analysis, we showed that for this faculty inpatient attending service in a children's hospital with an ADC of 7, a CF payment of $24.46 per TRVU for professional services is inadequate to support actual faculty salaries, benefits, academic taxes, and operating expenses. Inpatient revenues covered only 79% of the physician salary and benefit costs, with a weekly deficit of $525 per physician. Our financial modeling indicates that for a program with a similar expense structure, a conversion factor of $31/TRVU or an ADC of 9 would be required to generate sufficient revenue to support physician salaries and operating expenses.
Pediatric physicians in both academic and nonacademic settings have been faced with a declining reimbursement rate over the past few years. Our finding that the inpatient attending service was operating at a financial deficit was not unexpected, especially given our high proportion of Medicaid patients. The net financial results of a pediatric inpatient service reflect important and consistent influences on revenue and expense. In certain managed care environments, professional revenues for specific inpatient services may be bundled (along with hospital charges) into a combined "per-case" rate. More typical, inpatient revenues are based on a discounted fee-for-service fee schedule. Many plans have converted to an RVU-based fee schedule with payment set as a percentage of Medicare reimbursement. In this study, our CF of $24.46 is substantially less than the $34.24 national HCFA Medicare CF in effect at the time of this study. Our payment rate falls between the $44/RVU CFs offered by some Seattle commercial payors and the $22.00/TRVU that was being paid by Medicaid in Washington state at the time of this study.15 During the study period, this Medicaid reimbursement rate was insufficient to cover basic salary and benefit costs ($23.20/TRVU) and failed to allow for academic taxes and other operating expenses, such as malpractice insurance or billing and collection services. The finding that Medicaid payments for inpatient services do not cover physician salaries is concerning and once again emphasizes the need for equitable reimbursement rates for children's services to ensure access and quality of care for inpatient services for this underserved child population.
The use of an RBRVS-based analysis highlights the importance of diligent and accurate coding practices, to ensure that physicians receive adequate credit for the work (including time, effort, stress, and training) that they provide. Among our physicians, CPT codes reflecting the highest complexity of medical decision (99223 and 99233) were used for 34% of initial and 9% of subsequent hospital care encounters. This coding pattern differs somewhat from that described in a national survey of pediatric physicians, who reported using level 3 hospital codes in 36% of initial hospital care encounters and 32% of subsequent hospital care encounters.16 The underuse of higher-complexity CPT codes (compared with national norms) for subsequent visits among our physicians points out the need for ongoing physician education in appropriate coding techniques. The goal of these activities is a complex one; to maximize charge capture by ensuring that the coding reflects the physician effort accurately and also to ensure compliance with the specific and complex documentation requirements of payors and federal agencies.
Because the CPT codes used by our faculty have assigned typical times, the RBRVS system also permits an analysis of workload based on an estimate of actual time spent performing physician work. Although time alone may not be used to determine level of coding, it can be used to estimate the commitment (excluding teaching time) to provide these services that our faculty reported in a single year. This method indicates that our faculty spent 3163.3 hours generating 12 085 RVUs, or 3.8 RVUs per hour. Understanding physician production in terms of RVU/hour facilitates planning and managing an inpatient service. Once the salary per physician is established and the RVU production per hour is established, the CF necessary to cover physician expenses can be determined. The actual CF then can be calculated with the use of a blended payor mix and reimbursement rate.
In inpatient programs, expenses that are not covered by the prevailing CF would require hospital subsidy. The degree to which a given program requires subsidy is dependent on program costs, payor mix, blended CF, patient volumes, productivity, and charge capture. Higher patient volumes, more favorable physician contracts, increased physician productivity, and improved charge capture each would decrease the need for hospital subsidy, and any revenue in excess of physician salary and expenses may be used as salary incentives for employed physicians.
Inpatient physician productivity also can be measured in terms of patient census. There are few benchmarks for our faculty hospitalist inpatient workload. In a survey of 365 practicing hospitalists on adult medical services, Lurie et al17 found that the average workload was 13 inpatients. Pediatric programs that are seeking to enhance the financial performance of their inpatient service may wish to structure their inpatient services to increase individual attending daily workloads, thus increasing the likelihood that an individual physician will generate sufficient revenue to cover his or her salary costs.
We believe that although many of these findings can be generalized to other academic programs, certain key determinants of financial performance will differ between our academic program and other care models. For example, our physicians did not routinely bill for certain procedures that generally were performed by residents, such as lumbar punctures or bladder taps, or use available codes for discharge day services. In contrast to the faculty physicians in our practice who provide only inpatient care, community-based inpatient physicians or hospitalists may generate additional revenue through coverage of the emergency department, delivery room, or normal nursery or through provision of consultation services to family physicians and surgeons. Although additional revenues may be available to community-based hospitalists, inpatient physician salary costs also may be higher outside of academic programs. In a survey of 372 hospitalist physicians, most of whom were in community practice, Lindenauer et al18 reported a mean income of $143 000. However, only 5% of the respondents in that study were pediatricians, and the reported average salary may not reflect the experience of the typical pediatric hospitalist. The $108 700 we report as our mean faculty salary is within 10% of the national median for associate professor-level general pediatric faculty members in pediatric departments.19 Another important determinant of salary cost in a hospitalist program is the requirement for 24-hour coverage. In the academic model, residents often provide this coverage, whereas in community hospitals, 24-hour coverage is provided by in-house hospitalists, sometimes in combination with nurse practitioners or physician assistants. Therefore, a week of continuous coverage may require up to 4 individuals in a community hospital, whereas this same coverage can be provided by a single daytime attending combined with in-house residents in a teaching setting. When our hospital codes were converted to typical times, we found the need for 1.8 FTE physicians to cover the clinical (nonteaching) needs of these patients, with residents providing 24-hour coverage. Finally, operating expenses in academic inpatient practice may be higher as a result of the support of academic departments through an allocation of a portion of professional revenues.
We showed that this inpatient attending service in a children's hospital operates at a deficit of $26 000 per year of coverage per physician. This estimate assumes that all activity and funding sources during clinical rotations derive from clinical work. We are aware that some faculty have other sources of salary support that continue during "on-service" time, and in these cases, our methods may lead to an overstatement of the program losses. However, we also found that practice expenses often do not cover total practice costs. This finding, combined with our experience with funding of clinical faculty members, leads us to believe that this study actually underestimates the complete program costs in academic centers. Few individuals are able or willing to serve exclusively as inpatient hospitalists for 12 months per year, and for these faculty members, time spent teaching and performing other academic and administrative functions often is undercompensated.
What are the implications of these data for community or children's hospitals that are seeking to evaluate the financial performance of a pediatric hospitalist service? First, programs should model their revenue carefully with the use of ADC, hourly and daily RBRVS-based physician productivity (from all clinical sources), and specific RVU CFs and collection rates that reflect their unique payor mix. Children's hospitals with a majority of Medicaid patients should anticipate that the financial advantages of high patient volumes might be offset significantly by low RVU-based CFs and/or highly discounted fee-for-service contracts. After modeling revenue, cost must be considered carefully. In academic programs, these considerations should include operating expenses such as billing, collection, insurance, academic and practice plan taxes, and benefits, as well as any inherent inefficiencies in the academic staffing model. Community hospital programs need to evaluate salary costs carefully, taking into consideration whether in-hospital 24-hour attending care is required and whether revenues derived from providing overnight coverage will offset large additional salary expenses.
After analyzing projected physician productivity and reimbursement, we believe that in many cases, hospitals will find that physician productivity, patient volumes, and associated revenues are insufficient to cover professional costs of a hospitalist program. Under this circumstance, is hospital support of these programs justified? In academic programs, many would argue that the training and service mission of inpatient faculty attendings might justify the additional cost. If so, how will costs be apportioned among departments, divisions, and the hospital? Children's hospitals and community hospitals also may justify the expense of these programs, especially those that are seeking to increase market share, by encouraging pediatric referrals by local physicians and surgeons.
Although we provided a method to evaluate the financial outcomes of hospitalist programs using tools such as the RBRVS, decisions to support these programs should go beyond financial performance and ideally must be based on the medical outcomes of this model of care. Future research to evaluate clinical outcomes, health status, patient satisfaction, and resource use20,21 is critical as we seek to train, deploy, and finance hospitalists (or academic faculty serving as hospitalists) in pediatric inpatient settings.
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ACKNOWLEDGMENT |
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We thank Alex Dunne for providing invaluable assistance in preparing this article.
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FOOTNOTES |
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Received for publication Aug 2, 2000; accepted Nov 11, 2000.
Address correspondence to Sanford M. Melzer, MD, Children's Hospital and Regional Medical Center, Medical Administration, Mail Stop CH-41, 4800 Sand Point Way, N.E., Seattle, WA 98105-0371.
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ABBREVIATIONS |
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DRG, diagnosis-related group; HCFA, Health Care Financing Administration; RBRVS, resource-based relative value scale; RVU, relative value unit; CPT, current procedural terminology; TRVU, total relative value unit; CF, conversion factor; ADC, average daily census; FTE, full-time equivalent.
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J. S. Tieder, D. S. Migita, C. A. Cowan, and S. M. Melzer Newborn Care by Pediatric Hospitalists in a Community Hospital: Effect on Physician Productivity and Financial Performance Arch Pediatr Adolesc Med, January 1, 2008; 162(1): 74 - 78. [Abstract] [Full Text] [PDF] |
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P. S. Lye, D. A. Rauch, M. C. Ottolini, C. P. Landrigan, V. W. Chiang, R. Srivastava, S. Muret-Wagstaff, and S. Ludwig Pediatric Hospitalists: Report of a Leadership Conference Pediatrics, April 1, 2006; 117(4): 1122 - 1130. [Abstract] [Full Text] [PDF] |
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