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Securing Physician Resources: A Business Case for Outsourcing

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SECURING PHYSICIAN RESOURCES: A BUSINESS CASE FOR OUTSOURCING

by: FRANCISCO LOYA, MD, MS, RUSSELL H. HARRIS, MD, MMM, FACEP, CPE & MARK HAMM, MBA
 


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TABLE OF CONTENTS

INTRODUCTION
WHAT IS OUTSOURCING?
HOW THE CHANGING ENVIRONMENT IS IMPACTING OUTSOURCING
COULD MARCUS WELBY FLOURISH IN TODAY’S MEDICAL PRACTICE?
WHAT’S IN IT FOR HOSPITALS THAT CHOOSE TO OUTSOURCE?
SMART SOLUTIONS FOR CHANGING TIMES
CONCLUSION
CONTRIBUTORS
 

INTRODUCTION

As hospital and health system CEOs continue to see their organizations’ bottom lines being squeezed by a confluence of factors – declining reimbursement, demand for enhanced value from patients and payers, heightened focus on improving the quality of care and the overall patient experience – they are turning to a variety of tactics. One of the leading strategies is outsourcing for physician resources.

While outsourcing isn’t a new phenomenon, it has taken on increased importance, especially as a way of decreasing costs, strengthening alignment with physicians and supporting efforts to improve patient care and operational efficiencies. Physicians also are seeking shelter from the growing financial and regulatory pressures bombarding their private practices. They are turning to employment arrangements with health care organizations (HCOs) via outsourcing companies or direct contracts with hospitals and health systems, many of which are beginning to offer the support of outsourced management services.

This white paper explores the business case for outsourcing physician resources. Why has this strategy become increasingly popular? Why has it become an attractive alternative for physicians? How is it reducing costs while increasing efficiencies and improving patient outcomes?

WHAT IS OUTSOURCING?

According to the Oxford English Dictionary, 3rd edition, outsourcing involves the contracting out of a business process to another. Investopedia associates outsourcing with cost-saving efforts where it is more practical to hire or buy the service than provide it using internal resources.

HCOs first dipped their toes into the outsourcing pool by contracting out their support services including environmental services and food services. Clinical outsourcing began over 40 years ago when emergency medicine became a medical specialty. Today, the top five most commonly outsourced patient care services include dialysis, anesthesia, diagnostic imaging, hospitalist staffing and emergency department staffing1. In 2012, some 35 percent of all outsourcing agreements fell into this category, and the trend has remained steady over the past few years2.

HOW THE CHANGING ENVIRONMENT IS IMPACTING OUTSOURCING

There’s no doubt the whirlwind of change that is engulfing hospitals is pushing them to look outside of their own walls for relief. According to the 2012 Modern Healthcare Annual Outsourcing Survey, hospitals are being driven by a near-desperate need to reduce operating costs to cope with lower reimbursement rates, so they are increasingly turning to outside contractors for services such as medical staffing and information technology to bridge the gap in a more cost-effective manner.3

Contributing to the historic changes taking place in the healthcare environment is the changing face of the physician workforce. In 2014, the Physicians Foundation conducted the 2014 Survey of America’s Physicians: Practice Patterns and Perspectives. More than 20,000 physicians responded to the survey. According to the survey, there is a crisis in private practice with a strong migration toward the hospital employment model. The survey showed that solo practice volume dropped from 24 percent in 2012 to 17 percent in 2014. It pointed out the following challenges remaining in private practice – the administrative burden; the lack of access to capital; and the need to have communication with other physicians, physician groups and hospitals through large, expensive electronic medical records (EMR) systems.4

In its March 2015 report, The Complexities of Physician Supply and Demand: Projections from 2013 to 2025, the Association of American Medical Colleges adds these observations:

  • The demand for physicians will continue to grow faster than supply, leading to a projected shortfall of between 46,100 and 90,400 physicians by 2025.
  • Physicians between the ages of 55 and 75 comprise almost one-third of the entire physician workforce and could retire within the next decade.
  • Physicians in the Millennial age group might desire to work fewer hours and maintain a better work-life balance than their older counterparts. But, rising debt levels for graduating physicians could spur increased hours worked.
  • Medical specialties with the highest attrition rates are emergency medicine, anesthesiology, radiology and general surgery.
  • Due to the Baby Boomer bubble, demand for health services targeted to the chronic needs of seniors will increase, as will emergency room visits (12%) and hospital inpatient days (23%).5

COULD MARCUS WELBY FLOURISH IN TODAY’S MEDICAL PRACTICE?

He would probably have a very difficult time. Today’s medical practice is far different from the one that existed in his day. That could be why an increasing number of physicians in private practice are transitioning to the employed model. A survey of medical practice executives conducted in 2013 by the Medical Group Management Association and the American College of Medical Practice Executives identified five primary medical practice concerns:

  • „„Rising operating costs. From 2002 to 2013, the cost of running a medical group went up twice as fast as the consumer price index
  • Gearing up for reimbursement models that expect practices to shoulder increasing financial risk
  • Overseeing practice finances while dealing with uncertain Medicare reimbursement rates
  • Getting paid by patients who self-pay or participate in high-deductible and health savings account insurance plans
  • Comprehending the total cost of an episode of care.6
 

Comparing new physicians hired in 2004 to those hired in 2014 highlights the movement toward employment and away from a private practice environment. In 2004, 20 percent of newly hired physicians joined private practices compared to a little more than 1 percent in 2014. Newly hired physicians employed by hospitals jumped from 11 percent in 2014 to 64 percent in 2014.7


WHAT’S IN IT FOR HOSPITALS THAT CHOOSE TO OUTSOURCE?

How can a HCO determine whether to outsource services or keep them in-house? The Healthcare Financial Management Association offers these key questions to ask before making a final decision:

  • What barriers has your hospital encountered to achieving your business objectives? Why is outsourcing likely to solve a problem?
  • What are the sources, anticipated financial benefits, and true costs of outsourcing the function? Will outsourcing provide access to lower-cost computer capabilities? Will it provide lower labor and benefits costs (and if so, how will that be accomplished)?
  • What impact will outsourcing have on hospital employees?Will outsourcing provide additional benefits, better leadership, or more training? Will the outsourcing decision be viewed as a positive step or one that has to be “sold” within the organization?
  • How will outsourcing improve patient service and satisfaction?
  • With hospitals typically being one of the largest employers in a community, how will outsourcing affect the broader community?8

Not only are an increasing number of health care organizations choosing to outsource staffing or practice management services in clinical areas, many are now realizing the incremental value of seeking one outside partner for several service lines. There are many reasons for this trend including reduced physician recruitment and retention costs, improved operational efficiencies, strengthened alignment between HCO and physicians, accelerated development of physician leadership and improved clinical quality and outcomes.

The rush in the early ‘90s to employ physicians created significant financial losses for HCOs as they struggled to strategically integrate these new resources into their overall business. One study reported the median loss for employing a physician in 2012 was $176,463.9 A 2011 study on physician recruitment and retention revealed that the total interview cost per vacancy averages more than $30,000.10

Today, as HCOs begin to employ physicians, they also find that a significant investment in their IT platform and capabilities is required. Solid information technology capabilities are required to effectively manage practices and to monitor ongoing performance across many domains. Clinical and financial incentives must be aligned and shared goals must be established and achieved.11

This is a necessary cost of doing business for HCOs that choose to use physician employment as a strategy to strengthen alignment with the medical staff. A 2014 survey by HealthLeaders Media showed that 82 percent of hospitals, 80 percent of health systems and 58 percent of physician organizations are using employment as a physician alignment mechanism.12 As these peripheral costs unfold, outsourcing arrangements with companies that can support and engage physicians for better alignment may outdistance pure employment models.

 

ADDING VALUE TO OUTSOURCING

EmCare is a leading national provider of clinical department outsourcing and management services. As such, it has devoted significant resources creating capabilities in physician recruiting for emergencymedicine, hospital medicine, anesthesiology and radiology/teleradiology. Beyond staffing, the company also provides:

  • Credentialing
  • Scheduling
  • Leadership development
  • Training and continuing education
  • Recruiting
  • Billing services
  • Continuous quality improvement and innovation methodologies


 

Global Perspective

“When a hospital or practice partners with a large organization like EmCare for services — emergency medicine, hospital medicine, radiology/teleradiology and anesthesia — it gains the advantage of working with a team that has a global perspective of the current healthcare environment,” explains Francisco Loya, MD, chief executive officer of EmCare Hospital Medicine. “This perspective includes the latest thinking on bundled payments, core measures, documentation and many other aspects of the challenging environment facing hospitals today.”

“A hospital may be stuck, for example, on how to improve management of pneumonia patients,” says Dr. Loya. “A local group of physicians only has a local perspective of the market. We have the advantage of working with hundreds of hospitals and health systems across the country, so we can identify best practices at similar size organizations and share those with our hospital partner or local practice. Because of our structure, we can immediately implement practice changes and monitor performance for achieving the desired outcomes."

Resources

Sophisticated IT resources and expertise, integrated service line solutions and physician leadership development are other benefits that EmCare brings to the table to create a better value proposition for hospital partners says Mark Hamm, EmCare’s Chief Development Officer. “Small physician practices often have siloed views, and they don’t have the resources or money to provide these advantages,” Hamm says. “We can also bring our hospital partners top quality physicians because our extensive recruiting resources are able to foster relationships with top talent.”

Hospital-Physician Alignment

A frequent barrier to hospital physician relationships is the mix of business and personal relationships. “We help separate the business needs and objectives from the emotion associated with personal relationships,” explains Russ Harris, MD, chief executive officer of EmCare’s North Division. “You can hold people accountable to the contract between EmCare and the hospital partner, not to the relationship. So there is accountability to the quality, service and financial expectations outlined in the contract.

”Using an outsource resource like EmCare increases resources and provides clinical leadership to focus on the areas covered by the agreement freeing hospital leaders to focus on other priority areas.

Leadership Development and Other Advantages for Clinicians

Drs. Harris and Loya point to specific advantages that attract clinicians to EmCare's extensive resources. “When a physician joins EmCare, he or she becomes part of a large network that provides more timely information about best practices based on a database of millions of patient encounters each year,” stresses Dr. Harris. “One of the biggest advantages for physicians is that EmCare lifts the burden and costs of office management and personnel management from their shoulders,” says Dr. Loya. “By relieving physicians of the operational and management burdens, we free them up to focus on clinical excellence and delivery of the highest quality patient care.”


 

Another exceptional benefit for clinicians is EmCare's pioneering spirit and commitment to physician leadership development. "We spend a significant amount of time and moneyinvesting in physicians that desire to be leaders. One aspect of physician leadership development that we stress is how to relate to and work with hospital administration. This has paid off many times over for the hospital and for the physician,” says Hamm.

Dr. Harris points to the monthly support calls that EmCare holds with its medical directors as another advantage. “As an individual physician in a practice, you don’t have time to keep up with what’s current,” he explains. “Our monthly call enables our physician leaders to keep up with changes throughout the United States. Participants discuss clinical aspects such as core measures and operational aspects like patient throughput, length of stay and patient satisfaction.”

Metric Improvement

Realizing that hospital partners are exploring every avenue to reduce costs and maximize the benefits of economies of scale, EmCare has focused on partnering with hospitals for multiple clinical service lines. Using technology-based solutions to facilitate communication and logically link these service lines together results in reduced costs through improved operational efficiencies and an enhanced patient experience – key contributors to a hospital’s success under value-based purchasing.

Hamm and Dr. Loya have seen many examples of how hospital partners have benefited from working with EmCare. “A small for-profit hospital contracted with us for emergency department and hospital medicine physician services,” says Hamm. “On average, the hospital’s ED to inpatient bed times was five hours, creating a tremendous backlog problem in the ED. We brought in our RAP&GO™ program and discharge solutions that improve communication and coordination between the ED and hospitalists. Within the first month, we had reduced the ED to inpatient bed time to 90 minutes. The hospital not only loved the much more efficient throughput time, they told us that patients were also more satisfied.”

The future looks bright according to Drs. Harris and Loya. “As the reality of healthcare reform and its new reimbursementmodels – bundled payments and value based purchasing – begin to impact hospitals’ bottom line, the demand for outsourcing will continue to grow,” says Dr. Loya. “Our hospital partners have to achieve superior outcomes and to do that they can’t work in a silo. They have to be able to implement best practices quickly. EmCare is in a great position to do that and is already managing the entire care continuum.”

Dr. Harris sees the opportunity to contract with more accountable care organizations growing in the next two to five years. “We may be contracting with ACOs to provide focused physician services,” he says. “ACOs are looking for high efficiency, high quality and low cost. It will be much more efficient for them to partner with us and to hold us accountable to the expectations in our agreement."

SMART SOLUTIONS FOR CHANGING TIMES

EmCare and our parent company, Envision Healthcare, are changing the face of healthcare by pioneering solutions that increase the quality and experience of care while simultaneously reducing costs. By marrying our leading hospital-based physician group with the largest EMS and medical transportation organization (AMR) and launching a cutting-edge mobile integrated healthcare organization focused on post-acute care and intervention (Evolution Health), we are positioned to be on the leading edge, driving solutions for the future-state of healthcare.

Envision Healthcare is the only organization that offers:

  • „„IN-HOSPITAL CARE – through EmCare, a leading physician practice management company
  • MEDICAL TRANSPORTATION SERVICES – through AMR, the nation’s largest medical transportation company
  • OUT-OF-HOSPITAL CARE – through Evolution Health, a one-of-a-kind medical practice providing healthcare in homes or alternative settings using physician-led, interprofessional care teams who provide 24/7 clinical support.



 

Envision Healthcare-affiliated providers care for more than 15 million patients each year in thousands of communities nationwide. No other company offers a comparable array of resources and services, and no other single company can support hospitals, hospital systems and payers the way we do.

Our model provides an expansive array of services that improve quality and coordination of care from the home to the hospital and home again – with the objective of keeping patients healthy and out of the EMS system and the hospital. Doing so improves clinical outcomes and lowers the cost of care for payers, while simultaneously enhancing the patient’s experience. Our state-of-the-art medical command centers are the hub that deploys providers to deliver:

  • Appropriate levels of care
  • At appropriate times
  • In appropriate settings

Our pioneering mobile integrated healthcare (MIH) services bring enhanced solutions to patients through technology, communications and integrated medical records. For more information about Envision Healthcare’s scope of services, visit evhc.net.

CONCLUSION

As an outsourcing partner, EmCare has established track records of proven results – lower costs, improved efficiencies and outcomes and enhanced patient satisfaction. Hospitals continue to seek opportunities to work with strong partners in an effort to protect their bottom line. Outsourcing physician resources offers benefits to patients, physicians and HCOs. Outsourcing has become an important thread woven into America’s delivery of healthcare and will continue to help hospitals and health systems achieve sustainable improved performance.

CONTRIBUTORS

Francisco Loya, MD, MS

Dr. Francisco Loya is CEO of EmCare Hospital Medicine. In addition to his EmCare duties, Dr. Loya serves on several committees for the Society of Hospital Medicine, including the Practice Administrators Committee, the Hospital Quality and Patient Safety Committee and the Information Technology Committee. As a physician, Dr. Loya specializes in internal medicine. He earned his undergraduate degree at Rice University, earning a B.S. in Biochemistry and Molecular Biology. His M.D. came from the University of Texas Southwestern Medical School in Dallas and his internal medicine residency was completed at Brigham and Women’s Hospital in Boston – an affiliate of Harvard Medical School. Dr. Loya has also earned his Master of Science degree in Healthcare Management from the Harvard School of Public Health. After earning his master’s degree, Dr. Loya created the technology he named CMORx, which is now offered exclusively by EmCare.

 

Russell H. Harris, MD, MMM, FACEP, CPE

In addition to his duties at EmCare, Dr. Harris is also the Vice Chief of the Department of Emergency Medicine at Our Lady of Lourdes Medical Center in Camden, NJ, a position he has held for more than 20 years. He serves on the emergency medicine faculty of Thomas Jefferson University and is a frequent lecturer to residency programs. Dr. Harris is a past president of the New Jersey Chapter of the American College of Emergency Physicians (ACEP). He also served on ACEP’s EMTALA Task Force and in 2008 was recognized as a leader in governmental advocacy and Hero of Emergency Medicine. Dr. Harris received his Master of Medical Management degree from Tulane University and is active in the American College of Physician Executives (ACPE). He has been published in more than 20 medical journals and textbooks. Dr. Harris served a two year term as the health policy fellow assigned to the New Jersey State Senate Health Committee. He is a retired captain of the US Navy, having received two Navy Achievement Medals. Dr. Harris is currently serving on the Governor of Pennsylvania’s Advisory Health Board.

 

Mark Hamm, MBA

Mark Hamm was appointed Chief Development Officer for EmCare in 2015. Mr. Hamm’s ability to develop and foster relationships with clients and prospective clients has been a key part of EmCare’s extraordinary growth over the past several years. Prior to this role, Mr. Hamm served as EmCare Hospital Medicine’s Chief Executive Officer since 2010. He has expertise in emergency medicine, as well as an extensive background in the management of hospitalist programs, including developing and executing strategic plans, day-to-day operations and practice growth. He is the creator and architect behind EmCare’s pioneering Door-To-Discharge service which is reinventing the way hospital medicine is delivered in the United States by improving physician-to-physician communication, helping hospitals improve hospital-wide patient flow and decrease E.D. boarding times and lengths of stay for patients in both E.D. and inpatient settings, and improving physician, staff and patient satisfaction. Mr. Hamm has contributed to a number of articles on the subjects of decreasing boarding time and improving the patient care path from the E.D. to the inpatient floor. He is quoted in numerous journals on the topic of blending the objectives of the two hospital-based specialties, and he has presented the concept at many lectures and meetings, including presenting to over 2,000 participants at the Studer Group’s annual event, “What’s Right In Healthcare.” Prior to joining EmCare, Mr. Hamm served as Chief Operating Officer/Vice President of Hospital Medicine and Emergency Physician Operations at HCA Physician Services. He has also served as a Senior Vice President of Operations over TeamHealth’s Hospital Medicine Division and Emergency Medicine Division. Mr. Hamm earned a bachelor’s degree in Finance from the University of Memphis, and an MBA in Healthcare Management and Strategic Marketing from the University of Tennessee.



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