Evaluating Outsourced Hospitalist Provider Relationships

Client Issue/Challenge:

Pathstone partnered with a large 11 hospital health system in the southern region to evaluate the existing $11M relationship with their outsourced hospitalist provider. Two out of the eleven hospitals have an outsourced model, whereas the remainder of the health system relies on internal hospitalist resources. Given the recent leadership turnover, Pathstone worked collaboratively with the client by defining the current state, understanding previous system efforts, and future goals.

The incumbent hospitalist group dominates the rural local market and has been a long-term partner with the client for 10+ years. Given that many of the physicians have relocated and settled in the local area, additional consideration and sensitivity was needed given their livelihoods.

Given the variation in staffing models, Pathstone aligned on two simultaneous approaches to determine the best future state for the two hospitals:

Request for Proposal: Send out bids to national competitors to evaluate the current outsourced market
Insourcing: Hold internal discussions around feasibility of hiring internal resources given current labor market and health system priorities

Approach:

Pathstone’s clinical purchased service consultants formed a comprehensive team of stakeholders throughout the organization consisting of key leaders and operational owners within: Operations, Supply Chain, Finance, and Revenue Cycle. Recurring touchpoints with this team and other subcommittees generated the necessary momentum and buy-in to achieve maximum value and sustainable success.

Pathstone’s original business case provided insight into the financial business relationship and the historical performance of the incumbent, including recurring missed SLA metric targets and lack of expectations.

Within each of the identified 2 approaches the Pathstone team utilized a collaborative approach to tailor a solution that fit within the client’s department and organizational goals and objectives:

Request for Proposal:
- Bids from national suppliers helped provided visibility that the fees associated with the current local incumbent was not market competitive
- This provided leverage in incumbent negotiations and allowed the client to request realistic financial targets
Insourcing:
- A make / buy analysis provided insight into pros and cons of insourcing

Considerations included: labor market, geographic location, training resources, management resources, billing and collections, operational workflow

female doctor treating patient in hospital

Impact:

Over a 6 month period of working with the client, Pathstone was able to drive $1.1M in fixed fee savings by staying with the incumbent. In addition, to help enhance service levels and meet the client’s expectations, the client and supplier agreed to a $800K incentive payment tied to meeting key service level metrics, paid quarterly. This incentivized the medical directors of the physician group to entice their providers to provide better quality services in exchange for a higher salary and bonus.

Key Takeaways

Billing and collections withing clinical purchased services Though it is important to reduce costs by lowering expenses for a hospital, it is equally important to consider the revenue collection. In order to have a successful outsourced physician program, it is imperative that the operations, roles, and flow of billing & collections are reviewed. This may include additional resources for physicians for accurate billing, identifying appropriate partners for 3rd party collections, or defining policies & procedures.

Clarifying data sources To hold accountability, it is important to define and agree on data sources for review of Service Level Metrics. This could be a data pull from the client, or agreeing on a platform and fields for the outsourced partner to pull (i.e. EMR, internal tracking, etc).

Long-term partnerships Local supplier relationships are important to continue to keep in mind when evaluating other national partners. Many hospitals hold value in long term, local, relationships given that hospitals are also an integral part of the community. Though there may be a more efficient or less costly option available with a national supplier, it may be worth considering the pros and cons of continuing the community relationship.