H353 Article - Physician practice and hospital revenue...

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Physician practice and hospital revenue cycle drivers: what's the difference? One of the major challenges today's hospitals lace is managing the bottom line of hospital- owned, community-based physician practices-a task that is made even more difficult when the practices are "forced" acquisitions. When hospitals and health systems first began purchasing physician practices in the 1990s, purchase criteria and motivations were very different from what they are today. Although a hospital would likely consider the practice's financial stability, the real purchase driver was the practice's ability to direct specific types of admissions or referrals to the hospital. Once an acquisition occurred, there was little need for hospital executives to offer the practice-based providers incentives either to increase productivity or to increase referrals to the hospital. Today, there is a renewed need for hospitals to acquire physician practices. However, the old business model for practice management is impractical given significantly reduced reimbursement, increased expenses, and an acute need for providers to make major investments in technology. Hospitals no longer purchase physician practices because they wish to gain market share. Instead, they buy practices to stabilize their physician communities and prevent dissolution of their referral bases. Although hospitals recognize that it is better to lose some money on an underperforming practice than to lose all of the financial potential from a referral source, they also are seeking quantifiable opportunities to improve their acquired practices' financial performance and minimize potential losses. Many organizations have tried to improve physician practice performance by simply transferring strategies for hospital revenue cycle management to the management of these practices. However, most of these efforts have minimal impact because the drivers of the physician revenue cycle are different from those of a hospital revenue cycle--and thus, so are the optimal revenue cycle management techniques. To understand practice financial performance, set measurable performance expectations, and monitor against them, hospitals should first understand the distinct differences in revenue cycle management between hospitals and physician practices. Then, hospitals should provide support for the implementation of practice-specific revenue cycle management strategies that will allow the practices to meet expectations. Distinction No. 1: Unit of Work and Its Value The first major difference between hospital and physician practice revenue cycle management is basic: the reimbursable unit of work. Hospital financial managers are accustomed to having their organizations be paid based on a "patient day" or an "admission." Although hospitals generate individual charges for the services a patient receives, these charges generally are considered collectively by a payer and then either paid for (or denied) collectively as well. The reimbursable value of a hospital day or an admission is
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H353 Article - Physician practice and hospital revenue...

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