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With the revisions in the CMS Physician Fee Schedule (PFS), physicians should expect a change in compensation. Some physicians can expect to see an increase in their compensation while others may see a decrease. Amid the already-tenuous climate of COVID-19 for medical professionals, it may be vital to gain a trusted partner as you review changes in your physician contract. 

The expert negotiators at Contract Diagnosis have put together this info. Read on to learn the ins and outs of physician spend and gain insight into whether your contract is due for review.

Physician Spend, Compensation and Contract Reviews 

One of the most difficult parts about being employed by a healthcare organization is reviewing your contract. How are you supposed to know what is realistic for your contract if you aren’t sure about physician spend in the healthcare facility? The truth is, hospitals have a difficult time calculating physicians spend, too.

There are a lot of details that go into budgeting physician spend and compensation. Even so, there will be norms, trends and averages. Knowing the numbers provides actionable insight for your contract, and a greater understanding of how much a hospital values its physicians. 

To get the best contract agreement possible, it’s important to understand physician spend and compensation agreements. 

Estimating Total Physician Spend

Physician spend is the total amount of money that healthcare organizations spend on physician contracts. As a physician, you can use this information to your advantage. If you know how much, on average, a facility spends on certain services completed by a physician, you can understand what fair compensation looks like. 

There are two main variables involved here: 

  1. Payroll physicians versus other physicians
  2. Total facility physician spend

Often, the sum of payroll versus other physicians is the way to find a total spend estimate. For example: 

  • Imagine a median salary of $300,000.
  • Divide that by how many physicians are employed.
  • To get an estimated number for other physician spend, multiply the result from the payroll equation by: 
    • 1.2 (for investor-owned hospitals)
    • or 0.8 (for not-for-profit hospitals)
  • Add the payroll physician spend result and the other physician spend result together to get the total physician spend.

Getting confused? Let’s break this down better. 

Here are examples of how much investor-owned hospitals and not-for-profit hospitals may spend on their physicians:

Investor-owned hospital physician spend estimate:

  • Payroll: $300,000 x 40 physicians = $12,000,000
  • Other: $12,000,000 x 1.2 = $14,400,000
  • Total physician spend: $12,000,000 (payroll) + $14,400,000 (other) = $26,400,000

Not-for-profit hospital physician spend estimate:

  • Payroll: $300,000 x 40 physicians = $12,000,000
  • Other: $12,000,000 x 0.8 = 9,600,000
  • Total physician spend: $12,000,000 (payroll) + $9,600,000 (other) = $21,600,000

Based on these estimations, we can assume that most hospitals spend over $20 million on total physician spend. Essentially, physician spend is 5-10% of a hospital’s net patient revenue. 

Challenges to Understanding Physician Spend

While it is possible to estimate total physician spend, there are some challenges that prevent a full picture view. 

Here are some of the challenges to understanding physician spend:

  • Complex contractual arrangements 
  • Strict regulatory documentation requirements
  • Limited communication between different departments
  • Tense relationships between administrators and physicians 
  • Lack of physician contract knowledge and access
  • Complex payment methodologies and calculations
  • Manual documentation collection, payment and approval processes 

There are all kinds of unsolved elements in the equation of physician spend from hospital to hospital, and even from physician to physician. 

For example, not every physician has an equal contract. Some physicians are paid through RVUs and others are paid on a more regular payroll timeline. Either way, physician spend is complicated. Tough or not, attempting to understand it is still key to how you review and revise your contract

Difficulties in Paying Physicians

Unfortunately, when it comes to paying physicians healthcare facilities face quite a few problems. If you know what the difficulties are, then you can review and revise your contract to avoid them. There are a few areas in which healthcare organizations face difficulties in paying physicians.

Doctor Contracts

The first, and arguably the most important, comes from doctor contracts

These are a few ways in which paying difficulties come from contracts:

  • Missing and expired exhibits and dates
  • Complicated amendments
  • Unclear terms that may impact payment amounts, such as hourly rates and minimums/maximums
  • Stacked agreements with unclear payment terms
  • Lack of fair market value review for evergreen contracts 

If a physician does not thoroughly review their contract, then they may end up with problems relating to payment. 

Time Tracking and Billing Cycles

Another difficulty that healthcare organizations face when paying physicians is time tracking and billing cycles. If physicians are not tracking their time correctly or are out of line with hospital protocol then there may be an issue with payment. Billing cycles can also be a source of payment difficulties if they are mismatched or silent. 

Beyond those illustration, there are a myriad of issues that hospitals have when paying physicians:

  • Missing, excessive or unclear duties listed in a contract
  • Physician information is missing from billing cycles
  • Complex calculations such as stipends without hourly guidance, missing base salaries and annual, hourly limits

Overall, spending time on your contract to ensure clear and easy payment is key. Review your contract to ensure that any of the above problems don’t apply to you.

Physician Spend, Compensation and Contracts

Obviously, physician spend and compensation has a big impact on doctor’s contracts. When medical professionals better understand physician spend, and all that related factors, contracts make more sense. 

When it comes to revising your contract, you should always be clear and direct. Otherwise, you may end up with payment issues.

If you are in need of physician contract review services, trust Contract Diagnostics. We have the expertise necessary for successful contract review and negotiation. Here are some of the services that we provide:

  • Compensation and benefit review
  • Contract education
  • Compensation benchmarks
  • Contract negotiations

You want the confidence that you are being paid fairly by your employer. The Contract Diagnostics team can make this a reality. 
To get in contact with our team, give us a call at (888) 574-5526 or visit our website: