Hospital Medicine Groups Must Align Business Models

November 1, 2008

Hospital medicine groups yield cost savings of approximately 13% while delivering high quality care and patient satisfaction, irrespective of the business model.

A recently released annual survey conducted by the Society of Hospital Medicine confirms that the business model adopted by hospital medicine groups fall into two roughly equal camps: those that are employed by hospitals and those that function as private practice groups.

With the hospital medicine specialty evolving rapidly and the number of hospitalists growing from zero to 20,000 in less than 15 years, managed care executives and hospital executives remain satisfied with and committed to the hospital medicine group providing care to their inpatients. And with good reason.

Recent studies confirm that hospital medicine groups yield cost savings of approximately 13% while delivering high quality care and patient satisfaction, irrespective of the business model. Few would dispute that both business models are here to stay, and both models will contribute importantly to the increasing significance of hospital medicine as the primary driver of the delivery of inpatient care.

To determine which business model is the better fit going forward, the managed care executive as well as the hospital executive must recognize the fundamentally different values and assumptions upon which the two models are built.

Hospitalists are most comfortable and productive in a environment where entrepreneurial values such as empowerment, urgency, and initiative are recognized and rewarded. Such an environment is the raison d'être for the private practice. It is in this situation that the difference between a doctor functioning as a true hospitalist and a doctor functioning as a regular internist without an office is brought into sharp relief.

Conversely, when hospitalists find themselves in a bureaucratic environment they will tend to stagnate and fall short on deliverables. For example, the Society of Hospital Medicine reports in its recently released survey that hospital-employed hospitalists see nearly 25% fewer patients in a 12-hour period than their counterparts in larger private practice group organizations, with no reported differences in quality measures.

Even with a productivity advantage, many private practice groups face an uphill battle convincing hospitals and managed care organizations that they have the business infrastructure to remain stable and reliable over the long term. The smaller single-site private practice groups, still present in large numbers in facilities across the country, often fall back on their relationships and their history with the hospital as justification for their embedded status.

Practices that cannot or will not make the requisite investments in the business component of their enterprise are increasingly likely to be replaced or absorbed by larger private practice groups with a well-developed infrastructure that handles billing, recruiting, information systems, quality assurance, transition management, legal and regulatory affairs. Some of the larger groups possess capabilities specific to the practice of hospital medicine that are considerably more advanced than the hospitals in which their providers practice, providing added value to hospitals and managed care organizations.