The growing importance of tracking physician revenue

Hospitals and health systems are growing their footprints through physician practice acquisitions. Can they track the performance of their new practices?

Do you know what impact your owned and affiliated medical practices and individual doctors are having on your revenue cycle and net revenue performance? If you don’t know off the top of your head or can’t find out easily with a few dashboard clicks, you could be mismanaging an increasingly important part of your overall financial performance.

That’s why we’ll be hosting a half-day track entirely devoted to physician net revenue reporting modules at this year’s Kodiak Healthcare Summit. The modules are part of the Kodiak Revenue Cycle Analytics (RCA) platform, which more than 1,900 hospitals and over 250,000 physicians use to track, manage, and report their net revenue.

More on that later. Let’s look at the evolving physician practice acquisition landscape to see why organizations need to get a tighter grip on their medical practices’ revenue cycle and net revenue performance and simplify management of that performance on a single, consolidated platform like RCA for Physicians.

Hospital medical practice ownership and employment of physicians continues to rise

In July 2023, the American Medical Association (AMA) released its latest biennial report on changes in physician practice ownership and organization. The 18-page report is based on a survey of about 3,500 physicians. The survey documented the continuing decline of the number of physicians working in medical practices owned solely by physicians and the rise in the number of physicians working in practices owned by hospitals. Here’s a look at the trends:    

• The percentage of physicians working in medical practices wholly owned by physicians decreased to 46.7% in 2022 from 60.1% in 2012.
• The percentage of physicians working in medical practices owned in whole or in part by hospitals increased to 31.3% in 2022 from 23.4% in 2012.
• The percentage of individual physicians working for hospitals directly as an employee or as a contractor also increased to 9.6% in 2022 from 5.6% in 2012.
  
  

Further, the percentage of physicians working in medical practices owned by private equity (PE) firms rose slightly to 4.5% in 2022 from 4.4% in 2020, when the AMA first included a survey question about PE ownership.

More than three-quarters of doctors are employed by hospitals, health systems, and other corporate entities

In April 2024, the Physicians Advocacy Institute (PAI) and Avalere Health published a report on trends in corporate ownership of physician practices and physician employment over the past five years. The 39-page report is based on an analysis of physician and practice ownership data tracked by IQVIA, the healthcare market research firm. The analysis documented the continuing increase in physician employment and practice ownership by hospitals, health systems, and other corporate entities, including health insurers, PE firms, and other types of umbrella corporations that own multiple medical practices. Here are the trends:

• The number of U.S. physicians employed by hospitals or health systems rose 26.3% to 357,500 in 2024 from 283,000 in 2019.
• The number of U.S. physicians employed by corporate entities rose 57.6% to 145,600 in 2024 from 92,400 in 2019.
• The number of hospital-owned medical practices rose 12.3% to 69,500 in 2024 from 61,900 in 2019.
• The number of corporate entity-owned medical practices rose 98.4% to 73,800 in 2024 from 37,200 in 2019.
  
  

All told, the trends add up to 77.6% of all U.S. physicians being employed by hospitals, health systems, or corporate entities in 2024 compared with 62.2% just five years ago, according to PAI and Avalere.

Hospitals and health systems are paying more to hire physicians as employees

In May 2024, the Medical Group Management Association released its 2024 DataDive provider compensation report. The 16-page report is based on 2023 compensation data from more than 211,000 physicians and advanced practice providers. The report provides benchmarks on what hospitals, health systems, PE firms, and others must budget for newly employed physicians. Here are the numbers:  

• The median total compensation for a surgical specialist rose 4.4% to $554,108 in 2023 compared with 2022.      
• The median total compensation for a nonsurgical specialist rose 1.8% to $432,983 in 2023 compared with 2022.    
• The median total compensation for a primary care physician rose 4.4% to $312,427 in 2023 compared with 2022.
  
  

Interestingly, the report indicated hospital-owned medical practices reported lower levels of productivity than physician-owned practices as measured by work relative value units (wRVUs).

Physicians bill an average of nearly $4 million each annually for professional services

In April 2023, AMN Healthcare released its 2023 Physician Billing Report, which tracks claims submitted to commercial payors by physicians for professional services in 18 medical specialties. The report is an updated version of a semiregular report produced by Merritt Hawkins, the physician staffing company, on revenue generated by medical specialties for hospitals. AMN acquired Merritt Hawkins in 2005 and merged the two brands in October 2023. The data in the 11-page report is based on claims data tracked by AMN’s revenue cycle business unit. Here are the numbers, based on a 50% collection rate:

• The average annual billed amount to a commercial payor by all physicians was $3.8 million in 2023.
• The average annual billed amount to a commercial payor by a medical specialist was $4,650,750 in 2023.
• The average annual billed amount to a commercial payor by a primary care physician was $1,770,564 in 2023.
• The lowest average annual billed amount to a commercial payor in 2023 was $1,323,104 by pediatricians.
• The highest average annual billed amount to a commercial payor in 2023 was $11,669,016 by general surgeons.
  
  

The report did not break out claims data by employed or independent practitioners. But it did note that billed amounts do not include any charges for related ancillary services like facility fees, diagnostic tests, post-service treatments, or specific procedures. Related charges can dramatically increase the revenue potential for hospitals, health systems, and other entities where the physicians practice, per the report.

Take control of your organization’s net revenue from owned and affiliated medical practices

Collectively, the surveys, research, and reports described here say hospitals, health systems, and PE firms are buying more physician practices, employing more physicians, paying more to get them, and generating more revenue because of it.

Does that industry dynamic match the experience of your provider organization? How can you organize and simplify the financial management of all the different pieces that you’re adding to your patient care footprint? How can you optimize the return on investment in physicians and their practices to improve your clinical, financial, and operational performance?

If you don’t have the answers to those questions at your fingertips, we can put them there with RCA for Physicians from Kodiak Solutions. Attend the 2024 Kodiak Healthcare Summit in Nashville or virtually, Sept. 22-25, 2024, to learn how.

Register today and manage your owned and affiliated medical practices with confidence tomorrow.