The average hospital spends 3-5% of its total operating budget on physician contracts for emergency coverage, administrative positions, and hospital-based service agreements. These expenditures cannot be ignored any longer: the financial impact of these relationships can affect the financial outcomes of the entire organization.

1. 1
Measuring the Financial Health of Your
Physician Contracting Program
February 19, 2015

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Outline:
• Introducing MD Ranger
• Elements of physician contracting programs
• Why financial health is important
• Key questions to answer
• Essential metrics and reports
• Benchmarking your organization

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MD Ranger
MD Ranger is a market data company that collects non-employed
physician contract data directly from hospitals. Our approach to
capturing all contract data from an organization allows us to not
only determine what to pay, but also when to pay.
We help hospitals analyze their internal physician contracting costs
to enable negotiation of competitive rates with physicians, and
documentation of FMV and compliance with Stark.

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MD Ranger includes:
• A secure, web-based Data Tool to collect and organize contract
data (uploads via Excel available, too)
• Web-based Analytic Tools to benchmark a hospital’s individual
contracts, identify compliance issues, and analyze where dollars
are spent
• Benchmarks, available as full reports and online queries, with
market data for call, medical direction, leadership and other
services, hospital-based services, uncompensated care
programs, and diagnostic testing services
• Contract Reports to document FMV compliance and assist in
audits
• Consultations with our experts

5. Our benchmarks:
• 80+ administrative services: hours, hourly and annual rates
• Includes hard to find data on:
• Committee and meeting attendance
• Quality initiatives
• EHR and IT initiatives
• Department chairs and section chiefs
• Medical staff officers and leadership
• 50+ emergency call coverage services, including
uncompensated care rates
• 15 hospital-based services (pathology, hospitalists, etc.)
• Stipends
• Methods of payment
• Incentives
• Diagnostic and testing services: EEG, EKG, stress, autopsy, etc.
• Key contract terms: payment type, scope of service, incentives
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6. Introducing me
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• Eight years experience in
healthcare consulting and
technology; specializing in
physician marketing,
recruitment, engagement,
compensation, negotiations
• Helps MD Ranger subscribers
leverage data, analyze internal
costs and structure physician
contract compliance programs

7. Elements of Physician Contracting
Programs
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8. The Essentials:
• Executive oversight
• Contract management
• Compliance management
• Financial oversight
• Rigorous, consistent process for determining FMV
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9. Executive Oversight
• Designate an executive at your organization to take
responsibility for physician contract approvals
• The buck stops with her
• All exceptions for contracts go through her
• Rates are set with her guidance
• The daily physician contracting director/manager reports directly to
this person (ideally)
• Involve your compliance committee on a quarterly or
half-yearly basis
• Many hospitals require all physician contracts to be
reviewed by the board finance committee
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10. Contract Management
• Have a contract for all financial arrangements (even
non-monetary ones)
• Organize your contracts
• Alert your team to expiring contracts
• Renewal process
• Updated or new contract
• Checking the rate
• Negotiation
• Sign-off
• Strategic contract management
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11. Compliance Management
• Mandatory Stark training for all staff involved in the
process
• Understanding “fair market value”
• Creating a consistent, rigorous system for
determining FMV
• Deciding how you are documenting the compliance of
every arrangement
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12. Process to Determine FMV
• Discuss what’s most relevant for your organization
• Research various approaches (pros and cons)
• Document your organization’s philosophy and
approach to FMV
• Record step by step the process you’ll use to
document FMV
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13. Need more help?
www.mdranger.com/resources
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14. Financial Management of
Physician Contracting
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15. Financial Management: Questions
• Are all contracts commercially reasonable?
• What benchmark do you aim for in individual (or
group) arrangements?
• How much are you spending, in aggregate, on
physician administrative services, call arrangements,
and hospital-based service contracts?
• Is this comparable to peers?
• Is this sustainable within the context of overall financial
performance and goals?
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16. Physician contract expenditures as a
percentage of operating budget
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17. Physicians are powerful allies for your
organization’s success
• Physicians make critical decisions that impact your
organization’s bottom line daily
• Quality and outcomes are increasingly important, and
require significant physician engagement
• Well-designed physician contracts can enhance the
financial health of your organization and maintain
contractual relationships with physicians
• Preserving relationships with the medical staff is key
to your success
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18. Different Approaches
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19. Contract by contract management
• Good financial management begins at the contract level
• All physician agreements and payments must be
commercially reasonable
• All physician contracts should be paid at fair market
value
• Compliance with contract terms should be audited
annually and re-assessed prior to renewal to ensure the
agreement is being properly administered and that the
services are still necessary and advantageous
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20. Overall financial management
• Top to bottom approach (high level analysis)
• Understanding contracting as a percentage of total
budget
• Does this fit within the organization’s overall financial
strategy, goals, and needs?
• Does this fit within the organization’s overall
physician strategy? Think of initiatives like clinical
integration, EHR implementation, achieving quality
metrics, and physician employment.
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21. A delicate balance
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Reluctant
Payer
Proactive
Buyer
Overall financial and service goals
that guide policies and procedures
Optimal Contract
Terms

22. Key Questions
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23. Your physicians
• What is the relationship between my facility and the
medical staff?
• Do we have a physician relationship strategy?
• What percentage of my operating budget is physician
contract expenditures?
• What is the relationship between my facility and the
health system in which we belong? What is the
system-wide approach towards physician contract
management? What is the broader physician
strategy?
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24. Your contracts
• Have we thoroughly reviewed all physician contracts
to ensure each one is necessary to our business?
• Are we confident that every negotiated contract is
both commercially reasonable and within fair market
value for the service and specialty?
• Do we have sufficient documentation for every
agreement?
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25. The future
• Can we anticipate significant changes to our
physician contracting strategy in the next 3-5 years?
• Does our current contracting strategy match our
growth plan?
• Are we planning and budgeting appropriately for
physician costs in the future, given new programs or
acquisitions?
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26. Metrics and Reports
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27. Total Spending
• Across facilities
• Across services or service lines
• Across types of contracts
• Assess percentage total for each metric
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28. Spending across facilities
• Part of a system? Understand how your facility
compares to others within the organization, adjusting
for differences like size, payer mix, market, services,
and trauma status. Look for:
• Are there differences in payment rates for the same services across
the organization without reason?
• Why do some facilities have significantly more contracts?
• Opportunities for multi-facility contracts
• Facilities who spend less as a percentage of total operating margin
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29. Comparing facilities
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30. Spending across services or service
lines
• Some services and service lines have higher costs
than others. Are resources being spent wisely?
• Are top spending specialties what you expected?
Are there surprises when you compare services or
service lines?
• Is there a significant difference in the number of paid
positions for a given service?
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31. Comparing services
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32. Spending across contract types
• Measure how much your organization spends on emergency
coverage, physician administrative roles (including leadership
and medical staff officers), and hospital-based services
(stipends, collection guarantees, etc.).
• Understand the percentage of the physician contracting budget
for each contract type.
• Hospitals typically spend more for call coverage, followed by
administrative costs. Don’t underestimate hospital-based
service costs, however, if your organization pays groups a
premium to cover services like anesthesia, critical care,
pathology, etc.
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33. Comparing contract types
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34. Contract Metrics
• Number of Positions
• Payment Types
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35. Number of positions
• Count all administrative positions for each specialty
• Use MD Ranger “Number of Administrative Positions”
report to understand the market
• Some specialties typically have more administrative
positions and support; others do not
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36. Payment types
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• Review contracts and segment to determine payment
types
• Compare to benchmarks
• Consider opportunities for efficiency, payment
reductions, etc.

37. Reports
• Sortable contract reports
• Distribution of contracts by benchmark
• Distribution of paid and unpaid contracts
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38. Sortable contract reports
• Incredibly useful for prioritizing, uncovering red flags,
compliance and financial management, etc.
• Sort by contract value to prioritize high risk contracts
• Sort by benchmark range to reveal contracts that
could be considered outside fair market value
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39. Prioritization
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40. Distribution by benchmark
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• Divide your contracts by market range to identify high
risk contracts or reveal trends in overpayment

41. Benchmarking Your Organization
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42. Why benchmarks are useful
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• Determine performance over time through internal
benchmarking
• Compare facilities of similar size, complexity for
performance
• Demonstrate where initiatives are paying off
• Highlight areas for improvement
• Determine if “trouble areas” are common industry-
wide or specific to your organization

43. Best financial benchmarks
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• Total spending, physician contracts
• Spending across services or service lines
• Distribution of paid vs. unpaid contracts
• Total spending by facility
• Total spending within facilities for services or service
lines
• Number of administrative positions

44. Integrating benchmarks into financial
management
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• Set aside time yearly to review financial metrics for
physician contracts as a whole
• Compare aggregated amounts across your
organization to see how facilities perform in
comparison to one another
• Review benchmarks from other organizations’ data to
determine if your spending is on par with peers

45. Could we help?
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Could your organization use tools to help manage financial
oversight of physician contracting?
MD Ranger helps hospitals better understand physician
expenditures and become more strategic with contracting
decisions.
Reach out to us: we can help.
apullins@mdranger.com or 650-692-8873