Becker's Hospital Review

56 Executive Briefing: The Value of Specialist Hospitalist Support time and patient outcomes can be improved when care is provided by a specialist that is highly experienced in practicing in a hospital setting. • Reduced risks associated with pa- tient hand-offs in the event a private practice physician is performing an elective outpatient procedure and is required to present to a hospital in the event of an emergency. As with general hospitalist practices, spe- cialized hospital physicians can run into situations where financial support is re- quired in order to cover the costs of deliv- ering professional services. Unlike general hospitalist practices, however, specialist hospitalist services require additional scru- tiny on the part of hospitals, as oftentimes the practices rendering the services also maintain private practices, which may take elective cases to the hospital providing fi- nancial support. Considerations in the valuation of specialized hospitalist support payments Given the potential for referrals between in- dependent practices receiving financial sup- port and hospitals subsidizing such practices for specialist hospitalist services, extra care is warranted in ensuring that such payments are both commercially reasonable and con- sistent with fair market value. With regard to commercial reasonable- ness, HealthCare Appraisers (HAI) cau- tions that while there are potential benefits from the implementation of a specialized hospitalist practice, the following consider- ations must be made to determine if such a model "makes business sense:" Does the program generate sufficient volume to merit the full-time availabil- ity of specialized hospitalists? As with general hospitalist practices, the average daily census of patients requiring care is the key driver of physician workload, as they require regular rounding and ongo- ing monitoring. Unlike general hospitalist practices, however, specialized hospital- ists may also be required to perform pro- cedures on emergent and unassigned patients. Therefore, both census and pro- cedure volume must be sufficient to merit full-time specialist coverage at a hospital to ensure commercial reasonableness. Might other forms of financial support provide an effective way to secure spe- cialized inpatient coverage? For exam- ple, it is common for hospitals to provide per diem (i.e., daily) payments to specialists for coverage of the emergency department. Additionally, HAI has observed arrange- ments where hospitals cover the cost of a practice to secure malpractice insurance in the event that such expenses make hospi- tal coverage financially unviable. In the event that a specialized hos- pitalist program generates sufficient volume to merit full-time staffing, is financial support needed at all? Some facilities and associated practices face fa- vorable payer environments, resulting in sufficient reimbursement to cover profes- sional service costs. With regard to fair market value, the key consideration driving the determination of value is an accurate matching of the finan- cial support to the scope of services pro- vided. While HAI is aware of surveys that report levels of financial support provided to hospitalist practices, such data is insuf- ficiently granular to match the payment amounts to the services delivered. For ex- ample, a specialized hospitalist program required to maintain continuous in-house presence is likely to incur greater costs than a practice that is only required to fur- nish continuous on-call availability. As such, HAI has observed the following potential pitfalls in the valuation of special- ized hospitalist arrangements: The costs of maintaining a private practice should not be subsidized by a hospital. Like general hospitalists, spe- cialized hospitalists will practice in a hos- pital setting; thus, their level of operating expenses is materially lower than that of a private practice with the same special- ization, since the hospital will be providing the benefits of space, personnel and se- lect equipment. Facilities must exercise caution when basing their financial support on staffing representations made by the specialists. If a dedicated specialized hospitalist also provides private practice services to patients outside of the hospital setting, the burden of such time may not be subsidized by the hospital. Specialist hospitalist PSAs must clearly establish a level of priority over a physician that can practice outside of the hospital. It is common for spe- cialists, such as general and orthopedic surgeons, to see patients in an outpatient setting outside of the hospital. If the in- tent of the hospital is to require immediate presentation to its campus in the event of an emergency, the subject physicians are obligated to respond accordingly. Should they prioritize their private practice work, any support payment must be adjusted downward to reflect the reduced burden on the physicians. As illustrated above, specialist hospital- ist support arrangements introduce an additional layer of complexity with regard to determining fair market value. In the event a facility has had little experience in contracting with specialist physicians for hospitalist coverage, it should strongly consider engaging an independent expert to ensure that the proposed financial sup- port is both commercially reasonable and consistent with fair market value. n HealthCare Appraisers, a nationally recognized valuation and consulting firm, provides services exclusively to the healthcare industry, including: business valuation (e.g., ASCs, hospitals, physician practices, dialysis centers, home health, diagnostic/treatment facilities, and intangible assets); fixed asset appraisals for furnishings, machinery and equipment; fair market value opinions for compensation and service agreements (e.g., employment, ED call coverage, medical directorships, collection guarantees, equipment lease/use ar- rangements, and service/co-management arrangements); consulting and advisory services (including valuation for financial reporting); and litigation support. www.HealthCareAppraisers.com | info@hcfmv.com | (561) 330-3488 DELRAY BEACH | DENVER | DALLAS | CHICAGO | PHILADELPHIA Not all things are created equally. We are not your average Healthcare Valuation Firm. With over 12 years in the business and thousands of fair market value opinions rendered, HealthCare Appraisers has assembled a diverse, highly experienced team to help you navigate through a myriad of valuation needs and dilemmas. HealthCare Appraisers - Redeening Healthcare Valuation Since 2000

• Cover