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24 PRACTICE MANAGEMENT High Rate of Hospital Employment of Physician Linked to Lower Hospital Profits — 6 Key Points By Laura Dyrda T he Moody's Investor Service's Physician Employment FY 2014 Medians report links the high physician employment rate to lower hos- pital profitability. However, Moody's predicted hospitals will continue employing a high volume of surgeons going forward. Here are five key notes from the report: 1. e average median cash flow margin is 10.7 percent for hospitals with low physi- cian employment rate compared with 8.5 percent for hospitals with very high physi- cian employment rate. e survey defined low and high employment volume based on the employed physicians as a percentage of the total medical staff: • Low: 1 to 15 percent • Mid: >15 to 30 percent • High: >30 to 65 percent • Very High: >65 to 100 percent 2. e hospitals with a high rate of physi- cian employment reported higher revenue and expense growth due to absorbing phy- sician salaries. ese hospitals also made related IT investments and staff changes. 3. Hospitals with a high employment rate reported a 6.8 percent three-year revenue compound annual growth rate and 7.5 percent expense CAGR. e low physician employment hospitals reported median 4.9 percent three-year revenue CAGR and 5 percent expense CAGR. 4. Moody's expects the expense growth to slow as hospitals generate efficiencies through improved practice management and economies of scale. But direct losses on physician practices will remain a challenge. 5. e hospitals with high physician em- ployment reported $950 million average operating revenue, compared with $431 million for hospitals with low physician employment. e national median OR revenue is $673 million. 6. e hospitals with high physician em- ployment rates had a greater share of the outpatient revenue — 54 percent — when compared with inpatient revenue — 46 per- cent. is is nearly the inverse of hospitals with low employment rates. n Active Healing Through Orthobiologics Uniquely processed allograft tissue with high levels of naturally occurring growth factors that play a key role in bone remodeling such as BMP-2, BMP-7, aFGF, and TGF-β1. * Learn more about OsteoAMP at www.OsteoAMP.com Allogeneic Morphogenetic Proteins * Data on file RPT-000327; data from a single lot of OsteoAMP sponge product. © 2015 Bioventus, LLC. All rights reserved. All trademarks are the exclusive property of Bioventus, LLC. SMK-001559 12/15