Hospitalists and the ED revenue stream

SAN DIEGO – Adding hospitalist services is perhaps the most challenging of all the additional revenue opportunities for ED revenue stream expansion and diversification.

Part of the challenge is the differences in Relative Value Units (RVUs) between initial hospital care (CPT codes 99221-223) and subsequent hospital care (CPT codes 99231-33), Dr. Michael A. Granovsky said at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

"If you have a 3-day hospital stay, you have 1 day of initial care and 2 days of subsequent care, and there’s a huge revenue difference," explained Dr. Granovsky, a reimbursement and coding expert who is president of Bedford, Mass.–based LogixHealth. For example, the 2013 CMS payment for CPT code 99221 (low-severity care provided within 30 minutes) is $99.34, compared with $38.11 for CPT code 99231 (patient is stable or recovering and the encounter takes 15 minutes or less). "When looking at a pro forma for a hospital medicine group [you want to know] what the length of stay is," said Dr Granovsky, who is also the editor of "ED Coding Alert."

Hospitalists are often called upon to provide a vast array of services, including providing critical care (CPT code 99291), putting in a central line (CPT code 36556), performing CPR (CPT code 92950), and intubation (CPT code 31500). Basic costs to setting up a hospitalist service include salary, benefits, malpractice insurance, and billing. "The hospitalists need some meaningful practice infrastructure in place as well," Dr. Granovsky noted. "Hospitalists need management or clerical support. With a little education it’s probably a good idea for the hospitalists to fill out a charge ticket for coding."

The main advantage to providing hospitalist services is to "further cement the relationship within the hospital and protect your ED contract," he said. "This can help you streamline and control the admission process."

Fully fee-for-service hospitalist groups frequently require a stipend and the typical payer might be 55% Medicare, 10% Medicaid, 12% commercial insurance, 13% Blue Cross Blue Shield, and 10% self-responsible. Hospitalists turn over an average of 60 patients per week, "which generates about $70,000/month in revenue, which would be equal to $840,000 in 1 year," Dr. Granovsky said. "However, it can cost as much as $970,000 in salary and benefits for six full-time physicians to cover services 24 hours per day. Add in vacations, billing services, malpractice insurance and other services, and you have a big gap between the $840,000 that comes in and the $970,000, which is the cost for just putting the providers in place. As a result, typical hospitalist services require a stipend of several hundred thousand dollars just to break even."

Other ED revenue stream expansion and diversification opportunities he discussed include the following:

• Urgent care centers. Dr. Granovsky characterized this as a volume-driven business that requires 22-25 patients/day for the provider to break even. The first step is choosing the right location for the center "because you are volume dependent, and the volume is dependent on foot traffic," he said. "A new urgent care center could compete with your ED Fast Track if it’s too close by. Don’t risk your own money for a de novo site based on a consultant’s estimate of potential patient volumes. I would be very conservative [in estimating your market potential] when it comes to patient volumes. Not only is your general location important, but you also need easy patient access and convenient parking. I have not seen one significantly successful urgent care clinic that was not on the first floor."

Urgent care centers fall into one of three place of service (POS) designations: POS 20 is described as an office or clinic other than an ED for unscheduled, ambulatory patients seeking immediate attention. POS 22 is an outpatient hospital clinic that is typically on the hospital’s cost report and POS 11 is a nonhospital setting where routine care such as health exams, diagnosis, and treatment is provided on an ambulatory basis.

Clinicians who practice in POS 20, POS 22, and POS 11 settings typically report the office/other outpatient codes 99201-99205 for new patients and 99211-99215 for established patients. "There is a 25%-30% decrease in reimbursement for the same ankle sprain, sore throat, or otitis media when you see them the second time as an established patient," said Dr. Granovsky, who chairs ACEP’s Coding and Nomenclature Committee. "So whenever you look at a pro forma and run financials for an urgent care center, you have to assume that your per-patient revenue is going to decrease over time because your case mix over time will move predominately to established patients."

Total urgent care start-up costs range from $600,000 to $800,000. Ongoing expenses include rent, personnel, practice management, legal accounting insurance, billing, equipment and maintenance. "Providing higher-acuity services – Level 3 and Level 4 ER services seems to be the trend right now," he said. "A typical site may generate $100-$120/visit."

The general recipe for success is to have 25 patient visits per day, which translates into about 600 patient visits per month, or $60,000/month in revenue. "Some combination of patient revenue based on your contracted rate and volume needs to exceed your fixed cost," Dr. Granovsky said. "Good payer contracts are key. Before you spend a lot of money to open an urgent care clinic, do a little research to find out what your contracted rates will be. If those rates are poor, you’ll never make your money back. Partnering with a hospital is a conservative way to do it."

• Freestanding EDs. These facilities are typically owned and operated by a hospital or by a group of emergency medicine physicians. The business model can be profitable but many states require a Certificate of Need (CON) process in order to open one. "Unless you are a hospital it’s very hard to get through the CON regulatory process," Dr. Granovsky emphasized. "It’s expensive, daunting, and the cards are stacked against you. But some states, including Texas, Arizona, and Colorado, don’t require a CON. That’s one of the reasons why freestanding emergency departments owned by entrepreneurial physicians have prospered in those states."

Freestanding EDs can perform pretty much all the essential functions of a hospital-based ED except admit patients. As in the case of urgent care centers, location determines your payer mix. They may or may not participate with Medicare and Medicaid. Some freestanding centers can break even with as few as 12 patients per day.

"A single patient can potentially generate more than $500, even more if the patient requires sophisticated ancillary testing," he said. "You typically need to have a couple of million dollars to get started. Large ED groups are typically ones pursuing this, or you need investor partnering."

Dr. Granovsky said that he had no relevant financial conflicts to disclose.

[email protected]

SAN DIEGO – Adding hospitalist services is perhaps the most challenging of all the additional revenue opportunities for ED revenue stream expansion and diversification.

Part of the challenge is the differences in Relative Value Units (RVUs) between initial hospital care (CPT codes 99221-223) and subsequent hospital care (CPT codes 99231-33), Dr. Michael A. Granovsky said at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

"If you have a 3-day hospital stay, you have 1 day of initial care and 2 days of subsequent care, and there’s a huge revenue difference," explained Dr. Granovsky, a reimbursement and coding expert who is president of Bedford, Mass.–based LogixHealth. For example, the 2013 CMS payment for CPT code 99221 (low-severity care provided within 30 minutes) is $99.34, compared with $38.11 for CPT code 99231 (patient is stable or recovering and the encounter takes 15 minutes or less). "When looking at a pro forma for a hospital medicine group [you want to know] what the length of stay is," said Dr Granovsky, who is also the editor of "ED Coding Alert."

Hospitalists are often called upon to provide a vast array of services, including providing critical care (CPT code 99291), putting in a central line (CPT code 36556), performing CPR (CPT code 92950), and intubation (CPT code 31500). Basic costs to setting up a hospitalist service include salary, benefits, malpractice insurance, and billing. "The hospitalists need some meaningful practice infrastructure in place as well," Dr. Granovsky noted. "Hospitalists need management or clerical support. With a little education it’s probably a good idea for the hospitalists to fill out a charge ticket for coding."

The main advantage to providing hospitalist services is to "further cement the relationship within the hospital and protect your ED contract," he said. "This can help you streamline and control the admission process."

Fully fee-for-service hospitalist groups frequently require a stipend and the typical payer might be 55% Medicare, 10% Medicaid, 12% commercial insurance, 13% Blue Cross Blue Shield, and 10% self-responsible. Hospitalists turn over an average of 60 patients per week, "which generates about $70,000/month in revenue, which would be equal to $840,000 in 1 year," Dr. Granovsky said. "However, it can cost as much as $970,000 in salary and benefits for six full-time physicians to cover services 24 hours per day. Add in vacations, billing services, malpractice insurance and other services, and you have a big gap between the $840,000 that comes in and the $970,000, which is the cost for just putting the providers in place. As a result, typical hospitalist services require a stipend of several hundred thousand dollars just to break even."

Other ED revenue stream expansion and diversification opportunities he discussed include the following:

• Urgent care centers. Dr. Granovsky characterized this as a volume-driven business that requires 22-25 patients/day for the provider to break even. The first step is choosing the right location for the center "because you are volume dependent, and the volume is dependent on foot traffic," he said. "A new urgent care center could compete with your ED Fast Track if it’s too close by. Don’t risk your own money for a de novo site based on a consultant’s estimate of potential patient volumes. I would be very conservative [in estimating your market potential] when it comes to patient volumes. Not only is your general location important, but you also need easy patient access and convenient parking. I have not seen one significantly successful urgent care clinic that was not on the first floor."

Urgent care centers fall into one of three place of service (POS) designations: POS 20 is described as an office or clinic other than an ED for unscheduled, ambulatory patients seeking immediate attention. POS 22 is an outpatient hospital clinic that is typically on the hospital’s cost report and POS 11 is a nonhospital setting where routine care such as health exams, diagnosis, and treatment is provided on an ambulatory basis.

Clinicians who practice in POS 20, POS 22, and POS 11 settings typically report the office/other outpatient codes 99201-99205 for new patients and 99211-99215 for established patients. "There is a 25%-30% decrease in reimbursement for the same ankle sprain, sore throat, or otitis media when you see them the second time as an established patient," said Dr. Granovsky, who chairs ACEP’s Coding and Nomenclature Committee. "So whenever you look at a pro forma and run financials for an urgent care center, you have to assume that your per-patient revenue is going to decrease over time because your case mix over time will move predominately to established patients."

Total urgent care start-up costs range from $600,000 to $800,000. Ongoing expenses include rent, personnel, practice management, legal accounting insurance, billing, equipment and maintenance. "Providing higher-acuity services – Level 3 and Level 4 ER services seems to be the trend right now," he said. "A typical site may generate $100-$120/visit."

The general recipe for success is to have 25 patient visits per day, which translates into about 600 patient visits per month, or $60,000/month in revenue. "Some combination of patient revenue based on your contracted rate and volume needs to exceed your fixed cost," Dr. Granovsky said. "Good payer contracts are key. Before you spend a lot of money to open an urgent care clinic, do a little research to find out what your contracted rates will be. If those rates are poor, you’ll never make your money back. Partnering with a hospital is a conservative way to do it."

• Freestanding EDs. These facilities are typically owned and operated by a hospital or by a group of emergency medicine physicians. The business model can be profitable but many states require a Certificate of Need (CON) process in order to open one. "Unless you are a hospital it’s very hard to get through the CON regulatory process," Dr. Granovsky emphasized. "It’s expensive, daunting, and the cards are stacked against you. But some states, including Texas, Arizona, and Colorado, don’t require a CON. That’s one of the reasons why freestanding emergency departments owned by entrepreneurial physicians have prospered in those states."

Freestanding EDs can perform pretty much all the essential functions of a hospital-based ED except admit patients. As in the case of urgent care centers, location determines your payer mix. They may or may not participate with Medicare and Medicaid. Some freestanding centers can break even with as few as 12 patients per day.

"A single patient can potentially generate more than $500, even more if the patient requires sophisticated ancillary testing," he said. "You typically need to have a couple of million dollars to get started. Large ED groups are typically ones pursuing this, or you need investor partnering."

Dr. Granovsky said that he had no relevant financial conflicts to disclose.

[email protected]

SAN DIEGO – Adding hospitalist services is perhaps the most challenging of all the additional revenue opportunities for ED revenue stream expansion and diversification.

Part of the challenge is the differences in Relative Value Units (RVUs) between initial hospital care (CPT codes 99221-223) and subsequent hospital care (CPT codes 99231-33), Dr. Michael A. Granovsky said at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

"If you have a 3-day hospital stay, you have 1 day of initial care and 2 days of subsequent care, and there’s a huge revenue difference," explained Dr. Granovsky, a reimbursement and coding expert who is president of Bedford, Mass.–based LogixHealth. For example, the 2013 CMS payment for CPT code 99221 (low-severity care provided within 30 minutes) is $99.34, compared with $38.11 for CPT code 99231 (patient is stable or recovering and the encounter takes 15 minutes or less). "When looking at a pro forma for a hospital medicine group [you want to know] what the length of stay is," said Dr Granovsky, who is also the editor of "ED Coding Alert."

Hospitalists are often called upon to provide a vast array of services, including providing critical care (CPT code 99291), putting in a central line (CPT code 36556), performing CPR (CPT code 92950), and intubation (CPT code 31500). Basic costs to setting up a hospitalist service include salary, benefits, malpractice insurance, and billing. "The hospitalists need some meaningful practice infrastructure in place as well," Dr. Granovsky noted. "Hospitalists need management or clerical support. With a little education it’s probably a good idea for the hospitalists to fill out a charge ticket for coding."

The main advantage to providing hospitalist services is to "further cement the relationship within the hospital and protect your ED contract," he said. "This can help you streamline and control the admission process."

Fully fee-for-service hospitalist groups frequently require a stipend and the typical payer might be 55% Medicare, 10% Medicaid, 12% commercial insurance, 13% Blue Cross Blue Shield, and 10% self-responsible. Hospitalists turn over an average of 60 patients per week, "which generates about $70,000/month in revenue, which would be equal to $840,000 in 1 year," Dr. Granovsky said. "However, it can cost as much as $970,000 in salary and benefits for six full-time physicians to cover services 24 hours per day. Add in vacations, billing services, malpractice insurance and other services, and you have a big gap between the $840,000 that comes in and the $970,000, which is the cost for just putting the providers in place. As a result, typical hospitalist services require a stipend of several hundred thousand dollars just to break even."

Other ED revenue stream expansion and diversification opportunities he discussed include the following:

• Urgent care centers. Dr. Granovsky characterized this as a volume-driven business that requires 22-25 patients/day for the provider to break even. The first step is choosing the right location for the center "because you are volume dependent, and the volume is dependent on foot traffic," he said. "A new urgent care center could compete with your ED Fast Track if it’s too close by. Don’t risk your own money for a de novo site based on a consultant’s estimate of potential patient volumes. I would be very conservative [in estimating your market potential] when it comes to patient volumes. Not only is your general location important, but you also need easy patient access and convenient parking. I have not seen one significantly successful urgent care clinic that was not on the first floor."

Urgent care centers fall into one of three place of service (POS) designations: POS 20 is described as an office or clinic other than an ED for unscheduled, ambulatory patients seeking immediate attention. POS 22 is an outpatient hospital clinic that is typically on the hospital’s cost report and POS 11 is a nonhospital setting where routine care such as health exams, diagnosis, and treatment is provided on an ambulatory basis.

Clinicians who practice in POS 20, POS 22, and POS 11 settings typically report the office/other outpatient codes 99201-99205 for new patients and 99211-99215 for established patients. "There is a 25%-30% decrease in reimbursement for the same ankle sprain, sore throat, or otitis media when you see them the second time as an established patient," said Dr. Granovsky, who chairs ACEP’s Coding and Nomenclature Committee. "So whenever you look at a pro forma and run financials for an urgent care center, you have to assume that your per-patient revenue is going to decrease over time because your case mix over time will move predominately to established patients."

Total urgent care start-up costs range from $600,000 to $800,000. Ongoing expenses include rent, personnel, practice management, legal accounting insurance, billing, equipment and maintenance. "Providing higher-acuity services – Level 3 and Level 4 ER services seems to be the trend right now," he said. "A typical site may generate $100-$120/visit."

The general recipe for success is to have 25 patient visits per day, which translates into about 600 patient visits per month, or $60,000/month in revenue. "Some combination of patient revenue based on your contracted rate and volume needs to exceed your fixed cost," Dr. Granovsky said. "Good payer contracts are key. Before you spend a lot of money to open an urgent care clinic, do a little research to find out what your contracted rates will be. If those rates are poor, you’ll never make your money back. Partnering with a hospital is a conservative way to do it."

• Freestanding EDs. These facilities are typically owned and operated by a hospital or by a group of emergency medicine physicians. The business model can be profitable but many states require a Certificate of Need (CON) process in order to open one. "Unless you are a hospital it’s very hard to get through the CON regulatory process," Dr. Granovsky emphasized. "It’s expensive, daunting, and the cards are stacked against you. But some states, including Texas, Arizona, and Colorado, don’t require a CON. That’s one of the reasons why freestanding emergency departments owned by entrepreneurial physicians have prospered in those states."

Freestanding EDs can perform pretty much all the essential functions of a hospital-based ED except admit patients. As in the case of urgent care centers, location determines your payer mix. They may or may not participate with Medicare and Medicaid. Some freestanding centers can break even with as few as 12 patients per day.

"A single patient can potentially generate more than $500, even more if the patient requires sophisticated ancillary testing," he said. "You typically need to have a couple of million dollars to get started. Large ED groups are typically ones pursuing this, or you need investor partnering."

Dr. Granovsky said that he had no relevant financial conflicts to disclose.

[email protected]