Posted by: notdeaddinosaur | November 13, 2008

More on Hospitalist Economics

Many thanks to all those who commented on my recent post. Just a few more points to clarify my position:

Several people pointed out that Emergency Room (Emergency Department, if you’re WhiteCoat) doctors also have difficulty generating cash flow for their hospitals. The difference is that for the most part, they are aware of the basic economics of their situation. Hospital administrators can and do come down to the ER (EDiyWC) and let it be known when the income produced isn’t enough to cover the salaries of the doctors working there. There is the understanding that such a situation is not viable over the long haul. Doctors are expected to take some kind of action; either addressing billing and efficiencies to enhance income, or accepting pay cuts to reduce expenses. ERs (EDiyWC) have closed, as have hospitals, because of these financial realities. At least the docs don’t go crowing on the internet that the value they bring to the hospital somehow exempts them from the basics of economics.

While we’re on the subject of “value,” recall that this is a concept that works in two directions. Look at it this way: Happy the Hospitalist generates a certain amount of income for his hospital via billing for the services he provides. The amount he draws in salary above this amount (the part “subsidized” by the hospital) presumably represents compensation for all the extra “value” he brings. As it happens, there are other ways that a hospital (or any employer, for that matter) can express its appreciation for the things an employee brings to the job above and beyond money. So what’s to stop a hospital from paying Happy a salary more commensurate with what he actually brings in, along with an annual “Hospitalist Appreciation Day,” complete with bad coffee, stale donuts, mugs with the hospital’s logo on it and a lapel pin. Surely HH and his colleagues would begin laughing uproariously, not stopping until they were well out the door on the way to their new jobs, because the only real way to convey that an employee is “valued” is with cold, hard cash. (Funny how the hospitals seem to think the former works fine for nurses.) (They are wrong, by the way.)

Perhaps what really annoys me is Happy’s claim that he has somehow managed to rise above the rough and tumble, no-win economic reality of the Medicare National Bank, as he has christened it. He reminds me of a young doc just out of training, working as an employed phsyician (so that he doesn’t have to “worry about the business, but just practice medicine,” as so many of my friends in residency used to say.) He may start out proudly taking as much time as he wants with his patients without paying heed to the income he’s producing for his employer, but sooner or later that employer is going to have to sit him down and explain that it doesn’t work that way. Happy can either take the talk to heart, or go out and find another employer who recognizes all the (non-monetary) “value” he brings to the enterprise.

Here’s what’s really happening: we are in a Hospitalist bubble. Just like the dot-com boom, bubble and bust and the houseing boom, bubble and, now, bust, eventually the hospitalist model will have to address this economic reality.

I recognize that hospitalists are here to stay, so all those commenters warning of dire consequences if the positions were eliminated are completely off-base. I am just pointing out that they are not immune from the basic economic principles of supply and demand, even though Happy seems to believe otherwise. Just as the housing market eventually collapsed, hospitals will not be able to indefinitely pay hospitalists significantly more than they are able to generate in revenues.


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