Hospitals Measure Doctors By How Much Revenue They Generate

This video provides an in-depth exploration of how hospitals financially evaluate physicians, focusing on the revenue doctors generate rather than patient outcomes. Dr. Eric Bricker, from AHealthcareZ, begins by presenting data from a 2016 Merritt Hawkins survey of hospital CFOs, revealing that the average physician drives $1.56 million in hospital revenue annually through tests, procedures, and orders. This establishes a core theme: hospitals, operating within a fee-for-service system, are highly attuned to physicians as revenue drivers, a metric that often overshadows quality-of-care indicators.

The presentation delves into the specifics of revenue generation across different medical specialties. Orthopedic surgeons were found to be the highest revenue generators, bringing in $2.75 million per year, followed by interventional cardiologists ($2.45 million) and general surgeons ($2.17 million). Even family practice doctors, who primarily operate in outpatient settings, contribute significantly, generating $1.5 million annually, largely through ordering outpatient labs and imaging that flow to the hospital system. Dr. Bricker highlights how hospitals strategically employ primary care physicians to capture this revenue, demonstrating a calculated business approach where physician salaries are an investment to secure a larger revenue stream.

Further analysis in the video compares physician salaries to the revenue they generate, framing it as a "commission" or return on investment (ROI). For instance, orthopedic surgeons, paid an average starting salary of $500,000, yield a net revenue of $2.25 million for the hospital, representing an 18% "commission." Family practice doctors, with a $198,000 starting salary, net $1.3 million, equating to a 13% "commission" but a higher ROI of 7.5x compared to 5.5x for orthopedists. This favorable ROI explains why family practice and internal medicine physicians have consistently been the most sought-after recruits for hospitals. Dr. Bricker critically observes that hospital CEOs and CFOs are acutely aware of these revenue metrics, often recalling them offhand, while rarely discussing patient quality metrics like infection rates or readmission rates, underscoring a systemic prioritization of financial gain over patient well-being.

However, the video concludes with a hopeful counter-narrative, showcasing examples of hospitals that are actively shifting their focus from revenue to patient-centric quality metrics. University Hospitals in Cleveland, under the leadership of Dr. Peter Pronovost (Chief Clinical Transformation Officer), is presented as a prime example. This institution won a major award for quality transformation from the American Hospital Association, demonstrating an 80% reduction in central line-associated bloodstream infections and a 33% decrease in Medicare costs through quality initiatives. This case study illustrates that by measuring and managing patient-centric values, hospitals can dramatically improve quality and even reduce costs, challenging the notion that high revenue must come at the expense of patient care. Dr. Pronovost's quote, "hospitals are filled with mismanagement," is used to emphasize that a revenue-first approach can lead to systemic inefficiencies and suboptimal patient outcomes.

Key Takeaways:

• Physicians as Hospital Revenue Drivers: Hospitals view physicians as significant revenue generators, with an average doctor bringing in $1.56 million annually through ordered tests, procedures, and referrals, highlighting the financial engine of the fee-for-service model.
• Specialty-Specific Revenue Impact: Revenue generation varies significantly by specialty; orthopedic surgeons are the highest contributors ($2.75M/year), followed by interventional cardiologists ($2.45M/year), and general surgeons ($2.17M/year).
• Outpatient Revenue Contribution: Even primary care physicians, predominantly working in outpatient settings, drive substantial hospital revenue ($1.5M/year) by ordering outpatient labs and imaging, which are often processed by hospital systems.
• Strategic Physician Employment: Hospitals strategically employ primary care physicians to consolidate revenue streams. By acquiring independent practices, hospitals can capture the entirety of a physician's generated revenue rather than just a portion.
• Physician Compensation as Investment: Physician salaries are viewed by hospitals as an investment to secure larger revenue streams, with the "commission" (salary as a percentage of revenue) varying by specialty.
• Return on Investment (ROI) for Physicians: Family practice physicians offer a higher ROI (7.5x) for hospitals compared to orthopedic surgeons (5.5x), making them highly sought after for recruitment due to their favorable financial leverage.
• Revenue-Centric Management: Hospital CFOs and CEOs are acutely aware of revenue-per-doctor metrics, often prioritizing these financial figures over patient quality indicators like infection rates, readmission rates, or post-operative complication rates.
• Fee-for-Service System's Intent: The current fee-for-service healthcare system is described as a "well-oiled machine" intentionally designed to maximize healthcare spending and revenue generation, rather than focusing on cost containment or patient outcomes.
• Misplaced Prioritization: The emphasis on revenue metrics can lead to "mismanagement" within hospitals, diverting focus away from patient well-being and quality of care.
• Hope for Quality Transformation: There is a growing movement towards changing hospital metrics to prioritize patient quality and outcomes over revenue, demonstrating that improved quality can also lead to reduced costs.
• Case Study: University Hospitals Cleveland: This institution successfully reduced central line-associated bloodstream infections by 80% and Medicare costs by 33% through quality initiatives, proving that patient-centric metrics can drive significant improvements in care and financial efficiency.
• Impact of Measuring Quality: When hospitals measure patient-centric, quality-focused values, it leads to dramatic improvements in management, patient safety, and overall healthcare delivery, challenging the traditional revenue-driven model.

Examples/Case Studies:

• Merritt Hawkins Survey: A 2016 survey of hospital CFOs by physician recruiting firm Merritt Hawkins provided the core data on physician revenue generation.
• University Hospitals in Cleveland: Featured as an example of a hospital system that successfully shifted its focus to quality, achieving an 80% reduction in central line-associated bloodstream infections and a 33% decrease in Medicare costs.
• Dr. Peter Pronovost: Chief Clinical Transformation Officer at University Hospitals in Cleveland, recognized for his work in making hospitals safer and more patient-focused.