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When PSAs Are the Right Choice

Karen Minich-Pourshadi, for HealthLeaders Media, July 13, 2010
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PSA drawbacks
The PSA scenario isn’t the best one to use at hospitals in all cases. Ideally, physicians hired to work under a PSA help fill a void in the hospital’s system left during shortages in the area for a certain specialty or to help test out the viability of adding a new service line or product before making it a permanent offering. However, if a PSA isn’t worded thoughtfully, one of the largest drawbacks can become physician misalignment with the hospital’s goals, as well as decreased quality—both of which affect the bottom line.

For instance, Robin LaBonte, CFO at York (ME) Hospital, explains that her 79-staffed-bed facility uses PSAs with a local pathology group to handle day-to-day operations. The hospital, which generates net revenue of $155 million annually, employs approximately 75 physicians, opting to use PSAs for only pathology.

"You want to be sure that you have in the agreement that these physicians meet medical credentialing guidelines, follow the bylaws, and come up with compensation structure that’s based on the market but also has quality measures built in,” says LaBonte. "If you’re working with a group, you may want to get to know the people and specify who will deliver the services, how, when, and where. In some ways the PSA can be the equivalent of a regular employment model, but it has to be in the agreement.”

Joseph Lamantia, executive vice president and COO at South Nassau Communities Hospital in Oceanside, NY, agrees. His 390-staffed-bed facility works with over 700 physicians, and just 30 of those are working for the facility through a PSA agreement.

"Typically when you look at outsourcing you look for quality and service. Then you contract with those who are known for providing great service, rates, and who know how to manage expenses,” he says. South Nassau Communities uses exclusive PSAs for its radiology and anesthesiology groups. Some PSAs are tied to the physicians’ quarterly metrics for quality and patient service. This helps us ensure that the goals of all parties are aligned, he says.

And although the agreements are on a three-year team, Lamantia says his team members review the metrics quarterly to ensure that when the contract comes up for renewal, if there have been any issues, they know where they stand.

The cost of using PSAs in lieu of employing physicians is sometimes held up as a negative; however, the cost isn’t always more expensive than employing a physician or buying a practice. It may not always be practical to invest in the infrastructure, equipment, and staff for a new service line if a facility is unsure of reimbursements or whether the market will sustain the service line or program, adds Lamantia.

Oliver Rogers, president of hospital-based services for TeamHealth based in Knoxville, TN, agrees. TeamHealth was originally founded to provide emergency department administrative and staffing services and has grown to be one of the nation’s largest providers of hospital-based clinical outsourcing, with nearly 7,500 providers working with them.

"Often what hospitals find when they look in depth at our cost is that, when it’s taken as a whole, it’s significantly less than if they do it in-house. It’s sometimes difficult to master all aspects of a new operation quickly, so you need to decide if you should buy the expertise or figure it out as you go,” he says.

For facilities that aren’t as sophisticated at tracking the return on investment generated by a new service offering, PSAs can be written to require the physician to track and provide the metrics financial leaders need to prove or disprove the success of a program.

"We know that CFOs need to make X, Y, Z goals, so we incorporate those in our dashboards so we can keep in lockstep and try to achieve that goal aggressively,” says Rogers.

While most hospitals will continue to prefer employing physicians or using other models, Reiboldt says, PSAs have a very real purpose for hospitals and they can save money for facilities if they are worded correctly. Further, if a hospital is willing to commit to the expense of establishing a new service offering, PSAs may offer an opportunity to test the market to see if the venture will be a money generator or generate only losses—in which case the PSA will have enabled the hospital to avoid investing in infrastructure and equipment, he explains.


Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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