Conversion of Alaska Hospital Physicians to Contracts
Instructions
In this assignment, you act as the CFO (Chief Financial Officer) of a small rural hospital with 35 beds serving lower to middle-income populations. The city owns it, and the top 3 payers are Medicare, Medicaid, and self-pay/uninsured. Your new CEO (Chief Executive Officer) is from an urban area in the state whose hospital was regional, with 250 beds.
She is evaluating the current financial situation where the physicians are salaried by the hospital as employees. She speculates that under the continued changes with VBC (value-based care) and the hospital’s payer-mix, physicians be converted to contracts so that there are fewer hospital expenses such as physician employee benefits, salaries, and less organizational risk. The outcomes can be more effectively managed to give the hospital the ability to pay based on productivity and accountability since that is what the insurers are paying the hospital.
Select a position for or against the conversation to physician contracts from hospital employees based on business analysis and reply to the CEO in memorandum format. The memorandum must be comprehensive and detailed to present your position, address each CEO’s foundation for consideration, and any data or evidence to support your financial and business position.
While the memorandum should be formatted as such, any external sources should be properly cited at the end of the memorandum in APA to document external sources and originality on your part.
Grading Criteria
Student writing should be at the academic level, unbiased language in the third person, and proper healthcare and legal vernacular.
Assigned papers will require APA formatting (most current edition), including the title and reference pages. If you are unsure how to format using APA style, please see the Writing Center or Learning APA Style.
Excluding the APA title and reference pages, the papers should be between 1,000 - 1500 words in the body. The word count requires the substance to be concise, robust, logical, and demonstrate complete knowledge of the weekly content. Although not in proper APA formatting, please include the word count for the paper's body at the very bottom of the title page. For assistance with determining the word count, please see the following Microsoft Word resource.
The body of the paper should include first level APA headings for all content or topics when required. Having the required content as first-level headings will support students in meeting the content requirements and the paper's focus on the required subjects. Students are welcome to add subheadings at the second or third levels, but the first level is required. The APA Citation Guide can assist with formatting, including headings.
All sources used within the paper's body (directly and paraphrased) must be cited in the body of the paper and on the required reference page per APA requirements and should not exceed 20%. Content from other sources that exceed 20% could indicate a lack of originality or possibly plagiarism and will be addressed following the Academic Integrity Policy noted below.
Third-party plagiarism software, such as Turnitin, may be used to assess the originality of a student's work in any assignment, papers, and quizzes, or exams to rule out plagiarism. NOTE: a link is provided in the course for students to submit a DRAFT Turnitin submission for a pre-review before submitting for grading to meet course and SU requirements.
The quality of the content will be assessed using the attached rubric. All criteria in the category must be met to earn the full points. See attached rubric.
Hospital Financial Management Memorandum
Student's Name
College/University
Course
Professor's Name
Due Date
Word count: 1163
To: CEO Alaska Rural Hospital
From: CFO Alaska Rural Hospital
Date: March 31, 2023
Subject: Conversion of Alaska Hospital Physicians to Contracts
I am responding to your earlier proposal of converting hospital-based physicians from employees to contracts. It is concerning because I have a different view on why we must let them remain as permanent employees. After critically analyzing our financial position, I found several reasons why contracts would be an issue for the hospital. This paper recommends that physicians work as hospital employees because it supports effective cost management, better management of compensation and benefits, alignment of the hospital and the physician's objectives and interests, common good, and provider accountability.
Better Cost Management
First, the reimbursement rates would be lower since the hospital operates under a payer mix (uninsured, Medicare, and Medicaid). This is vital as cost management is the primary aspect of financial stability. According to a review by Blocher et al. (2019), cost management has four major benefits. First, it helps reduce expenses by effectively managing cost controls. Second, it helps gain operational efficiency, thus ensuring that all hospital activities run smoothly and within the stipulated budget. Third, it helps streamline our technology, making us aware of when to upgrade or simplify our systems. Finally, it enhances our realization of procurement effectiveness (Blocher et al., 2019). In this light, the Centers for Medicaid and Medicare Services (CMS) affirms that using these services, especially in a rural hospital, enhances health equity.
Effective Management of Compensation and Benefits
Second, employing physicians as primary care hospital employees will help us manage their compensation and benefits effectively. Since the physicians' expenses, benefits, and salaries are fixed, it will be easier to budget for them. However, it will be challenging when they start operating as contracts since we have to negotiate these benefits individually, which is unpredictable and time-consuming. Another reason for keeping physicians as employees is the competitive demand for their services in the United States (U.S). Since there has been a shortage of physicians statewide, convincing them to operate based on contracts will be increasingly challenging (Zhang et al., 2020). This is possible because they will pay better in urban hospitals since our facility operates in low- and middle-class neighborhoods with a low-income distribution. These professionals require value benefits that our hospital may not afford. Also, maintaining physicians on a full-time basis will make our hospital reputable. For example, uninsured individuals will forever seek treatment in hospitals where services are cheap and available. The payments received from these clients are significant for the facility's financial sustainability. Employing physicians as permanent employees contributes to higher chances of income security compared to contracts since having job security to them means that they have earnings security (Gifford et al., 2022). This makes the physicians develop aspects of commitment, which offers an impetus to discharge high-quality healthcare services.
Better Alignment of Physician-Hospital Goals
Third, employing physicians in our facility will help us align their interests and objectives with ours, such as improving patient outcomes and providing quality care. By compensating them through our facility salary structure, we can incentivize them to work collectively towards the hospital's goals without being concerned about individual productivity. By retaining physicians as permanent employees, we can set standards by training them to suit our terms since we are in control. There is an entitlement that emerges from hiring permanently. It is only possible to make physicians get on board if they are aware of the goals and their voice is incorporated into our decisions. According to Harrison and Bazzy (2017),...