Part 2. How Physician Part A Time Influences Your Hospital Reimbursement
When one thinks about “time studies for cost reporting,” they are most likely thinking about Physician Part A time. It’s the broadest and most pervasive category of cost reporting time studies – it’s also the one that most reimbursement teams struggle with.
The underlying concept of time studies is that Medicare contributes to hospital operations as a way to compensate them for their overhead. CMS calls this overhead time the “Provider Component,” but it is commonly known as “Part A.”
A portion of Part A time is easily tracked, because the people that perform some tasks fall entirely into that category, such as administrative, maintenance, and IT. However, physicians’ work is split so that some of it is directly compensated for which is referred to as “Part B.” This represents physician services provided for direct patient care and reimbursed via the Medicare Physician Fee Schedule (MPFS).
Capturing Part A time is hard, because it requires asking over-burdened physicians to complete one more task. Yet, documenting this time has a large impact on the amount a provider gets from CMS. If there isn’t a time study, CMS will not count that time. However, putting in the effort can dramatically improve your financials. Let’s see how it works.
Why Physician Part A Time Matters
Previously in this series, we provided an overview of what time studies are and how they’re critical to your organization. The Part A time for physicians is not directly reimbursed, but it does have a significant impact on overall reimbursement.
This Physician Part A time contributes to the pool of hospital wages that determines the CMS Wage Index, which sets the Average Hourly Wage (AHW) for a certain market. This grouping of wages is called the Occupational Mix Survey, or “OccMix” for short. The OccMix pool gathers a range of salaries and is then used specifically to set the Wage Index for that region. The Wage Index then influences the hourly rate for the labor portion of reimbursements. (This will be covered in detail in Part 8. Time Studies and Wage Index on June 4.)
Even though the overall number of hours contributed to the pool by physicians is relatively small, they are the highest-compensated employees, so they have an outsized impact. When all of this time is reflected in the cost report, the physician wage allocation could increase the AHW by a material amount. Raising the AHW by just $0.50/hour could yield millions in additional reimbursement income.
What Activities Are Included in Physician Part A Time?
Part A time includes administrative, teaching and other tasks that support patient care and hospital operations but are not directly reimbursed. Reimbursed time included under part A includes activities associated with:
Department administration, supervising nurses and technical staff, utilization reviews, etc.
Emergency room on-call availability
Teaching and supervising interns, residents, and allied health students in approved programs
Direct patient care is reimbursed via the aforementioned IPPS, and anything else, such as writing for journals, research, and vacations is not reimbursed.
Illustrating the Impact of Physician Part A Time
Physician time is tricky to calculate because of the varied activities they perform within your facility. However, without time studies, Medicare considers all physician time Part B, limiting your organization to only direct reimbursements for care.
TABLE 1. CALCULATING ‘PROVIDER COMPONENT’ AND AHW.
Let’s take a look at how physician time studies work in real-world dollars. For our hypothetical, the hospital has 250 physicians with salaries ranging from $350,000 to $600,000 annually. If we focus on their combined $90 million in salaries, we find an average hourly wage of $173 per hour.
Based on their time studies, we find that the hospital’s team of physicians spend 13.6% of their annual working hours on Part A time. That equates to 70,500 hours across all 250 physicians, averaged at $173 per hour.
When added to the hospital’s overall wage pool, those physician hours raise the average hourly wage of your facility by $1 per hour or more.
Collecting physician time studies can have a larger impact, not only on your hospital but on your region, by influencing the wage index. We cover the wage index more later in this series.
Impact of Participation Rates
In our example, we are assuming a 100% compliance rate, but many hospitals fall short of that – many by a long measure. Let’s take a look at the impact physician participation can have on a hospital’s reported average hourly wage.
First, we made a few assumptions. We’re assuming a hospital system in our hypothetical with an average physician hourly wage of $173 per hour (as in Table 1) and a non-physician staff average hourly wage of $55. For the balance of the non-physician staff, our example shows 3.25 million hours for this fiscal year.
Now we can gauge the financial impact of whether a hospital does an excellent job or a poor job of collecting Physician Part A time, as illustrated in Table 2. By adding the maximum amount of Part A hours by collecting 100 percent of the wage allocation available, the hospital’s AHW is $57.52.
Even though the physician time is relatively small in terms of time at just 2.1 percent of the total staff hours, their high wages represent 6.4 percent of the wage contribution, clearly illustrating the outsized impact that these hours represent. Even by increasing physician time capture by 20 percentage points adds approximately $0.50 to the AHW, an amount that would make a material impact on the hospital’s bottom line.
TABLE 2. IMPACT OF PHYSICIAN PART A CAPTURE ON HOSPITAL AHW.
Improve Your Physician Time Studies
It’s a challenge to get physicians to fill out time studies, especially when they don’t see the direct benefit. It’s also complicated for hospitals to administer them and flow the information into the cost report at the end of the year. (The topic will be covered in detailed Part 7. Increasing Time Study Participation Rates on May 28.)
However, the financial impacts can make the investments of time and energy worthwhile. Time studies don’t have to be a burden. Although many hospitals still use paper forms or unwieldy spreadsheets, there is a better option. With automation tools, simple surveys, and pre-filled fields, your time study program can run smoothly, obtain accurate information, and prepare you for the end-of-year cost reports.
Suggestion Box
If you have a question or would like to learn more about a specific topic regarding time studies and cost reporting, please share it with us in the form here. It’s likely others may want to learn it as well.
We will do our best to cover it!
