Hospitals are struggling to survive. Financial challenges from shrinking reimbursements and skyrocketing expenses have pushed many facilities to the brink. The problem is especially dire in rural communities, where 5 percent of hospitals have closed since 2010, and another 21 percent are at high risk for closing. As a result, hospital administrators are looking for new ways to cut spending and improve profitability. Although it’s only one piece of the puzzle, one of the fastest-growing costs for many hospitals is physician call pay. Many hospital administrators see call pay as a zero-sum game, facing increasing pressure from physicians wanting to be paid, EMTALA requirements and the need to maintain service lines. While call pay may be unavoidable, it doesn’t have to be a financial killer. With the right solution in place, hospitals can actually recoup some of the cost. Here’s a closer look at the extent of the call pay issue, what it means for hospital culture and what administrators can do to remedy the situation.

Scope of the problem

It’s hard to overstate how untenable physician call pay has become for many hospitals. A 2014 Sullivan and Cotter survey found that between 2012 and 2014 alone, the average hospital’s call pay expenses increased 50 percent. According to the same study, those expenses actually rose a staggering 83 percent relative to net revenues. This dramatic rise has only continued in years since, and call pay now represents a substantial portion of total physician spend.

The physician shortage has only exacerbated these issues. In rural areas, some specialties are in such demand that hospitals and administrators will do just about anything they can to retain their services. This has led some hospitals to offer on-call contracts that go above fair market value and simply aren’t financially viable long-term.

How physicians view call pay

While it’s easy to view call pay as a strictly financial issue, it has broader implications that raise concerns about transparency, fairness and respect. Essentially, physicians tend to view call pay as a clear indicator of how much a hospital values them. The higher their call pay rate, the more valued they feel. Often hospitals will negotiate call pay rates with individual specialties based solely on fair market value.

But single-specialty negotiations create discord because of perceived divisions between the “haves” and “have nots.” In other words, when one specialty gets a higher call pay rate, people get jealous. This leads to distrust, disruptive rumors and ultimately higher physician turnover — another huge cost for hospitals. So when hospital administrators bend to a particular specialty’s demand for more call pay, they may actually be creating more problems than they solve.

Innovative solutions needed

Many hospitals have tried to solve the problem by adding to their call pay budgets but have found that this doesn’t resolve the issue. Administrators need a fresh approach that provides financial relief while addressing the underlying issues surrounding call pay. That’s where MaxWorth Consulting Group's innovative Call Pay Solution® comes in.

Composed of three unique phases, the Call Pay Solution® provides a path forward for both hospital administrators and physicians. It starts with the Physicians’ Call Committee™, which brings together physicians from a wide range of specialties to negotiate call pay based on a common “fairness standard.” This helps alleviate many of the cultural problems caused by call pay inequalities. Next, the Physicians’ Advantage Plan™ uses a deferred compensation vehicle to reward physicians, allowing them to invest their call pay dollars pre-tax. This also benefits the hospital, giving them a tool for physician recruitment and retention. Finally, using common funding methods, hospitals may be able to offset and recoup some of the cost of call pay.

With this three-pronged approach, the MaxWorth Call Pay Solution® turns an unsustainable call pay expense into a powerful differentiator that can actually improve the financial strength of a hospital.