Texas Tech University Health Sciences Center
CEO Minute: The Unit of Work and Its Value

CEO Minute: The Unit of Work and Its Value

CEO Minute: The Unit of Work and Its Value- image0After about five years with Texas Tech Physicians it doesn’t happen as much, but people formerly asked me the biggest difference between hospital financial management and physician practice financial management.  I always had the same answer — it is the unit of work and its value.

What I mean by this — in the hospital business, the entity is paid based on a "patient day" or an "admission" per a DRG. Although hospitals generate individual charges for the services a patient receives, these charges generally are grouped together by a payer and then either paid for (or denied) on that basis as well. The reimbursable value of a hospital stay or an admission is usually in the hundreds or thousands of dollars.

In the physician practice world, charges are also generated based on the services or procedures provided. But payers usually consider each physician charge individually and make payment decisions at the service level. As a result, the unit of work and its reimbursable value is much smaller. For example, a single current procedural terminology (CPT) service code may be worth only ten dollars. In both cases, it costs a lot of money to collect a “unit of work.”  So, when the payment per unit is smaller, the cost of collection per unit is greater.

I am not saying it is better or worse from a financial perspective, it is just different. Nor am I saying that hospitals are “cash cows” because many hospitals in the nation have a very thin or non-existent margins (yes, they bring in a lot of money, but they spend a lot of money too).

I am saying this—since we are paid the way we are (and we are doing well financially), we have a duty to try to collect on every “unit of work” that we provide to patients. It is essential that we have polices, processes and practices that support effective revenue cycle management. Because, largely, it is our collections that keep this enterprise moving forward. Furthermore, and, this is timely, our gross collections exceeded $5.1 million for April, and for a current benchmark, it is encouraging to be above $5 million. Therefore, a pat on the back to all who play a role in the revenue cycle—and that is a mighty long list.  Let’s keep collecting for those “units of work.”