An Economic
Analysis
of a Pediatric
Housestaff
Practice
Jeffrey Weiss, MD, and Allan De Jong, MD
From the Department of Pediatrics, Thomas Jefferson University, Philadelphia
ABSTRACT. Pediatric residency programs that stress
primary care education are attempting to develop ongoing model practice experiences for their house officers. This paper describes such a model practice and outlines the expenses and revenues involved. In the initial 12 months of operation, revenues have offset 64% of total program costs. Our methods of balancing financial and educational goals are discussed. Program directors are urged to make cost analysis an important part of the evaluation of in-novative primary care programs. Pediatrics 66:91-96, 1980; primary care, residency training, model practice, financial analysis.
The recent emphasis on the preparation of pedia-tricians for careers in primary care has resulted in the need for modifications within the residency curriculum. Pediatric programs that stress primary care education are attempting to develop ongoing practice experiences for their house officers. Throughout the entire three-year course of training, the resident is expected to provide direct ambula-tory patient care to an identifiable panel of patients. By spending time each week in these continuity practices, the resident is expected to learn about child development, chronic disease, preventive pe-diatrics, and psychosocial problems. These model practices also attempt to provide house officers with opportunities to improve interviewing skills, to work effectively with nurse practitioners and health team members, and to learn some administrative principles and skills. Of course, to attain these goals residents must spend substantial amounts of time working in these practice settings. (Department of Health, Education, and Welfare training grants
re-quire 10% of each week and 25% of the entire
Received for publication March 26, 1979; accepted Oct 22, 1979. Reprint requests to (J.W.) Department of Pediatrics, Jefferson Medical College, Children’s Health Center, Philadelphia, PA 19107.
PEDIATRICS (ISSN 0031 4005). Copyright © 1980 by the
American Academy of Pediatrics.
residency to be spent in continuity experience.’) Therefore, it is extremely important that these in-novative model practices are planned and evaluated carefully. This paper describes the formation of such a practice within the setting of a university pediatric group practice and emphasizes the cost analysis of this new training program.
DESCRIPTION
The resident’s continuity experience takes place within the Children’s Health Center, a university-based practice that was converted from the hospital pediatric clinic in 1976. The conversion involved moving to a new facility, enlarging and improving the staff, and making major changes in the financial and administrative structure.
The Children’s Health Center is an 8,000-sq ft
facility located in the private office area of the new
Thomas Jefferson University Hospital. It contains
21 examining rooms, comfortable reception and
waiting areas, its own medical record section, a
weighing room, two laboratories, a large conference room, and administrative offices. All outpatient ser-vices, including subspecialty services, are delivered
here on an appointment basis. In addition, the
Children’s Health Center serves as the teaching facility for third and fourth year medical students, student nurses, and residents from the pediatric and family medicine departments.
The Children’s Health Center provides subspe-cialty care for a diverse population while more comprehensive care is provided for poor inner city children and children of students, residents, and faculty of the medical school.
The staff consists of three full-time general
pe-diatricians, 13 subspecialists, two nurse practition-ers, one LPN, and five clerk-secretaries.
While in the past the hospital administration
plan. This group consists of the full-time faculty members of the Department of Pediatrics. These
faculty members are paid 75% of their salary from
college funds; the remaining 25% comes from
prac-tice plan profits. Unlike the hospital clinic
arrange-ment, this method provides physicians with a
finan-cial incentive to improve the efficiency of the am-bulatory care delivered at the Children’s Health Center.
.The pediatric house staff continuity practice con-sists of five teams, each of which meets one after-noon per week in the Children’s Health Center. Each team has three residents (at different levels
of training), a nurse practitioner and a full-time academic general pediatrician who acts as the team
advisor. The advisor is free of other responsibility
during the weekly session and is available for im-mediate consultation. His other duties include chart
review, organization of team meetings, and acting
as substitute for residents unable to attend the session because of illness.
Printed business cards are provided to each team
for distribution to their patients. These cards add a professional aura to the practice, serve to improve patient-doctor communication, foster a certain
team identity, and indicate to the residents the importance we place on the continuity experience.
Patients enter the continuity practice in several ways. The residents can arrange for follow-up care for patients whom they have encountered on the
various inpatient services or they may choose to
continue to see children who were first seen while on the two-month ambulatory rotation. The
re-maining appointment slots are filled with patients
transferred from the large general practice because of their particularly interesting, complicated, or chronic problems. In addition, healthy newborns are referred from the hospital nursery for well-baby care. In the future, we are planning to get regular
referrals from the obstetrical service for prenatal counseling.
Each group’s weekly afternoon session lasts ap-proximately four hours and begins with a 30- to
40-minute discussion of patient problems, journal ar-tides, or primary care issues. Team members take turns preparing a brief talk to introduce the discus-sion topic. Following the discussion, the residents see patients on an appointment basis. The appoint-ments are generally spaced at 30-minute intervals, but shorter or extended visits can be arranged. We
had been scheduling five to seven patients for each
resident, but based on broken appointment rate
data, we will increase to eight appointments per session.
In the 12 months from October 1978 to Septem-ber 1979 the continuity practice held 251 sessions. Of the 3,668 appointments scheduled, 2,369 were kept (65%), 966 were “no shows” (26%), and 333
patients called to cancel (9%). Residents see an
average of 3.5 patients per session, but because of vacation time, the average number of patients seen
by the entire team is 9.4 patients per session. (Those
patients seen by the faculty member and pediatric
nurse practitioner are not included in these figures.) Table 1 indicates that during the year there has been no improvement in the appointment-keeping rate or in the number of patients seen each session.
COST ANALYSIS
The operational expenses of the continuity ex-perience program include both fixed and variable costs. Fixed costs include resident stipends, salaries of physicians, nurses, and clerk-secretaries, rent,
and general overhead. Variable costs, which are
dependent upon patient volume, include those for
supplies, telephone service, medical record mainte-nance, and bffling operations. All costs are for the
TABLE I. Monthly Analysis of Productivity and Appoin tment Keeping
Month Scheduled
Appointments
Appointments Kept
No. of Sessions
Average Pa-tients/Session
Kept Appoint-ment Rate (%)
Oct 235 175 22 8.0 75
Nov 274 173 20 8.6 63
Dec 255 165 19 8.7 65
Jan 357 247 22 11.2 69
Feb 339 184 20 9.2 54
March 329 220 22 10.0 67
April 290 177 20 8.9 61
May 308 197 22 9.0 64
June 290 183 21 8.7 63
July 314 199 21 9.5 63
Aug 360 243 23 10.6 68
Sept 317 206 19 10.8 65
12-month period from October 1, 1978 to September
30, 1979.
Fixed Costs
1. Resident Stipend. Including fringe benefits, the average annual stipend for a pediatric resident is
$17,880 or $4.91 per hour (based on 70 hours per
week). Each of 15 residents spends four hours in
continuity experience weekly which costs $15,319
for the year.
2. Support Staff Salary. Apportionment of these
salaries to the continuity experience program is
based on annual patient load data. In the first year of operation, the continuity practice residents have
seen 2,369 of the approximate 14,000 total general ambulatory visits. Therefore, the continuity pro-gram has assumed responsibility for one sixth of
the $29,726 nursing salaries and of the $35,940 cler-ical staff salaries. The total cost to the continuity
program is $10,944 (nursing = $4,954; clerical =
$5,990).
3. Rent. The area of the three examining rooms used exclusively by the continuity practice is 408 sq ft. Fifteen hundred additional square feet of space
for laboratory, weighing, and waiting areas are
shared with the other outpatient practices. At $10.50/sq ft/year, the annual rent for the continuity practice is $4,760.
4. Faculty Salary. Including fringe benefits, the average salary for the attending physicians is
$42,000 annually or $16.15 per hour (based on 50 hours/week). The 12-month cost to the continuity program is $16,800.
Variable Costs
1. Billing. Because a large majority of the
pa-tients seen in the continuity practice have
reim-bursement from Pennsylvania Department of
Pub-lic Assistance, a simple billing procedure can be
managed by one clerk. Her salary and the bffling supply costs were $12,000 for the year. Again, using the 1/6 apportionment rate, the cost to the conti-nuity practice was $2,000.
2. Medical Records. All medical records are
maintained on the premises by our own clerical
staff. Because all forms utilized are considered “sup-plies,” the only cost involved is for the folder itself.
This cost is estimated at approximately $1,000.
3. Phone Bills. The amount spent on telephone charges was $481.
4.
Storeroom and Pharmacy Supplies. The total supply costs for the ambulatory department were$6,745. One sixth of this amount, $1,124, is appor-tioned to the continuity practice.
5. Overhead. Certain administrative and opera-tional costs that are difficult to measure are in-cluded in overhead. Six percent of direct costs, excluding faculty salary, is our estimate based on a knowledge of our program and previously published reports.2’3
Table 2 is an analysis and summary of the model practice costs. The total annual operating expense was $54,566, equivalent to $23.03 per patient visit. If the advisor salary is excluded, these amounts are lowered to $37,766 total cost and $15.94 per visit.
REVENUES
Our usual charge for a routine visit is $15.00. The
hospital prorates self-pay patients by income level and subsidizes their visit in the amounts shown in Table 3. For medical assistance patients, we receive $12 from state Medicaid funds and the $3 hospital
subsidy. We also perform Early and Periodic
Screening, Diagnosis and Treatment Program (EPSDT) examinations for which we are paid $12 for children less than 19 months old and $24.50 for
TABLE 2. Financial Summary for Jefferson Children’s Health Center Pediatric Model
Practice
Cost Category Amount Cost/Visit
(2,369 visits)
Total Costa (%)
Fixed
Resident stipend $15,319 $6.47 28
Support staff $10,944 $4.62 20
Rent $4,760 $2.01 9
Faculty salary $16,800 $7.09 30
Variable
Billing $2,000 $0.84 4
Medical records $1,000 $0.42 2
Phone $481 $0.20 1
Supplies $1,124 $048 2
Overhead $2,138 $0.90 4
TABLE 3. Fee Schedules and Patient Distribution by Payment Source
Fee Hospital Total Visits (%)
Subsidy
Medicaid $12.00 $3.00 $15.00 66
EPSDT*
Patient <19 mo $12.00 0 $12.00 15
Patient >19 mo $24.50 0 $24.50 5
Self-pay rate
A $12.00 $3.00 $15.00 3
B $9.00 $6.00 $15.00 4
C $6.00 $9.00 $15.00 7
* EPSDT, Early and Periodic Screening, Diagnosis and Treatment Program.
those more than 19 months old. Since only about
8% of charges are bified directly to the patients, bad debt problems are minimal (2% of total charges).
Billing for the continuity program is not done
separately; therefore, it is impossible to report the
exact amount ofrevenue generated by this program. However, if we assume that the continuity practice
profile is similar to that of the entire practice, an estimate of income can be made. For 2,369 patient
visits at $15 per visit and with a 2% bad debt rate, the model practice has earned $34,825 in its first
year of operation.
Most revenues to our practice come from
pro-grams with fixed fee schedules (EPSDT, Medicaid).
Fifty-two percent of our receipts come from Medi-caid, 20% from EPSDT, 20% from hospital subsidy, and only 8% from patient payments. Therefore, in order to generate enough income to cover costs,
resident productivity must be increased. We
esti-mate that each team will have to care for 16 patients
per session for our program to become
self-suffi-cient. This is equivalent to about 4,000 patient visits
annually for the entire continuity practice.
DISCUSSION
Many of the skills needed for effective and
effi-cient office practice are not adequately taught in most residency programs.4 Practicing pediatricians
feel greater emphasis should be placed on the prob-lems of ambulatory care, behavioral and
develop-mental disorders, management of chronic disease, and office admimstration.8 Recently, many
resi-dency programs have created model practices in
which participating house officers get a chance to
develop these primary care ski1ls.#{176} These model
practices have been created within medical school clinics, university group practices, prepaid health
plans, neighborhood centers, community hospitals,
and private practices. While some programs
em-phasize training in special areas such as
psychoso-cial problems,” health care administration,’3 and community pediatrics,’4 all of these practices
at-tempt to deliver continuous comprehensive care.
At the same time that medical educators are
providing more primary care training, hospital
ad-ministrators are recognizing the financial advan-tages of replacing inefficient hospital clinics with private group practices.2123 It is within this type of
university-based practice that our residents are
ex-posed to the economic pressures of private office pediatrics. Through first hand experience, group
discussions, and written material2426 the resident learns about billing, insurance forms, fee schedules,
accounting practices, work loads and appointment systems, and general office management. He is
ex-pected to approach medical problems with an
in-terest in cost and efficiency. In our practice, we
have tried to heed Haggerty’s warning7 to avoid unrealistically small work loads, patient visits of unlimited length, and unnecessary, time-consuming meetings.
While the house officer must learn to be
produc-tive, he must also be able to provide high-quality medical care.’ The resident must not be placed into a setting where patients are seen so rapidly and
superficially that there is no time for teaching or self-evaluation.27 We realize that our model practice
has a major teaching function and that some degree of efficiency has had to be sacrificed for the sake of our educational goals.
We have tried to incorporate both the primary care health team and the group practice approaches into the continuity experience. Future pediatricians
will probably work together rather than enter solo
practice.#{176} Group practice can provide quality care at lower costs,3’ but does require the pediatrician to interact effectively with his partners. They must agree on a practice philosophy and develop plans
for division of income, administrative tasks, and
patient-care responsibility.25 We believe that the
organizational structure of our groups encourages
the house officer to communicate effectively with
the other members of his team.
The concept of the primary care health team has been discussed in detail by Siegel.32 Recent
stud-ies show nurse practitioners can provide quality
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2. Stern P..S, Jennings M, Delbanco T, Dorsey J, Stoeckle JD, Lawrence R: Graduate Education in Primary Care: An Eco-nomic Analysis. N Engl J Med 297:638, 1977
3. Owens A: Doctors expenses: Some good news at last. Med Econ 55:166, 1978
4. Brent R: Involvement versus noninvolvement. Pediatr Clin North Am 15:301, 1968
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6. Haggerty R.J, Janeway CA: Evaluation of a pediatric house-officer program. Pediatrics 26:858, 1960
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9. Pasquariello PS, Ames MD, Lusting HS: Participation of 15% of practicing pediatricians employ a pediatric
nurse practitioner.#{176}’ Pediatricians are stifi con-cerned about financial feasibility, quality of care, and malpractice liability issues. We hope that the exposure that our resident gets while in the
conti-nuity program will, as suggested by Kahn,37 enable
him/her to make a rational decision about whether or not to utilize a nurse practitioner.
Despite pleas for careful financial analysis of new teaching programs, little information is available concerning operating costs of model practices. When financial data are presented, the analyses are often arranged to compare health care delivery organizations#{176} or types of providers or to describe medical costs to society as a whole.40’4’ However, if the cost analysis is to be used to indicate the feas-ability of model practice experiences or to deter-mine fees and work loads for such practices, ex-penditures must be examined from a “cost-to-the-doctor” viewpoint.
Stern et al2 have published an excellent financial analysis of a large model practice for internal med-icine residents. Table 4 compares their expenses, expressed as percentage of total costs, to those of our program. The expenditure percentages of the two programs are almost identical, with the largest amounts being spent for resident stipends and fac-ulty salaries. The percentages for support staff, rent, and supplies were also quite similar in the two housestaff practices.
In general, the expenses involved in model prac-tice programs exceed revenues collected. In 1975, Goroll et al’#{176}reported that in the first year of operation of the Primary Care Program at Massa-chusetts General Hospital income covered only 60% of expenses. In 1977, Stern and associates2 showed
that revenues in the Harvard Primary Care
Pro-gram amounted to 77% of total program costs. The Genesee Health Service training model for
obstet-TABLE 4. Comparison of Model Practice Expenses as
a Percentage of Total Costs*
JCHC BIACt 28 39 20 15 9 7 30 22 4 3 2 5 1 ... 2 3 4 6 Cost Category Resident stipend Support staff Rent Faculty salary Billing Medical records Phone Supplies Overhead
* JCHC denotes Jefferson Children’s Health Center
(pe-diatrics) and BIAC denotes Beth Israel Ambulatory Cen-ter (internal medicine).
t
To allow adequate comparison with the JCHC data, thestated teaching component expense was added to the
BIAC costs and all percentages recalculated.
rics and gynecology residents had an improvement
of income-cost ratio from 64% in 1974 to 94% in
1976.’ In our initial 12 months of operation, income has amounted to 64% of expenses.
Presently our program obtains support from
grant monies, hospital subsidies, and departmental funds. Eventually, many of these dollars will have to be replaced by income from patient care services. Stern et al2 calculated that residents would have to increase productivity by 40% in order for their prac-tice to be self-sufficient. They feared that this in-crease could interfere with the educational goals of the program. However, we do plan to increase res-ident work loads in an attempt to increase income. If each of our groups cares for 16 patients per week, we will reach the “break-even” point. Since this will stifi allow for at least 30 minutes per visit, we do not expect the educational aspects of the program to be compromised.
One of the reasons that some new educational programs fail is that they cannot be economically justified and supported. Therefore, it is important
that a fmancial analysis be started while a program is in its initial stages of development and growth. We have been quite encouraged by the financial data from our program’s first year of operation.
ACKNOWLEDGMENTS
This paper was supported by the Department of
Health, Education, and Welfare Primary Care Training grant 1 D28 PE 13148-01 STC.
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