Cost-effectiveness of a hospitalist service in a public teaching hospital

The authors report implementing an academic hospitalist team as a cost-effective solution to the problem of an inpatient census that exceeds their public hospital's teaching service limits. Medi-Cal (California's Medicaid program) per diem reimbursement was the primary source of revenue, which rendered moot some traditional advantages of hospitalist services.

The authors assessed cost-effectiveness by comparing average inpatient census, payment denial rate, and Medi-Cal reimbursement for internal medicine in 2008 and in 2007. They also focused on Medi-Cal patients admitted with low-risk chest pain in 2008, comparing the length-of-stay and denied-day rate data with data from 2005.

Overall Medi-Cal reimbursement was $2,310,000 higher in 2008 than in 2007. Overall payment denial rate fell from 29% to 27.4%, while yearly admissions increased from 8,069 to 8,643, and the average daily census increased from 97.7 to 107.1 patients. For low-risk chest pain admissions, length of stay decreased from 2.48 to 1.92 days, denial rate decreased from 43.8% to 31.8%, and average reimbursement per inpatient day increased from $787 to $955. Total salary outlay for the first year of the service was approximately $310,000.

By reducing payment denials and increasing the inpatient census, hospitalists were able to more than offset their compensation with a substantial increase in revenue under per diem reimbursement, which adds a new dimension to prior reports of cost-effectiveness of hospitalist services in diagnosis-based, capitated, or fee-for-service reimbursement systems. Hospitalists are a cost-effective solution to the problem of increasing inpatient workloads at public teaching hospitals.