Analysis of downstream revenue to an academic medical center from a primary care network

Purpose Many academic medical centers (i.e., teaching hospitals) have established primary care networks for not only assuring a referral base but also for educating students in the primary care setting. Such networks generally are not profitable when analyzed on an individual facility basis. However, revenues generated at the medical center in terms of inpatient admissions, laboratory testing etc., usually are much larger than generated on site. In this study, the downstream revenue from 18 practice sites was evaluated at The Ohio State University Medical Center. Method Revenues in fiscal year July 1, 2003, to June 30, 2004, were broken down into four streams, including inpatient and outpatient charges and collections for both network and specialist physicians. A fifth stream evaluated specialist professional fees. The authors developed a novel conservative weighting system to capture the concept that not all revenues generated from network patients were actually dependent on the use of the network. Results Findings included that the downstream direct contribution margin of $14 million just from the admissions and outpatient tests and procedures directly generated by network physicians alone was nearly twice the $8.3 million network operating loss. The total downstream net revenue of nearly $115 million was more than 6 times the $18.9 million net revenue to the network. The downstream direct contribution margin of $52 million was 6.3 times the network loss. Total downstream gross revenue (charges) to the medical center was over $250 million and over $300 million when the specialist gross revenues were included. Conclusions This study demonstrates that a primary care network can generate significant financial support for an academic medical center.