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Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
Physician Practices Today – Business Realities
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Physician Practices Today – Business Realities

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  • 1. Physician Practices Today – Business Realities & Opportunities Rosemarie Nelson, MS Principal, MGMA Health Care Consulting Group October 2006
  • 2. Best Business Practices <ul><li>Definition: a proven service, function, or process that has been shown to produce superior outcomes or results in benchmarks that meet or set a new standard. </li></ul><ul><ul><li>Best: optimal for organization given its patients, mission, community, culture and external environment </li></ul></ul><ul><ul><li>Trends </li></ul></ul>
  • 3. Dynamic relationship <ul><li>More revenue </li></ul><ul><li>Higher operating costs </li></ul><ul><li>Operating expense increases </li></ul><ul><li>Total profit rises </li></ul><ul><li>How is it managed? </li></ul>Productivity Expenses Revenue Profit
  • 4. Better Performer Findings : <ul><li>Overall effectiveness of physician/administrative team critical </li></ul><ul><li>Commonality of expectations between physicians </li></ul><ul><li>Motivation of physicians thru productivity based compensation </li></ul><ul><li>BP administrators on incentive based compensation </li></ul><ul><li>Regular physician/staff training to ensure coding compliance </li></ul>
  • 5. Selection criteria by performance area: <ul><li>Less than median for percent of total A/R over 120 days; and </li></ul><ul><li>Greater than median for adjusted fee-for-service collection percentage; and </li></ul><ul><li>Less than median for months gross fee-for-service charges in A/R. </li></ul>Accounts Receivable and Collections <ul><li>Greater than median for total procedures per FTE physician; and </li></ul><ul><li>Greater than median for total gross charges per FTE physician. </li></ul><ul><li>Anesthesia practices, greater than median for ASA units per FTE physician. </li></ul>Productivity, Capacity and Staffing (surgical specialty aggregate) <ul><li>Greater than median for in-house professional procedures per sq.ft; and </li></ul><ul><li>Greater than median for total gross charges per FTE physician. </li></ul>Productivity, Capacity and Staffing (nonsurgical specialties) <ul><li>Greater than median for total medical revenue after operating cost per FTE physician; and </li></ul><ul><li>Less than median for operating cost (not including NPP costs) per medical procedure (inside the practice). </li></ul>Profitability and Cost Management
  • 6. Opportunity <ul><li>Thesis – “There are no perfect solutions” </li></ul><ul><li>“Nothing achieves 100%” </li></ul><ul><li>“Many small changes add up” </li></ul><ul><li>If others can improve, why not your practice? </li></ul>
  • 7. Benchmarking- MGMA Hematology/Oncology (where you stand vs. the rest of the world) 13.35 8.89 7.36 4.23 Support staff 85.18% 79.76% 71.85% 65.32% Operating cost as % of medical revenue $4,926,461 $3,910,725 $3,288,839 $2,162,498 Medical revenue $10,182,290 $7,736,067 $4,995,615 $4,031,922 Gross charges 90th %tile 75th %tile Median 25th %tile   Per FTE physician (2005 Cost Survey Based on 2004 Data)
  • 8. Advantages of Benchmarking <ul><li>Where is the opportunity? </li></ul><ul><li>How much? </li></ul><ul><li>Starting point for change? </li></ul>
  • 9. Profit Improvement Objectives (Are you voluntarily limiting profitability by not optimizing return on overhead?) <ul><li>Improve revenue </li></ul><ul><li>Reduce, or realistically control cost </li></ul><ul><li>Simple concepts, but we forget </li></ul><ul><li>No single action, but combination of – multiple actions </li></ul>
  • 10. Incremental Revenue Should you accept poor paying contract? Obvious answer – No! Practical answer – project the numbers! ? Participate, or not? Current practice Proposed 50% Payor B 70% Payor A 80% Medicare 58% Health Plan Contracts and % of fee
  • 11. Practice A – Full practice (limited access) Answer – no Practice B – needs patients, but cost would increase Answer – maybe Practice C – needs patients, minimal increased cost, physician willing to increase volume Answer – YES!
  • 12. Volume Problems (inadequate patient base) <ul><li>Access: </li></ul><ul><ul><li>Who controls the appointments? </li></ul></ul><ul><ul><li>Convenience vs. productivity </li></ul></ul><ul><ul><li>Convenience for: </li></ul></ul><ul><ul><ul><li>Physicians </li></ul></ul></ul><ul><ul><ul><li>Staff </li></ul></ul></ul><ul><ul><ul><li>Patients </li></ul></ul></ul><ul><ul><li>Hours/days </li></ul></ul><ul><li>Marketing: </li></ul><ul><ul><li>Do you have a hook? </li></ul></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Patient network </li></ul></ul>
  • 13. Staff Cost <ul><li>Major cost (10% - 30% of revenue) </li></ul><ul><li>Set the hours – avoid overtime </li></ul><ul><li>Part-time/full-time </li></ul><ul><li>Out source (billing service, MSO, transcription) </li></ul><ul><li>Midlevel – cost reality </li></ul>
  • 14. Staffing *Reference: Elizabeth Woodcock 2004 70 – 90 patients/day Check-out with scheduling and cashiering 70 – 90 patients/day Check-out with scheduling and charge entry 75 – 100 patients/day Site check-in with registration verification and cashiering only 60 – 80 patients/day Check-out with follow-up scheduling, charge entry and cashiering 60 – 80 patients/day Pre- or site registration with insurance verification 100 – 130 patients/day Check-in with registration verification only 70 – 90 patients/day Referral specialist (inbound or outbound referrals) 50 – 75 calls/day Appointment scheduling with full registration 75 – 125 calls/day Appointment scheduling with no registration 300 – 400 calls/day Telephones with messaging
  • 15. Billing performance benchmarks <ul><li>Billing FTE/provider </li></ul><ul><li>Cost of billing (% of net revenue) </li></ul><ul><li>Annual claims/FTE </li></ul><ul><li>Accounts worked/day </li></ul><ul><li>Encounters worked/day </li></ul><ul><li>Payments posted/day </li></ul><ul><li>.75 FTE </li></ul><ul><li>7-9% </li></ul><ul><li>6,700 </li></ul><ul><li>60-70 </li></ul><ul><li>130-140 </li></ul><ul><li>500 </li></ul>Source: Collation of MGMA, Physicians Practice, Camden. Note: Billing includes charge entry.
  • 16. Communications: Your Patients Are Online <ul><li>7.2 million consumers visited physician web sites over 3 months in 2002 </li></ul><ul><li>Compares to 2.5 million over same period for 2001 </li></ul><ul><li>Want more than “electronic business cards” on physician sites </li></ul><ul><ul><li>Clinical info </li></ul></ul><ul><ul><li>Automated appointments </li></ul></ul><ul><ul><li>Electronic prescription refills </li></ul></ul>
  • 17. www.patienteducationcenter.org
  • 18. Web service providers <ul><li>www.max.md </li></ul><ul><li>www.medfusion.net </li></ul><ul><li>www.nexsched.com </li></ul><ul><li>www.practisinc.com </li></ul><ul><li>www.relayhealth.com </li></ul>
  • 19. Billing structures <ul><li>Centralized </li></ul><ul><ul><li>Encounter slips route to billing office for charge posting and time of service payment posting </li></ul></ul><ul><ul><li>Follow up by billing office </li></ul></ul><ul><li>Decentralized </li></ul><ul><ul><li>Charges posted at check out </li></ul></ul><ul><ul><li>Follow up scattered among departments </li></ul></ul><ul><li>Hybrid </li></ul><ul><ul><li>Charges posted at check out </li></ul></ul><ul><ul><li>Payments and follow up centralized </li></ul></ul>
  • 20. Details of success <ul><li>Collect co-pays in advance of service </li></ul><ul><li>Professional coders </li></ul><ul><li>Denial analysis </li></ul><ul><li>Longevity = experience </li></ul><ul><li>Combination of point of service and batch method of data entry </li></ul><ul><li>Electronic submission and remittance </li></ul><ul><li>Monitor and communicate </li></ul>
  • 21. Cost management <ul><li>Costs identified – service lines </li></ul><ul><li>Reduce manual efforts and use reporting tools – add-ons to practice management system </li></ul><ul><li>ROI on collections calls to patients </li></ul><ul><li>Gap-itis costs – automate appointment reminder calls and cancellation lists </li></ul><ul><li>Nursing time and paperwork </li></ul>
  • 22. Time/cost spent per FTE physician 2004 MGMA – Analyzing cost of administrative complexity in group practice (www.mgma.com/gprn) $375 25.8 Support staff time on phone with pharmacies - formulary $20,570 Total cost per year $925 63.8 Support staff time resubmitting denied claims $3,876 267.3 Support staff time verifying patient coverage/copayment/deductibles $1,636 16.4 Physician time on phone with pharmacies – other $8,083 80.8 Physician time on phone with pharmacies – Rx refills $1.442 14.4 Physician time on phone with pharmacies – Rx substitutions (generic) $1,570 15.7 Physician time on phone with pharmacies – formulary issues $390 26.9 Support staff time on phone with pharmacies – other issues $1,929 133.0 Support staff time on phone with pharmacies – Rx refills $344 23.7 Support staff time on phone with pharmacies – Rx substitutions (generic) Cost/FTE Hours/year Per FTE physician
  • 23. Cost management example: Internal collectors effectiveness
  • 24. Internal controls <ul><li>Budget variance reporting </li></ul><ul><li>Post-investment audit </li></ul><ul><li>Bulletin board indicators </li></ul><ul><li>Per cent of patient pre-registrations and verifications </li></ul><ul><li>Per cent of copays collected at time of service </li></ul>
  • 25. Reports as management tools <ul><li>Monitor </li></ul><ul><ul><li>Trends </li></ul></ul><ul><ul><li>Duty of curiosity </li></ul></ul><ul><li>Decision making </li></ul><ul><li>Project impact </li></ul><ul><li>Measure and monitor </li></ul><ul><li>Decision making </li></ul>
  • 26. Metrics to Manage 93.3 97 87 96 93.3 1120 Xray studies 679.0 675 670 692 686.8 8241 Lab procedures 103.7 111 92 108 102.9 1235 You name the service 1080.7 1122 1006 1114 1024.7 12296 Total encounters 956.7 987 892 991 915.2 10982 Est. patient visits 19.7 23 17 19 18.8 226 Office consults 33.3 37 27 36 31.0 372 New Patient visits Running monthly avg Nov Oct Sept Prior Year Monthly Avg Prior Year Totals Office services
  • 27. Metrics to Manage 99.0% 94.8% 107.5% 95.7% 98.5% 98.5% Net collection ratio $1,137 $6,453 ($8,169) $5,128 n/a $20,043 Change in A/R $235,859 $237,438 $230,985 $239,154 n/a $234,026 Ending A/R $115,596 $116,662 $116,374 $113,752 $108,518 $1,302,223 Net collections ($1,910) ($1,744) ($2,066) ($1,920) ($1,868) ($22,415) Receipt adjustments $117,506 $118,406 $118,440 $115,672 $110,386 $1,324,638 Gross collections $116,733 $123,115 $108,205 $118,880 $110,184 $1,322,266 Adjusted charges ($19,523) ($20,100) ($20,050) ($18,420) ($15,612) ($187,344) Insurance write-offs ($3,065) ($3,080) ($3,155) ($2,960) ($2,713) ($32,500) Adjustments $139,322 $146,295 $131,410 $140,260 $128,509 $1,542,110 Gross charges $234,722 $230,985 $239,154 $234,026 n/a $213,983 Beginning A/R Running monthly avg Nov Oct Sept Prior Year Monthly Avg Prior Year Totals Financial Data
  • 28. Metrics to Manage 100.00% $234,621 $237,438 $227,269 $239,156 100.00% $233,956 Total 16.84% $39,517 $39,355 $39,355 $39,842 14.47% $33,864 >120 days 5.19% $12,183 $10,596 $10,596 $15,358 9.30% $21,764 91-120 days 15.26% $35,794 $35,269 $35,598 $36,514 15.00% $35,104 61-90 days 21.84% $51,243 $54,104 $48,365 $51,260 22.31% $52,188 31-60 days 40.87% $95,884 $98,114 $93,355 $96,182 38.91% $91,036 Current Mthly Avg Percent of Total Running monthly avg Nov Oct Sept Percent of Total Prior Year Totals A/R Aging
  • 29. Performance and Practices of Successful Medical Groups: 2005 Report Based on 2004 Data 47.75% 55.26% 65.56% 63.64% 51.65% Reimbursement to contract terms by payer 66.67% 72.37% 88.89% 77.27% 70.33% Patient visits per physician 39.19% 39.47% 52.22% 47.73% 35.16% No shows and cancellations 28.83% 37.50% 46.67% 38.64% 37.36% Next available appointment time by physician 32.43% 33.55% 40.00% 31.82% 34.07% Claims processed by billing staff 32.43% 32.24% 41.11% 31.82% 29.67% Claim denial rates by payer Others All Better Performers Patient satisfaction Better Performers Accounts receivable management Better Performers Productivity, capacity, and staffing Better Performers Performance areas measured
  • 30. Operational and business discipline <ul><li>Critical concepts </li></ul><ul><ul><li>Sound financial management to ensure profitability </li></ul></ul><ul><ul><li>Perfect operational methods </li></ul></ul><ul><li>Sample behaviors </li></ul><ul><ul><li>Annual budget and business planning </li></ul></ul><ul><ul><li>Incorporate financial goals into strategic plan </li></ul></ul><ul><ul><li>Monitor against budget </li></ul></ul><ul><li>Essential metrics </li></ul><ul><ul><li>Revenue/collections </li></ul></ul><ul><ul><li>Total operating expense and as percent of revenue </li></ul></ul><ul><ul><li>Staff per FTE physician </li></ul></ul><ul><ul><li>Accounts receivable aging </li></ul></ul><ul><ul><li>Denial rates </li></ul></ul><ul><ul><li>Payer mix </li></ul></ul><ul><ul><li>Revenue and expense per RVU </li></ul></ul>
  • 31. Incremental change <ul><li>How do you become a better performing practice? </li></ul><ul><ul><li>Where would you start? </li></ul></ul><ul><li>Focus, focus, focus </li></ul><ul><ul><li>No more than 3 objectives </li></ul></ul><ul><li>Write goal and action steps </li></ul><ul><ul><li>List areas for focus </li></ul></ul><ul><ul><li>Prioritize and develop rationale </li></ul></ul>
  • 32. Successful groups assess strategy and evaluate implementation <ul><li>Identify specific goals and objectives </li></ul><ul><ul><li>Identify methods to overcome anticipated barriers </li></ul></ul><ul><li>Identify concrete tactics and actions to achieve goals </li></ul><ul><li>Commit to the physical and human resources needed to support the tactics </li></ul><ul><li>Establish objective measurement criteria to monitor progress </li></ul>
  • 33. MGMA Cost Survey Says… <ul><li>Physician comp method that rewards productivity </li></ul><ul><li>Good communication among physicians, administrators, staff </li></ul><ul><li>Effective physician-administrator management team </li></ul><ul><li>Clearly defined roles and responsibilities for physicians, administrators, staff </li></ul><ul><li>Budgeting and control systems to monitor performance (group knows cost of doing business) </li></ul><ul><li>Decision-making delegated to executive committee, even in smallest practices </li></ul><ul><li>Clinical staff, business office and physicians that focus on customer service </li></ul><ul><li>Physicians and staff who place significant emphasis on quality of care, reputation and patient satisfaction </li></ul><ul><li>Supervisors who are empowered to be decision-makers, held accountable for productivity and cost-efficiency </li></ul>
  • 34. Better Performing Practices: That which gets measured gets managed.
  • 35. Thank You We appreciate the opportunity of speaking with you today. If we can be of assistance to you in the future, please do not hesitate to contact the MGMA Health Care Consulting Group www.mgma.com. Rosemarie Nelson, MS Principal, MGMA Health Care Consulting Group [email_address] 315-391-2695

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