Managing your new medical practice

1. Managing Your MedicalManaging Your Medical
PracticePractice
Gregory L. Angstman, MDGregory L. Angstman, MD
August 4, 2011August 4, 2011
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2. ““What a privilege it is to beWhat a privilege it is to be
able to teach.”able to teach.”
Dr. Charlie Mayo, 1919Dr. Charlie Mayo, 1919
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3. Objectives:Objectives:
The beginning physician shouldThe beginning physician should
have a basic understanding ofhave a basic understanding of
management principals to:management principals to:
• Appreciate the importance ofAppreciate the importance of
maintaining a balanced budget to insuremaintaining a balanced budget to insure
practice vitalitypractice vitality
• Identify methods of tracking costs toIdentify methods of tracking costs to
increase income and cash flowincrease income and cash flow
• List three resources available toList three resources available to
establish benchmarksestablish benchmarks
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4. Physician Training in PracticePhysician Training in Practice
ManagementManagement
• Residency: limitedResidency: limited
• Prior work experience, financialPrior work experience, financial
backgroundbackground
• Personal interestPersonal interest
• Consultants: $$$Consultants: $$$
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5. Medical practice must beMedical practice must be
financially viablefinancially viable
• IncomeIncome
• ExpenseExpense
• ProductivityProductivity
• Maintain Mayo qualityMaintain Mayo quality
• Staff moraleStaff morale
• ? Quality-Prices-Customer? Quality-Prices-Customer
ServiceService
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6. It’s About Value:It’s About Value:
Value = Quality/CostValue = Quality/Cost
Prove It !Prove It !
Value = Outcomes/Cost +Value = Outcomes/Cost +
Service/Cost +Service/Cost +
Safety/CostSafety/Cost
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7. Physician ProductivityPhysician Productivity
• Objective measure of the physician’s workObjective measure of the physician’s work
and laborand labor
• Related to efficiencyRelated to efficiency
• Distinct from quality, serviceDistinct from quality, service
• Used to measure physician compensationUsed to measure physician compensation
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8. How do we measureHow do we measure
productivity ?productivity ?
• Traditional: $$, numbers and types ofTraditional: $$, numbers and types of
patients, hourspatients, hours
• Capitation: panel size, risk adjustment, ?Capitation: panel size, risk adjustment, ?
• More recent: RBRVUMore recent: RBRVU
(compare CRVS-1969)(compare CRVS-1969)
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9. Resourced Based Relative ValueResourced Based Relative Value
ScaleScale
• Evolved from California RVSEvolved from California RVS
• Harvard Study to quantify MC feeHarvard Study to quantify MC fee
payments to physicianspayments to physicians
• Each CPT Code is assigned RVUEach CPT Code is assigned RVU
• Advantage: independent of dollar effectAdvantage: independent of dollar effect
• Disadvantage: dependent upon accurateDisadvantage: dependent upon accurate
CPT coding, not useful in capitatedCPT coding, not useful in capitated
environmentenvironment
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10. RVU Reflect :RVU Reflect :
• Time required to perform the serviceTime required to perform the service
• Technical skill and physical effortTechnical skill and physical effort
• Mental effort and judgmentMental effort and judgment
• Psychological stress associated with thePsychological stress associated with the
physician’s concern about iatrogenic riskphysician’s concern about iatrogenic risk
to the patientto the patient
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11. TOTAL RVU =TOTAL RVU =
WORK RVU XWORK RVU X
GPCIGPCI
++ PRACTICE EXPENCE RVU XPRACTICE EXPENCE RVU X
GPCIGPCI
++ MALPRACTICE RVU XMALPRACTICE RVU X
GPCIGPCI
MULTIPLIER 2009MULTIPLIER 2009 $36.066$36.066
MEDICARE PAYMENT=TOTAL RVU XMEDICARE PAYMENT=TOTAL RVU X
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12. Physician Compensation:Physician Compensation:
• Fee for service, Productivity %Fee for service, Productivity %
• RVU basedRVU based
• CapitatedCapitated
• SalarySalary
• MixedMixed
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13. Typical Physician ResponseTypical Physician Response
• Work harder, see more patients,Work harder, see more patients,
longer hourslonger hours
• Raise feesRaise fees
• Fire staff, spouse manages officeFire staff, spouse manages office
• Cancel vacations, new car, summerCancel vacations, new car, summer
camps for childrencamps for children
• ““Things will work out”Things will work out”
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14. Physician SkillsPhysician Skills
• Examine patient, make diagnosis,Examine patient, make diagnosis,
prescribe treatmentprescribe treatment
• Use same tools to evaluate practice’sUse same tools to evaluate practice’s
financial healthfinancial health
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15. Process:Process:
• Gather dataGather data
• Diagnostic toolsDiagnostic tools
• Normal values, benchmarksNormal values, benchmarks
• Differential diagnosisDifferential diagnosis
• Patient management, practicePatient management, practice
managementmanagement
• Periodic re-evaluationPeriodic re-evaluation
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16. Select BenchmarksSelect Benchmarks
• Medical Economics surveysMedical Economics surveys
• AMA surveys Specialty organizationsAMA surveys Specialty organizations
• Medical Group Management AssociationMedical Group Management Association
(mgma.com) $500.00(mgma.com) $500.00
• American Medical Group AssociationAmerican Medical Group Association
(amag.org)(amag.org)
• ““Internal”—year to year, compare to selfInternal”—year to year, compare to self
• Purchase benchmarksPurchase benchmarks
• No benchmark is exact, expressed inNo benchmark is exact, expressed in
quartilesquartiles
• Compare to similar practice andCompare to similar practice and
geographygeography
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17. Practice ManagementPractice Management
ConsultantConsultant
Call for HelpCall for Help
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18. Evaluate the Monthly IncomeEvaluate the Monthly Income
StatementStatement
• Total RevenueTotal Revenue
• ExpensesExpenses
– Salaries, benefitsSalaries, benefits
– Medical suppliesMedical supplies
– EquipmentEquipment
– RentRent
– Insurance, legal, accountingInsurance, legal, accounting
– Retained earnings, cost of capitalRetained earnings, cost of capital
– Lab, X-ray feesLab, X-ray fees
– TelephoneTelephone
– Administration, marketing, office supplyAdministration, marketing, office supply
– Management feesManagement fees
– Charity careCharity care
• Physician DistributionPhysician Distribution
• Take an Accounting classTake an Accounting class
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19. Financial MeasuresFinancial Measures
• Total gross charges per MD FTE,Total gross charges per MD FTE,
encounter, work RVUencounter, work RVU
• Net medical revenue (NMR) per MDNet medical revenue (NMR) per MD
FTE, encounter, work RVUFTE, encounter, work RVU
• Total physician expense per MD FTE,Total physician expense per MD FTE,
encounter, RVU as a % of NMR---encounter, RVU as a % of NMR---
efficiency measureefficiency measure
• Total staff expenses…Total staff expenses…
• Staff compensation…Staff compensation…
• Bad debtBad debt
• Rent per square footRent per square foot
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20. Operational MeasuresOperational Measures
• Annual and daily patient encounters,Annual and daily patient encounters,
charges, RVU per MD FTEcharges, RVU per MD FTE
• Patient panelPatient panel
• RVU and charges per encounterRVU and charges per encounter
• Patient care hours per dayPatient care hours per day
• New patients per month per MDNew patients per month per MD
• Staff per MD FTEStaff per MD FTE
• Age of charges enteredAge of charges entered
• # Proc per MD per day# Proc per MD per day
• Distribution of E & M charges by MDDistribution of E & M charges by MD
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21. Example:Example:
Dr Cortese: Increase productivity 10%Dr Cortese: Increase productivity 10%
20042004
• Work longer daysWork longer days
• See more patientsSee more patients
• Work smarter, not harderWork smarter, not harder
• Use technologyUse technology
• Collective and collaborative wisdomCollective and collaborative wisdom
• Effective practice managementEffective practice management
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22. Evaluation of operational,Evaluation of operational,
production, and financialproduction, and financial
measures:measures:
• Decreased patient demand, 5 %Decreased patient demand, 5 %
• Reduce # level 1, 2 E & M chargesReduce # level 1, 2 E & M charges
• Increase # level 4, 5 E & M charges (withIncrease # level 4, 5 E & M charges (with
appropriate documentation)appropriate documentation)
• Increase # proceduresIncrease # procedures
• Add Preventative Medicine E & MAdd Preventative Medicine E & M
servicesservices
• Add Home Health, Hospice, and CareAdd Home Health, Hospice, and Care
Plan Oversight E & M servicesPlan Oversight E & M services
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23. Basic FormulaBasic Formula
(Collections/RVU) X (Total RVU)(Collections/RVU) X (Total RVU)
[Net Income][Net Income]
==
Practice Expense [overhead] +Practice Expense [overhead] +
Physician Salary + Physician BenefitsPhysician Salary + Physician Benefits
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24. ResponsibilitiesResponsibilities
• Collections per RVU = Payer Mix & BillingCollections per RVU = Payer Mix & Billing
PerformancePerformance
• Overhead management = AdministrationOverhead management = Administration
• RVU = Physician Performance & CodingRVU = Physician Performance & Coding
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25. Change Practice ParametersChange Practice Parameters
• Periodic monitoring of changes andPeriodic monitoring of changes and
benchmarksbenchmarks
• Is the cost worth the benefitIs the cost worth the benefit
• Some medical services for patientSome medical services for patient
satisfaction / fun / MD conveniencesatisfaction / fun / MD convenience
• Observe for unintended consequencesObserve for unintended consequences
• Admit mistakes and move on to nextAdmit mistakes and move on to next
stepstep
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26. SummationSummation
• Control OverheadControl Overhead
– Compare to National BenchmarksCompare to National Benchmarks
• Bill For Your ServicesBill For Your Services
– Appropriate documentation andAppropriate documentation and
coding of E & M and Proccoding of E & M and Proc
• Collect What You BillCollect What You Bill
– Know Your $ per RVUKnow Your $ per RVU
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27. This platform has been started byThis platform has been started by
Parveen Kumar Chadha with theParveen Kumar Chadha with the
vision that nobody should suffer thevision that nobody should suffer the
way he has suffered because ofway he has suffered because of
lack and improper healthcarelack and improper healthcare
facilities in India. We need lots offacilities in India. We need lots of
funds manpower etc. to make thisfunds manpower etc. to make this
vision a reality please contact us.vision a reality please contact us.
Join us as a member for a nobleJoin us as a member for a noble
cause.cause.
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