Physician Strategy News: March-April '07
Developing a Practice Management Infrastructure
While hospital executives are very skilled at running hospitals, they often fall short when trying to manage their employed physician groups. We see three primary contributors to this: 1) a lack of practice knowledge; 2) treating the practice like a hospital department; and 3) a failure to develop the necessary infrastructure required for the physicians to be successful. In this article, we’ll highlight and discuss the key infrastructure investments required.
KEY INVESTMENTS
There are nine key investments that the hospital must make when operating practices. These are:
- Practice administrator. If possible, select a manager experienced in working with the specialties you are employing. Each specialty has unique nuances, and prior knowledge is invaluable. No matter what, avoid placing a hospital employee in this role.
- Billing supervisor. Cash is the lifeblood of a practice. To minimize subsidies, it is crucial to have an effective leader in billing. Many practices outsource this capability, but they must still manage the patient registration and charge posting processes within the practice. A detail-oriented, almost compulsive, person is required for this role.
- Practice management system. The practice must have a system to drive its scheduling, charging, and billing, and that system must be able to produce good reports. While a significant investment is required, the right system will help to produce more cash in the practice. Some of this capital expense can be saved if the service is outsourced.
- Compensation model. Clearly defined physician compensation models, which include appropriate incentives, are a solid investment. Doing this work at the beginning will help to avoid conflict down the road and models that cannot be sustained.
- Practice environment/decor. The hospital must decide on its set of standards for office décor. In support of these standards, additional investment might be required when buying existing practices.
- Staff development. Staff development for this new operation is critical, both for the operational staff who control the patient’s experience and for the back office staff who often control the cash flow. Trying to save money on this aspect of the practice can be costly.
- IT/EHR. Investment in IT has many potential advantages, from better coordination of care with the hospital to improved care in the office. Many hospital employed practices have not focused on this issue, but with the growth of pay for performance systems for physicians, the focus must increase.
- Support Services. Allocation of hospital overhead to practices often creates controversy and concern among the physicians. Some support services, such as HR, maintenance, and accounting, may best be provided through the hospital. Decide early on if the practice will handle these tasks or purchase them from the hospital, and clearly define how costs will be allocated. This is crucial if it affects physician compensation.
- Legal and Accounting Costs. Avoid the temptation to bill through the hospital’s tax identification number. That will result in commingling of payments from insurers and will make production of practice financials more difficult. A small investment in legal and accounting fees can avoid this problem.
