Physician Strategy News: February '08
Physician Practice "Check-ups"
As an executive with a hospital that employs physicians, you want to know about the overall health of those practices. Perhaps, you feel that something just isn't right, but you can't put your finger on it.
- Your charges seem low. Are your providers as productive as they should be? Are you losing charges because of a system flaw? Are your providers under-coding?
- Are cash collections low? Do you have enough billing and collections staff? Is your staff working payer denials appropriately?
- Is your office too big? Is it draining revenue from the bottom line?
- Are your days in accounts receivable too high?
The number of potential deficiencies within a medical practice can be perplexing and require a systematic approach in investigation. Healthcare Strategy Group has years of experience in investigating, detecting, and prescribing solutions to what ails physician practices. Below are measures that we suggest you employ when diagnosing and remedying the ailments of physician practices:
- Observations: Direct observation of patient flow and practice operations is a must.
- Note the efficiency with which patients are moved from the waiting room to the exam room. Are there any "bottlenecks" that hinder the flow of patients through the office?
- Observe how check-in and check-out employees interact with patients. Are they courteous and helpful? Do they represent the desired first impression for the practice? Do they verify and update patient address and insurance information so that the billing process is clean and error free?
- Monitor collection of co-pays and patient balances. This is the best time to collect such balances.
- Interviews: Face-to-face interviews with the practice's providers and staff are invaluable.
- Interviews often reveal system deficiencies, understaffing, insufficient training, personal interaction issues, etc.
- Often staff members will have ideas that can fix problems in their work area.
- Data collection: Financial and production data must be collected and evaluated, including:
- Income statement from the last 12 months. Statement can come from the practice's accountant or from accounting software utilized by the practice.
- Balance sheet that corresponds to the same period ended as the income statement.
- Practice management system reports.
- Provider productivity reports, by CPT billing code, units, charges, adjustments, and payments by provider.
- Accounts receivable aging reports displaying practice A/R by aging cohort (i.e., current, 31 to 60 days, 61 to 90 days, 91 to 120 days, and 121 days and above).
- Productivity reports by payer/payment classification. CPT codes including corresponding units, charges, adjustments, and payments by payer/payment classification.
- A/R aging reports by payer displaying practice A/R by aging cohort by payer.
- The practice's fee schedule.
- Employee and payroll reports. These reports should detail each employee's position, status (full-time vs. part-time), hours worked, annual salary (include hourly rate if hourly employee), payroll expenses (FICA, FUTA, Federal, State, local income taxes, etc.), and benefits (i.e., retirement plan contributions, health, disability, and life insurance costs).
- Data analysis and benchmarking In order to begin diagnosing potential problems within the practice, measures must have a point of reference. There are two primary points of reference that practices can be benchmarked against - historical performance of the practice itself and the practice's peers. Such data helps answer questions like: How did we do last year? How are similar practice's performing? What is different from last year? What are our peers doing that we are not?
- Benchmarking requires utilization of the data collected in calculation of various percentages, ratios, and averages. Indices most often employed by Healthcare Strategy Group include:
- Financial ratios and A/R measures:
- Net worth;
- Current ratio;
- Debt to equity ratio;
- Debt ratio;
- Return on total assets ratio;
- Days in A/R;
- Gross fee for service collection percentage; and
- Adjusted fee for service collection percentage.
- Productivity measures:
- Gross fee for service charges per provider (excluding technical component charges);
- Gross fee for service collections per provider (excluding technical component collections);
- Number of ambulatory and hospital encounters per provider;
- Surgical cases per provider;
- Work relative value units (wRVUs) per provider.
- Operating costs as a percentage of revenue for select cost categories:
- Total support staff cost;
- Information technology;
- Medical and surgical supply;
- Building and occupancy;
- Furniture and equipment;
- Administrative supplies and services;
- Professional liability insurance;
- Outside professional fees;
- Promotion and marketing;
- Miscellaneous operating costs;
- Total operating cost;
- Non physician provider cost;
- Physician cost; and
- Total cost.
- Benchmarking data sources
MGMA's surveys are largely regarded as the leading sources for physician practice data and serve as the primary benchmark sources utilized by the Healthcare Strategy Group. MGMA surveys contain definitions for the operating cost categories previously highlighted. They also contain formulas for the calculation of ratios and percentages outlined above. Below is a more comprehensive list of resources that may be useful, including the relevant MGMA reports.
- Medical Group Management Association (MGMA) Physician Compensation and Production Survey;
- MGMA Cost Survey;
- Sullivan, Cotter & Associates, Inc.
- Merritt, Hawkins, & Associates
- Medical Specialty Boards
- State Organizations
- Internal Benchmarks/Budget Targets
- Experience
- Historical Standards/Performance
- Hay Group
- Hospital and Healthcare Compensation Services Phys Comp and Productivity Survey
- William M. Mercer Integrated Health Networks Compensation Survey
- American Medical Group Association (AMGA) Annual Compensation and Productivity Survey
- Warren Surveys
If you feel that attempting to self-diagnose is less than optimal, please contact Healthcare Strategy Group about performing a practice operating assessment of your independent or hospital employed practice.
For more information call Neal Barker at (502) 814-1189.
