10 Ways to ensure optimal management of your practice.

Physicians today face significant challenges in attempting to run a successful practice. Pressures come from lower reimbursement, staffing shortages and turnover, difficult receivables management, increasing expense more intrusive government regulation, cost of maintaining up-to-date information systems and the advent of increasing consumerism.

Physicians are especially feeling the impact of the cost of running a practice on their ability to generate an acceptable level of operating margin. According to Medical Group Management Association survey results, the median operating cost in a multispecialty practice was $154,884 per physician in 1986.

In 2001, this increased to $314,808. Had medical costs increased at the rate of inflation, the cost in 2001 would have been $249,708 per physician.

In 1965, a multispecialty practice had 2.85 staff members per physician. By 2001, this increased to 5.19. During the same period, practice overhead increased from 44.34 percent to 63.60 percent.

According to Regina Herlinger, Harvard Business School and author of Market Driven Healthcare, "An earthquake is transforming our health care system. As it rambles, a new landscape is emerging. If you can't sense it, wake up--this quake is for real. It is caused by primal forces--powerful changes in socio-demographic characteristics, medical technology and organization structures."

What is a physician to do?

In spite of the challenges facing the physician, there continue to be many successful practices that focus on their customers (payers, employers & patients), are disciplined in their approach to operating their business and are acutely aware of all of the financial and operational statistics.

Let's look at 10 ways that a practice can operate at an optimal level.

1. Billing, collections & accounts receivable 

The key to successful performance in this area is to bill every day, take advantage of electronic filing and auditing and do it right the first time. There should be no more than 48 hours between the time the patient is seen and the claim is submitted to the insurance carrier. Additionally, the practice should aggressively collect patient balances at the time of service.

Practices that perform at a high level tend to collect something from the patient 80 percent to 90 percent of the time and virtually 100 percent for copayments. Implement procedures so that you collect 100 percent of payments from payers within 45 days and pursue collection efforts for patient balances within 60 days.

2. Proactively manage payer relationships

Make sure all of your payer contracts are filed, accessible and organized. Go through each of your payer contracts and create a grid that summarizes the key components. Post copies of the grid at the front desk and other areas throughout the practice to be used as a reference in answering patient questions and keeping the staff informed of major contract terms.

There is a wealth of information in the practice's information system. Take the time to evaluate each payer's performance and be prepared to show documentation of poor performance at the time of contract negotiations. Information that is readily available includes time between filing and date of service, payer mix, claims denials (timely filing, authorization), requests for additional information, average time for payer to pay claim and coding and/or fee changes.

And finally, meet with your major payers at least quarterly and begin the negotiation process three to four months before the renewal date. Do your homework, and by providing performance documentation, you will be in a better negotiating position.

3. Invest in your staff

Staffing expense generally consumes between 20 percent and 30 percent of all operating costs of a physician practice. Your staff has a major impact on how your patients view the practice and on how well normal everyday tasks are performed.

According to MGMA survey results, better performing practices have more staff and higher operating costs and better performers get a higher return on their human resources. For minimal costs of as low as $200 per employee per year, practices can find many local and regional educational opportunities that will provide a multiple return on this small investment.

Every position must have a detailed job description that not only clearly outlines specific goals and objectives, but also encourages collaboration with other staff members. Practices of all sizes should discuss performance with staff on a monthly basis and have formal annual evaluations.

Regular communication and involving your staff in decision making will yield substantially more favorable results than operating in a dictatorial manner. Use mistakes as learning experiences and let them have fun doing their jobs.

4. Coding

In my experience profiling physician practices, I found that a majority of physicians tend to undercode, resulting in lost opportunity of 10 percent to 15 percent of net revenues. Some of this is due to conservatism and the rest is due to poor or untimely documentation practices.

Each practice should have at least one certified coder and provide adequate funds for training and updates to allow the coding staff to maintain a high skill level.

The practice should provide each physician with a coding profile on a monthly basis comparing coding performance to industry averages and peers within the practice. Physicians should meet on a monthly basis to review charts and discuss, coding options based on actual patient cases.

To ensure quicker and more accurate claims payment, many practices proactively review coding prior to submitting claims.

5. Access

The health care industry, is becoming more consumer-driven and many patients are beginning to expect physician practices to mirror the service standards of other industries.

As the financial responsibility of paying for health care services shifts to the patients, they will become more demanding and evaluate the value they receive based on the cost. The days of the simple $10 copayment are going by the wayside. Patients will expect to have better access to their provider of choice, not have to wait a long time for an appointment and be offered more flexibility in office hours.

The practice should look internally to determine if its operating procedures are hindering or helping patient access. Areas to evaluate include the scheduling structure, triage, telephone access, patient-to-provider continuity and hour of operation that match patient preference.

6. Reliability

Providing a safe and secure range of health care services is absolutely critical in today's environment of increased scrutiny and accelerating cost of malpractice insurance. Physicians should take the time to profile their patient base and compare how they are each taking care of patients in the major disease and surgical categories.

Consensus amongst the physicians in a group on how to manage their patient population will contribute to a more consistent and safer patient environment.

Practices should require participation in risk management programs, discuss the introduction of new technology, track each physician's continuing education focus, be able to document patient out comes and ensure that all patients' preventive medicine requirements are met and documented. It is not enough to wait for illnesses to occur, as physician practices will be expected to anticipate patient needs in the future.

7. Patient interaction

There is a direct correlation between patient satisfaction and how the patient perceives the quality of medicine that is delivered in the health care setting. Practices that appreciate their patient by projecting respect, being attentive to their needs and valuing their time will engender a high degree of patient loyalty and compliance with treatment plans.

In addition to focusing on satisfying the patient, the practice should operate smoothly with members of the medical group practice by communicating freely and showing respect for each other.

Each member of the team has a role and the ability to contribute in a positive manner or have a negative impact on patient perception. Patients have an acute sense of the environment and operating like a dysfunctional family does not contribute to positive patient relationships.

8. Financial focus

No matter how small the practice, it is essential to prepare an annual budget with regular and timely monthly financial reports and variance analyses. Each physician in the practice should be acutely aware of the numbers and be able to modify practice performance in the event that improvement is required.

Many physician practices focus extensively on costs. About 80 percent of the costs in a practice are virtually fixed, so a practice that focuses on optimizing its return on its fixed costs by generating additional revenue will be more successful. A practice needs people, space and supplies to allow for a high level of patient throughput.

And finally, "cash is king." Every member of the practice, including clinical staff, should contribute to ensuring maximum collections for services rendered. Health care seems to have a tendency to feel bad about collecting, but every other business requires payment for services rendered and goods sold.

9. Information systems

Physician practices should carefully evaluate the functionality of their current system to ensure that it is being optimally used and that all staff are thoroughly trained on its capabilities.

Although many groups are moving to more advanced information systems, information contained in traditional systems is often underutilized. Practice management systems contain a plethora of information on patient demographics, coding patterns, disease categories, payer performance and other financial and operational benchmarks.

Eventually, all practices will be forced to move to more sophisticated electronic functionality. The practice should carefully review product offerings and take the time to visit organizations that have successfully converted to the next generation of systems.

A key factor to success is to negotiate vendor performance standards with strict measurement criteria, that include penalties for non-performance. As a transition strategy, practices should look at hand-held devices that can assist the physician in coding, documentation, hospital census, prescriptions and medical information.

10. Compliance & risk management

In recent times, most practices focused on the issues related to Health Insurance Portability and Accountability Act readiness and implementation. There are numerous businesses, consultants and others that developed a wide range of products to assist practices in complying with this regulation at an affordable price.

In addition to HIPAA, practices need to continue to focus on other compliance and risk management issues. An emphasis should be placed on providing a safe environment for patients and staff, falling under the purview of Occupational Safety and Health Administration regulations and Workers' Compensation.

Staff, physicians and other providers need to maintain their licensures and attend appropriate continuing education courses. It is essential that the practice keep informed and up to date on Medicare fraud and abuse regulations.

And finally, hiring practices, infection control, narcotics control and other safety issues need to follow local, state and federal regulations.

Rick E. Weymier, MBA, FACMPE, is director of clinical consulting and physician services at VHA, Inc., a nationwide network of community-owned health care organizations and physicians. He is based in Irving, Texas and can be reached at 972-830-0298 or at [e-mail].