Evidence-based practice management.

Let's consider seven hypothetical solo-practice otolaryngologist located in different regions of the United States. They are able to compare themselves with each other in "apples to apples" terms because all seven physicians in this network use the same practice management software via the Internet. Comparing their financial data (figure) can be very instructive.

Amount of payment per RVU. Note that doctor 1 and doctor 7 charged and received approximately the same amount of money during the 90-day period, but doctor 7 needed to produce only 38%, of doctor 1's relative value units (RVUs) (1,310/3,471). We can conclude from this information that doctor 7's payer mix is better. Therefore, doctor 1 should investigate the contracted rates and specifics of doctor 7's reimbursement arrangement to determine if he can increase his compensation for services provided. The geographic practice index might account for a small portion of the discrepancy, but also note that doctor 7's average charge is much higher than doctor 1's ($406.44 vs. $178.26). This implies that doctor 7 has a higher surgical volume in his practice. In fact, doctor I has a large allergy practice, which means that his average charges are lower.

Doctor 6's average charge is 88% of doctor 7's ($357.54/$406.44). Doctor 6 received $101.55 per RVU Is 144,106.19/1,419), while doctor 7 received $185.20 per RVU ($242,616.50/1,310). A comparison of the practices of doctors 1,6, and 7 indicates that doctor 7's payer reimbursement is the best of the three. Doctor 7's practice can serve as a benchmark for improving reimbursement for all members of the network.

Improving collections. Doctor 6 received 71% of doctor 5's payments ($144K/$2(/2K), although the gap between their 90-day charges, average charges, and number of RVUs was not nearly as wide. This implies that doctor 5 has a better payer mix and/or a better collection system. Increasing the number of collections received at the time of service can have a dramatic influence on practice revenues. (1) Again, doctor 6 should study doctor 5's methods to learn how to improve his performance.

During the 90-day period, doctor 4 collected 57% of his outstanding charges ($189K/$333K). By contrast, doctor 3 collected only 44% ($166K/$381K). Also note that doctor 4's accounts receivable total is much higher than doctor 3's ($134K vs. $99K). It is known that doctor 4 pursues all collections to the end, including filing suits in small-claims courts for unpaid balances. It would be helpful to investigate whether doctor 4's collection strategy can explain his better performance, considering that the average charge and the number of RVUs in the two practices are similar.

Other factors. Doctor 1's practice generates the highest amount of revenue ($594K). He is known to have a larger office practice, whereas doctor 7, whose revenue is just slightly less ($593K), has a larger surgical practice. These practices can be compared on several levels: the number of full-time equivalents, the doctor's efficient use of time, and malpractice risks and insurance costs. The availability of additional data would likely generate other opportunities for comparison and might clarify some observations.

Comparing data obtained from geographically diverse practices that use the same database can be of tremendous service in terms of improving processes and profitability. In fact, such analyses can be extended to all areas of practice management.

Medical practice management is a true science, perhaps as much as the clinical practice of medicine. And as is the case with clinical medicine, using evidence-based information to make decisions is much preferred to intuition.

Figure. Sharing and comparing financial data with other
practices in a network gives less successful practices an
opportunity to improve.

               Charges        Payments
Client         90 days         90 days      A/R current

Doctor 1    $ 594,133.11    $ 248,375.75    $ 192,332.52
Doctor 2    $ 340,535.50    $ 125,725.49    $  69,732.77
Doctor 3    $ 381,465.12    $ 166,234.14    $  98,577.80
Doctor 4    $ 333,112.20    $ 188,982.56    $ 134,096.59
Doctor 5    $ 507,174.00    $ 201,981.61    $ 160,663.36
Doctor 6    $ 491,613.00    $ 144,106.19    $ 160,083.00
Doctor 7    $ 592,989.95    $ 242,616.50    $ 131,709.57

               Average
Client          charge          RVUs         $/RVU

Doctor 1    $  178.26         3,471         $  71.55
Doctor 2    $  244.81         1,464         $  85.87
Doctor 3    $  169.31         2,447         $  67.93
Doctor 4    $  148.51         2,451         $  77.10
Doctor 5    $  329.55         1,539         $ 131.24
Doctor 6    $  357.54         1,419         $ 101.55
Doctor 7    $  406.44         1,310         $ 185.20

Reference

(1.) Isenberg SF. Emphasize collection of copays while the patient is still in the office. Ear Nose Throat J 2003:82:758.

Dr. Isenberg is an otolaryngologist in private practice in Indianapoolis: [e-mail]