The following diagram indicates which areas of operations should be examined based on the practice’s patient volumes and revenue when compared to benchmarks. For example, if both volume and revenue are above industry medians, initial focus should be on reviewing the practice’s expenses.
This quick assessment can provide an immediate evaluation of a practice’s performance and can help leadership focus and prioritize resources in areas with the most potential for significant improvement of bottom line performance.
Based on the assessment’s initial results, group leadership should examine the following areas for further evaluation:
Expenses
Staffing costs are typically the most significant expense of the practice. Hospitals that are subsidizing underperforming practices must take a more dramatic approach than simply monitoring expense levels compared to benchmarks. For example, if the practice were to be recreated from scratch, how many staff would be necessary and what skill level would be required in each position? Can tasks be “pushed down” or reassigned to lower cost positions?
It is also important to consider what impact staffing or other reductions may have on productivity before making significant changes. “Doing less with less” will typically not improve an organization’s net financial performance.
Another significant expense is physician compensation. An examination of the relationship between physician compensation and productivity/sources of revenue is critical. Is the compensation structure rewarding appropriate utilization? Are physicians incentivized to help control practice expenses?
Productivity
Most underperforming practices have excess capacity and can see more patients without significantly increasing expenses. Physician tasks not directly related to providing patient care should be reassigned to less expensive staff positions. This reduces expenses and frees time for physicians to see more patients. Each additional patient added to the schedule without adding staff will generate revenue that falls straight to the bottom line.
Management must carefully assess patient access to the practice, as poor access can impact productivity. Implementation of approaches such as advanced access, use of e-mail, and e-visits can increase physician and staff productivity.
Demand
Practices cannot succeed without enough patients, and management should routinely monitor patient demand for services to effectively balance the supply of appointments.
If the practice suffers from low patient demand, the options are to either reduce supply by cutting back on providers and staff or attempt to increase patient demand. Not only can demand be increased with traditional marketing efforts, but it can also be increased by actively managing the care of patients. EMRs and disease registries facilitate the ability to monitor patients’ treatment for chronic disease or receipt of preventive care. Reminder systems and patient education programs can go a long way to maintaining patient contact and assuring appropriate care management. How accessible is the practice’s website? Is the practice Internet-ready? Many physicians are using patient portals and social networking sites to introduce themselves or maintain communication with patients.
Revenue cycle
To ensure that the practice is receiving all of the revenue due, management must actively monitor key performance indicators such as accounts receivable (A/R) aging, collections at the time of service, net revenue per visit, billing staff productivity, and billing error rates.
Underperforming practices should carefully review every aspect of the revenue cycle to identify areas for improvement. This review should include contract negotiation, patient registration, provider documentation/coding, charge entry, claims submission, payment posting, and follow-up. The processes and procedures during each step must be observed and evaluated to ensure that information is accurately captured and recorded.
Contracts with health plans and IPAs should be evaluated annually to ensure that reimbursement levels are competitive. Plans that have low patient volume and low reimbursement should be considered for termination if plans refuse to increase their rates. Given today’s high deductible plans, the practice’s policies for cash patients may need refreshing. Availability of credit card payments, collection at the time of service, and a discount policy for cash-only patients are all essential.
Coding and documentation
A practice cannot succeed financially if physicians do not accurately document and code their work. Practices must compare physicians’ coding distributions against national benchmarks to identify potential outliers. The average wRVUs per visit is another good measure of physicians’ patient acuity and coding. Regular education and training help physicians accurately code their encounters and also assure compliance standards are met.
As pay-for-performance initiatives pick up steam, the accurate documentation of patient diagnoses and treatment is increasingly important. Effective participation (and rewards) in PQRI (Medicare) or private payers’ performance initiatives means paying attention to the accurate collection of data, as well as discussing how to improve outcomes.
Summary
Assessing a practice’s high-level performance can help focus limited resources on specific areas for improvement, dramatically improving financial performance and helping ensure the viability, growth, and success of the physician enterprise.
For more strategies to improve underperforming hospital-affiliated practices, please contact Marc Mertz at (310) 320-3990 or mmertz@thecamdengroup.com.
For more information or to sign up for complimentary issues of The Camden Quarterly, please visit www.thecamdengroup.com.
