Physician Practices Today – Business Realities & Opportunities

1. Physician Practices Today – Business Realities & Opportunities Rosemarie Nelson, MS Principal, MGMA Health Care Consulting Group October 2006

2. Best Business Practices • Definition: a proven service, function, or process that has been shown to produce superior outcomes or results in benchmarks that meet or set a new standard. • Best: optimal for organization given its patients, mission, community, culture and external environment • Trends

3. Dynamic relationship • More revenue Higher operating costs • Operating expense increases Total profit rises • How is it managed? Productivity Profit Expenses Revenue

4. Better PerformerFindings: • Overall effectiveness of physician/administrative team critical • Commonality of expectations between physicians • Motivation of physicians thru productivity based compensation • BP administrators on incentive based compensation • Regular physician/staff training to ensure coding compliance

5. Selection criteria by performance area:

6. Opportunity • Thesis – “There are no perfect solutions” • “Nothing achieves 100%” • “Many small changes add up” • If others can improve, why not your practice?

7. Benchmarking- MGMA Hematology/Oncology (where you stand vs. the rest of the world)

8. Advantages of Benchmarking • Where is the opportunity? • How much? • Starting point for change?

9. Profit Improvement Objectives(Are you voluntarily limiting profitability by not optimizing return on overhead?) • Improve revenue • Reduce, or realistically control cost • Simple concepts, but we forget • No single action, but combination of – multiple actions

10. Incremental Revenue Should you accept poor paying contract?Obvious answer – No!Practical answer – project the numbers! Proposed 50% ? Participate, or not? Payor B 70% Health Plan Contracts and % of fee Payor A 80% Current practice Medicare 58%

11. Practice A – Full practice (limited access)Answer – noPractice B – needs patients, but cost would increase Answer – maybePractice C – needs patients, minimal increased cost, physician willing to increase volume Answer – YES!

12. Volume Problems(inadequate patient base) • Access: • Who controls the appointments? • Convenience vs. productivity • Convenience for: • Physicians • Staff • Patients • Hours/days • Marketing: • Do you have a hook? • Cost • Patient network

13. Staff Cost • Major cost (10% - 30% of revenue) • Set the hours – avoid overtime • Part-time/full-time • Out source (billing service, MSO, transcription) • Midlevel – cost reality

14. Staffing *Reference: Elizabeth Woodcock 2004

15. Billing FTE/provider Cost of billing (% of net revenue) Annual claims/FTE Accounts worked/day Encounters worked/day Payments posted/day .75 FTE 7-9% 6,700 60-70 130-140 500 Billing performance benchmarks Source: Collation of MGMA, Physicians Practice, Camden. Note: Billing includes charge entry.

16. Communications: Your Patients Are Online • 7.2 million consumers visited physician web sites over 3 months in 2002 • Compares to 2.5 million over same period for 2001 • Want more than “electronic business cards” on physician sites • Clinical info • Automated appointments • Electronic prescription refills

17. www.patienteducationcenter.org

18. Web service providers • www.max.md • www.medfusion.net • www.nexsched.com • www.practisinc.com • www.relayhealth.com

19. Billing structures • Centralized • Encounter slips route to billing office for charge posting and time of service payment posting • Follow up by billing office • Decentralized • Charges posted at check out • Follow up scattered among departments • Hybrid • Charges posted at check out • Payments and follow up centralized

20. Details of success • Collect co-pays in advance of service • Professional coders • Denial analysis • Longevity = experience • Combination of point of service and batch method of data entry • Electronic submission and remittance • Monitor and communicate

21. Cost management • Costs identified – service lines • Reduce manual efforts and use reporting tools – add-ons to practice management system • ROI on collections calls to patients • Gap-itis costs – automate appointment reminder calls and cancellation lists • Nursing time and paperwork

22. Time/cost spent per FTE physician 2004 MGMA – Analyzing cost of administrative complexity in group practice (www.mgma.com/gprn)

23. Cost management example: Internal collectors effectiveness

24. Internal controls • Budget variance reporting • Post-investment audit • Bulletin board indicators • Per cent of patient pre-registrations and verifications • Per cent of copays collected at time of service

25. Reports as management tools • Monitor • Trends • Duty of curiosity • Decision making • Project impact • Measure and monitor • Decision making

26. Metrics to Manage

27. Metrics to Manage

28. Metrics to Manage

29. Performance and Practices of Successful Medical Groups: 2005 Report Based on 2004 Data

30. Operational and business discipline • Critical concepts • Sound financial management to ensure profitability • Perfect operational methods • Sample behaviors • Annual budget and business planning • Incorporate financial goals into strategic plan • Monitor against budget • Essential metrics • Revenue/collections • Total operating expense and as percent of revenue • Staff per FTE physician • Accounts receivable aging • Denial rates • Payer mix • Revenue and expense per RVU

31. Incremental change • How do you become a better performing practice? • Where would you start? • Focus, focus, focus • No more than 3 objectives • Write goal and action steps • List areas for focus • Prioritize and develop rationale

32. Successful groups assess strategy and evaluate implementation • Identify specific goals and objectives • Identify methods to overcome anticipated barriers • Identify concrete tactics and actions to achieve goals • Commit to the physical and human resources needed to support the tactics • Establish objective measurement criteria to monitor progress

33. MGMA Cost Survey Says… • Physician comp method that rewards productivity • Good communication among physicians, administrators, staff • Effective physician-administrator management team • Clearly defined roles and responsibilities for physicians, administrators, staff • Budgeting and control systems to monitor performance (group knows cost of doing business) • Decision-making delegated to executive committee, even in smallest practices • Clinical staff, business office and physicians that focus on customer service • Physicians and staff who place significant emphasis on quality of care, reputation and patient satisfaction • Supervisors who are empowered to be decision-makers, held accountable for productivity and cost-efficiency

34. Better Performing Practices: That which gets measured gets managed.

35. Thank You We appreciate the opportunity of speaking with you today. If we can be of assistance to you in the future, please do not hesitate to contact the MGMA Health Care Consulting Group www.mgma.com. Rosemarie Nelson, MS Principal, MGMA Health Care Consulting Group RosemarieNelson@alum.syracuse.edu 315-391-2695