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PRE102: Optimizing Your Medical Practice: Current and Future Financial Performance Preconference

PRE102: Optimizing Your Medical Practice: Current and Future Financial Performance Preconference. Owen J. Dahl, MBA, FACHE, LSSMBB Annual Conference October 6, 2013. Objectives. Today’s Health Care Dollar. -------------------------$100.00 ---------------------------. $60.00 is collectable

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PRE102: Optimizing Your Medical Practice: Current and Future Financial Performance Preconference

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  1. PRE102: Optimizing Your Medical Practice: Current and Future Financial Performance Preconference Owen J. Dahl, MBA, FACHE, LSSMBB Annual Conference October 6, 2013

  2. Objectives

  3. Today’s Health Care Dollar -------------------------$100.00 --------------------------- $60.00 is collectable 50% overhead 50% for physicians take home Adjustments ($40.00): Medicare Medicaid Managed care $30.00 of total charges go home

  4. What is your vision/mission/core business • Office visits • Procedures • Ancillary revenue • All of the above • Type of patients seen • Diagnostic • Treatment • Chronic

  5. Accounting 101 • Cash • Record activities when cash is in hand • Accrual • Record activities when the transaction occurs

  6. Financial reporting

  7. Cash Basis Balance Sheet

  8. Accrual Basis Balance Sheet

  9. Income & ExpenseStatement

  10. Benchmark • Evaluate your practice in terms of best practice leading to improving some aspect of performance, function, financial or process improvement • Methodology • Identify problem areas • Identify how you did it before (how others do it) • Identify “leading edge” practices • Implement new and improved business practices

  11. Revenue

  12. What can I make? • Fee schedule • Sources of income • Medicare/Medicaid • Managed care • Traditional insurance • Patient

  13. Revenue – Top line • Driven by • Contracts • Time involved • Hours to sell • Others to support your effort • Services provided • Diagnostic procedures • Treatment • Niche market

  14. Top Line • New patients • Recruit • Advertise • Referral sources • Managed care contracts

  15. Top Line • New services • Expand by offering something totally new • Enhance by improving what is currently offered • Factors: • Experimental • Reimbursement • Training • Capital expenditure

  16. Top Line • Improve revenue • Collections • Managed care contract negotiations • Identify what contractual rates you are willing to receive, is Medicare sufficient? • Coding for service provided

  17. Top Line • Patient retention • Cost of loosing a patient • Common for business to loose 15 - 20% per year • Another use of protocols • Determine when patients should return, track • How • What benefits the patient? • “free visits”

  18. Expense

  19. Bottom Line • Cost management • Per service • Per visit • ABC • RVU • What things are you doing that make money? • What things loose money? • What is the desired target return?

  20. Overhead - allocated • Category PCP SCP • Staff 24% 16% • Occupancy 6% 4% • Malpractice 8% 15% • Supplies 6% 2%

  21. Bottom Line • Financial statement • Salaries • Occupancy costs • Malpractice • Supplies • Telephone • Phone • Marketing • All other • Percentages • 20%+ • 6 - 8% • 3 - 12% • 1 - 8% • 2 - 5% • 1% • 2% • to total 50% (or greater)

  22. Overhead Overhead = costs/medical revenue • $300,000 overhead costs and $1,000,000 revenue • $500,000 overhead costs and $2,000,000 revenue Which practice do you want to be?

  23. Overhead Employee 20+% Variable Watch overtime, staff well, hold people accountable Benefits – cost-sharing, capped plans Supplies – review systems, protocols, shop online Your own printing and desktop publishing Fixed Malpractice – don’t be over-insured, attend training Space utilization – are you in the right location Telecommunications – consolidate, eliminate (F/V)

  24. Overhead • Is the doctor overhead? A cost? • Overhead is your cost of doing business • In your practice is it too much? • Is it just right? • Measure by determining if you are getting the most out of your cost, the most from your staffing, etc.

  25. How much does it cost to see a patient?

  26. Careful when discussing costs How do you manage these issues? Clinically involve your physicians • Global = payer costs Vs. • Practice = daily costs of operation • Global = • DX • TX • Chronic

  27. Costs

  28. How to calculate cost $365,761 / 6250 = $58.52 Total expenses for period of time divided by number of patients seen in the same time period, e.g., one year.

  29. Assumptions

  30. Financial Statement

  31. Costs Graph $283,161 C O S T Variable Costs $82,600 Fixed costs Visits

  32. Office Visit Activity Only Remove Ancillary New Cost Per Visit $64.93

  33. Background look

  34. Cost per visit

  35. Cost per hour *Could include all hours worked and divide into total income (bottom line) to determine the “cost”

  36. Cost per visit / hour

  37. Cost per RVU and wRVU

  38. Break Even Analysis

  39. Managing Your Costs Employee 20+% Watch overtime (V) Staff well, hold people accountable (V) Benefits – cost-sharing, capped plans (V) Telecommunications cost – consolidate, eliminate (F/V) Malpractice – don’t be over-insured, attend training (F) Supplies – review systems, protocols (V) Shopping online (V) Your own printing and desktop publishing (V) Space utilization – are you in the right location (F)

  40. Tests and procedures in the office • Identify costs associated with this department • Staff, supplies = variable • Equipment and space = fixed • If possible, identify based on top 5 – 10 procedures done • Consider using RVU and apply all overhead to these processes as an option • Question: Return on investment = meeting expectations?

  41. Hospital activity • Carve out MA and most other clinic support • Retain billing costs • Key factor is time associated with visits • Consider the use of RVU • Questions: • Is the time to walk/drive back and forth factored in and does this service bring value to the practice? • Real question of cost benefit related to time: remember $190.50 is the total cost per hour (slide 21) • Is this a marketing effort or a direct financial return?

  42. Surgical Procedure • Goal: Total cost of this procedure • Number of visits • Office pre and post • Hospital • Time in operating room • Allocation of “overhead” • Awareness of options related to “total costs”, e.g., ambulatory center vs. hospital and the fact of who controls the decision • Protocol for global treatment plan = national standards or group standards? • Therapy – in office, separate cost vs. total cost

  43. Program for cost management Understand costs – create a culture of monitoring cost Establish cost reduction/control goals Benchmark Utilize data available internally as well Identify drivers of costs Drill down into the processes Insure that cost reduction/control goals are consistent with the overall vision and organizational goals

  44. Cost focus

  45. Future revenue

  46. Alternative Methods of Payment Fee for Service (FFS) FFS + Shared Savings Episode Payment Partial Comprehensive Care Payment + P4P Comprehensive Care (Global Payment) Capitation

  47. Major ways to pay for care …… Source: Sustaining The Medical Home: How Prometheus Payment Can Revitalize Primary Care

  48. Set Payment Levels Regulation = Medicare Price setting by Large payers = Medicare as base Negotiation between payers and providers Competition by providers Evidence based estimation – cost of each component estimated and combined

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