Managing Your Medical Practice

1. Managing Your Medical Practice Gregory L. Angstman, MD August 4, 2011

2. “What a privilege it is to be able to teach.” Dr. Charlie Mayo, 1919

3. Objectives:The beginning physician should have a basic understanding of management principals to: • Appreciate the importance of maintaining a balanced budget to insure practice vitality • Identify methods of tracking costs to increase income and cash flow • List three resources available to establish benchmarks

4. Physician Training in Practice Management • Residency: limited • Prior work experience, financial background • Personal interest • Consultants: $$$

5. Medical practice must be financially viable • Income • Expense • Productivity • Maintain Mayo quality • Staff morale • ? Quality-Prices-Customer Service

6. It’s About Value: Value = Quality/Cost Prove It ! Value = Outcomes/Cost + Service/Cost + Safety/Cost

7. Physician Productivity • Objective measure of the physician’s work and labor • Related to efficiency • Distinct from quality, service • Used to measure physician compensation

8. How do we measure productivity ? • Traditional: $$, numbers and types of patients, hours • Capitation: panel size, risk adjustment, ? • More recent: RBRVU (compare CRVS-1969)

9. Resourced Based Relative Value Scale • Evolved from California RVS • Harvard Study to quantify MC fee payments to physicians • Each CPT Code is assigned RVU • Advantage: independent of dollar effect • Disadvantage: dependent upon accurate CPT coding, not useful in capitated environment

10. RVU Reflect : • Time required to perform the service • Technical skill and physical effort • Mental effort and judgment • Psychological stress associated with the physician’s concern about iatrogenic risk to the patient

11. TOTAL RVU = WORK RVU X GPCI + PRACTICE EXPENCE RVU X GPCI + MALPRACTICE RVU X GPCIMULTIPLIER 2009 $36.066MEDICARE PAYMENT=TOTAL RVU X MULTIPLIER

12. Physician Compensation: • Fee for service, Productivity % • RVU based • Capitated • Salary • Mixed

13. Typical Physician Response • Work harder, see more patients, longer hours • Raise fees • Fire staff, spouse manages office • Cancel vacations, new car, summer camps for children • “Things will work out”

14. Physician Skills • Examine patient, make diagnosis, prescribe treatment • Use same tools to evaluate practice’s financial health

15. Process: • Gather data • Diagnostic tools • Normal values, benchmarks • Differential diagnosis • Patient management, practice management • Periodic re-evaluation

16. Select Benchmarks • Medical Economics surveys • AMA surveys Specialty organizations • Medical Group Management Association (mgma.com) $500.00 • American Medical Group Association (amag.org) • “Internal”—year to year, compare to self • Purchase benchmarks • No benchmark is exact, expressed in quartiles • Compare to similar practice and geography

17. Practice Management ConsultantCall for Help

18. Evaluate the Monthly Income Statement • Total Revenue • Expenses • Salaries, benefits • Medical supplies • Equipment • Rent • Insurance, legal, accounting • Retained earnings, cost of capital • Lab, X-ray fees • Telephone • Administration, marketing, office supply • Management fees • Charity care • Physician Distribution • Take an Accounting class

19. Financial Measures • Total gross charges per MD FTE, encounter, work RVU • Net medical revenue (NMR) per MD FTE, encounter, work RVU • Total physician expense per MD FTE, encounter, RVU as a % of NMR---efficiency measure • Total staff expenses… • Staff compensation… • Bad debt • Rent per square foot

20. Operational Measures • Annual and daily patient encounters, charges, RVU per MD FTE • Patient panel • RVU and charges per encounter • Patient care hours per day • New patients per month per MD • Staff per MD FTE • Age of charges entered • # Proc per MD per day • Distribution of E & M charges by MD

21. Example:Dr Cortese: Increase productivity 10%2004 • Work longer days • See more patients • Work smarter, not harder • Use technology • Collective and collaborative wisdom • Effective practice management

22. Evaluation of operational, production, and financial measures: • Decreased patient demand, 5 % • Reduce # level 1, 2 E & M charges • Increase # level 4, 5 E & M charges (with appropriate documentation) • Increase # procedures • Add Preventative Medicine E & M services • Add Home Health, Hospice, and Care Plan Oversight E & M services

23. Basic Formula (Collections/RVU) X (Total RVU) [Net Income] = Practice Expense [overhead] + Physician Salary + Physician Benefits

24. Responsibilities • Collections per RVU = Payer Mix & Billing Performance • Overhead management = Administration • RVU = Physician Performance & Coding

25. Change Practice Parameters • Periodic monitoring of changes and benchmarks • Is the cost worth the benefit • Some medical services for patient satisfaction / fun / MD convenience • Observe for unintended consequences • Admit mistakes and move on to next step

26. Summation • Control Overhead • Compare to National Benchmarks • Bill For Your Services • Appropriate documentation and coding of E & M and Proc • Collect What You Bill • Know Your $ per RVU