In recent years, physicians and their practice administrators have had to manage a lot of “building the plane while flying it” as the increase in regulatory and payer requirements has created new challenges for physician practice leadership. Unfortunately, the challenges traditionally facing leaders have also remained.
A recent Medical Group Management Association (MGMA) member survey ranks within its Top 10 the following daily challenges faced by practice administrators in 2015:
- Operating costs
- Payer reimbursement (especially Medicare)
- Collections
Here are some practical assessment tools to assist in managing these areas:
- Benchmarks – With numerous competing time requirements for physician administrators, this standard review and comparison may have fallen off the radar. An annual benchmark of practice costs and collections compared with industry peers of the same specialty can provide insights into areas that can be quickly addressed. To that end, we offer these recommendations:
- Assess the practice payer mix as compared to peers. Are there opportunities for outreach with particular referral sources that could shift the practice to higher reimbursing payers?
- Review each cost category, such as staffing, technology, malpractice insurance, and medical supplies. Develop an understanding of money spent and ascertain if there are opportunities for discounts or savings, or conversely, confirm that the practice compares favorably to peers in managing costs.
- When comparing staffing costs, first look at the staff-to-physician full-time equivalent (FTE) ratio. How does this metric compare to the top performing practices in the same specialty? Look further to compare the ratio by staffing category. Are there opportunities to reorganize the staff in order to reduce costs while improving quality patient care and increasing collections?
- How do the practice’s technology costs compare to those of peers in the same specialty? If higher, have recent Electronic Health Record (EHR) updates, ICD-10 preparations, or quality reporting requirements added to practice software costs? Reach out to your vendor to explore possible discounts or savings.
- For malpractice insurance costs, if you’ve not compared coverage costs in the past two years, now is the time to do so. In addition to gauging what you’re paying compared to the current market rates, you also can determine if there are premium credits or discounts for your providers based on patient safety or other educational programs.
- If the practice medical supplies’ costs are higher than those of peers, explore a group purchasing organization option.
- Trending – How is the current year practice performance compared to prior years? To make that determination:
- Analyze payer mix, collections, and charges by service category over time to understand any shifts in the business.
- Compare cost categories year-over-year and analyze significant changes.
- Practice checklist – Identify and assign a staff person the monthly responsibility of completing a routine practice maintenance checklist to ensure that key performance indicators are monitored and any unexpected changes are addressed as quickly as possible. Your checklist should include the following items:
- Provider productivity — total visits, new patient visits, procedures, or work relative value units (wRVUs).
- Collections — can be assessed by provider, by location, by service category, or by payer, as needed.
- Gross collection rate (GCR) — a percentage which reflects the amount of money that the practice has collected based on the charges submitted to insurance carriers and patient billings. The GCR is affected based on how charges (i.e., the fee schedule) are established in relation to payer reimbursement in an individual practice. When updating the practice fee schedule, confirm that each established charge amount is greater than the highest reimbursing payer for each CPT code in order to capture contracted allowables.
- Adjusted collection percentage (ACR) — reflects how much of the “collectible charges” the practice is actually collecting. ACR factors in payments and mandated adjustments, which are usually insurance write-offs and other practice/physician-negotiated discounts, divided by the practice’s charges.
- This is a good indicator of how well the practice is performing collection activities. It is expected that this ratio should range from 93% to 100% depending on timing differences of claims filings and payment receipt.
- Days in accounts receivable — reflects the number of days of average daily charges present within accounts receivable. This metric reflects the time lag between rendering a service and collecting payment for it. This metric will invariably lead to further analysis in payer mix or provider productivity changes in order to understand fluctuations.
- Total aging accounts receivable — can also be analyzed by provider, location, service category or payer, as needed.
PYA frequently performs practice assessments in all specialties and assists practice leadership in developing tools for monitoring key areas on an ongoing basis. For information about these and other physician services, contact the expert listed below at PYA (800) 270-9629.
