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more than 48 hours between the time the patient is seenand the claim is submitted to the insurance carrier.Additionally, the practice should aggressively collectpatient balances at the time of service.

Practices that perform at a high level tend to collectsomething from the patient 80 percent to 90 percent ofthe time and virtually 100 percent for copayments.Implement procedures so that you collect 100 percent ofpayments from payers within 45 days and pursue collec-tion efforts for patient balances within 60 days.

2. Proactively managepayer relationships

Make sure all of your payercontracts are filed, accessi-ble and organized. Go

through each of your payer contracts and create a gridthat summarizes the key components. Post copies of thegrid at the front desk and other areas throughout thepractice to be used as a reference in answering patientquestions and keeping the staff informed of major con-tract terms.

There is a wealth of information in the practice’sinformation system. Take the time to evaluate eachpayer’s performance and be prepared to show documen-tation of poor performance at the time of contract negoti-ations. Information that is readily available includes timebetween filing and date of service, payer mix, claimsdenials (timely filing, authorization), requests for addition-al information, average time for payer to pay claim andcoding and/or fee changes.

And finally, meet with your major payers at leastquarterly and begin the negotiation process three to fourmonths before the renewal date. Do your homework, andby providing performance documentation, you will be ina better negotiating position.

Physicians today face significant challenges in attempt-ing to run a successful practice. Pressures come fromlower reimbursement, staffing shortages and turnover,difficult receivables management, increasing expenses,more intrusive government regulation, cost of main-taining up-to-date information systems and the adventof increasing consumerism.

Physicians are especially feeling the impact of thecost of running a practice on their ability to generate anacceptable level of operating margin. According toMedical Group Management Association survey results,the median operating cost in a multispecialty practice was$154,884 per physician in 1986.

In 2001, this increased to $314,808. Had medicalcosts increased at the rate of inflation, the cost in 2001would have been $249,708 per physician.

In 1965, a multispecialty practice had 2.85 staff mem-bers per physician. By 2001, this increased to 5.19.During the same period, practice overhead increasedfrom 44.34 percent to 63.60 percent.

According to Regina Herlinger, Harvard BusinessSchool and author of Market Driven Healthcare, “Anearthquake is transforming our health care system. As itrumbles, a new landscape is emerging. If you can’t senseit, wake up—this quake is for real. It is caused by primalforces—powerful changes in socio-demographic charac-teristics, medical technology and organization structures.”

What is a physician to do? In spite of the challenges facing the physician, there

continue to be many successful practices that focus ontheir customers (payers, employers & patients), are disci-plined in their approach to operating their business andare acutely aware of all of the financial and operationalstatistics.

Let’s look at 10 ways that a practice can operate atan optimal level.

1. Billing, collections & accounts receivable

The key to successful performance in this area is to billevery day, take advantage of electronic filing and audit-ing and do it right the first time. There should be no

10 Ways to Ensure OptimalManagement of Your PracticeBy Rick E. Weymier, MBA, FACMPE

Practice Management

THE PHYSICIANEXECUTIVE SEPTEMBER•OCTOBER 2003 57

3. Invest in your staff

Staffing expense generally con-sumes between 20 percent and 30percent of all operating costs of aphysician practice. Your staff has amajor impact on how your patientsview the practice and on how wellnormal everyday tasks are performed.

According to MGMA surveyresults, better performing practiceshave more staff and higher operat-ing costs and better performers geta higher return on their humanresources. For minimal costs of aslow as $200 per employee per year,practices can find many local andregional educational opportunitiesthat will provide a multiple returnon this small investment.

Every position must have adetailed job description that notonly clearly outlines specific goalsand objectives, but also encouragescollaboration with other staff mem-bers. Practices of all sizes shoulddiscuss performance with staff on amonthly basis and have formalannual evaluations.

Regular communication andinvolving your staff in decisionmaking will yield substantially morefavorable results than operating ina dictatorial manner. Use mistakesas learning experiences and letthem have fun doing their jobs.

4. Coding

In my experience profilingphysician practices, I found that amajority of physicians tend to under-code, resulting in lost opportunity of10 percent to 15 percent of net rev-enues. Some of this is due to conser-vatism and the rest is due to poor oruntimely documentation practices.

Each practice should have atleast one certified coder and pro-vide adequate funds for trainingand updates to allow the coding

staff to maintain a high skill level. The practice should provide

each physician with a coding profileon a monthly basis comparing cod-ing performance to industry aver-ages and peers within the practice.Physicians should meet on a month-ly basis to review charts and discusscoding options based on actualpatient cases.

To ensure quicker and moreaccurate claims payment, manypractices proactively review codingprior to submitting claims.

5. Access

The health care industry isbecoming more consumer-driven andmany patients are beginning to expectphysician practices to mirror the serv-ice standards of other industries.

As the financial responsibility ofpaying for health care services shiftsto the patients, they will becomemore demanding and evaluate thevalue they receive based on thecost. The days of the simple $10copayment are going by the way-side. Patients will expect to havebetter access to their provider ofchoice, not have to wait a long timefor an appointment and be offeredmore flexibility in office hours.

The practice should look internal-ly to determine if its operating proce-dures are hindering or helping patientaccess. Areas to evaluate include thescheduling structure, triage, telephoneaccess, patient-to-provider continuityand hours of operation that matchpatient preference.

6. Reliability

Providing a safe and securerange of health care services isabsolutely critical in today’s envi-ronment of increased scrutiny andaccelerating cost of malpracticeinsurance. Physicians should takethe time to profile their patient baseand compare how they are eachtaking care of patients in the majordisease and surgical categories.

Consensus amongst the physi-cians in a group on how to managetheir patient population will con-tribute to a more consistent andsafer patient environment.

Practices should require partici-pation in risk management pro-grams, discuss the introduction ofnew technology, track each physi-cian’s continuing education focus,be able to document patient out-comes and ensure that all patients’preventive medicine requirementsare met and documented. It is notenough to wait for illnesses tooccur, as physician practices will beexpected to anticipate patient needsin the future.

7. Patient interaction

There is a direct correlationbetween patient satisfaction andhow the patient perceives the quali-ty of medicine that is delivered inthe health care setting. Practices thatappreciate their patient by project-ing respect, being attentive to theirneeds and valuing their time will

58 SEPTEMBER•OCTOBER 2003 THE PHYSICIANEXECUTIVE

engender a high degree of patientloyalty and compliance with treat-ment plans.

In addition to focusing on satis-fying the patient, the practiceshould operate smoothly with mem-bers of the medical group practiceby communicating freely and show-ing respect for each other.

Each member of the team has arole and the ability to contribute in apositive manner or have a negativeimpact on patient perception. Patientshave an acute sense of the environ-ment and operating like a dysfunc-tional family does not contribute topositive patient relationships.

8. Financial focus

No matter how small the prac-tice, it is essential to prepare anannual budget with regular and time-ly monthly financial reports and vari-ance analyses. Each physician in thepractice should be acutely aware ofthe numbers and be able to modifypractice performance in the eventthat improvement is required.

Many physician practices focusextensively on costs. About 80 per-cent of the costs in a practice arevirtually fixed, so a practice thatfocuses on optimizing its return onits fixed costs by generating addi-tional revenue will be more suc-cessful. A practice needs people,space and supplies to allow for ahigh level of patient throughput.

And finally, “cash is king.”Every member of the practice,including clinical staff, should con-tribute to ensuring maximum collec-tions for services rendered. Healthcare seems to have a tendency tofeel bad about collecting, but everyother business requires payment forservices rendered and goods sold.

9. Information systems

Physician practices should care-fully evaluate the functionality oftheir current system to ensure that itis being optimally used and that allstaff are thoroughly trained on itscapabilities.

Although many groups aremoving to more advanced informa-tion systems, information containedin traditional systems is often under-utilized. Practice management sys-tems contain a plethora of informa-tion on patient demographics, cod-ing patterns, disease categories,payer performance and other finan-cial and operational benchmarks.

Eventually, all practices will beforced to move to more sophisticat-ed electronic functionality. Thepractice should carefully reviewproduct offerings and take the timeto visit organizations that have suc-cessfully converted to the next gen-eration of systems.

A key factor to success is tonegotiate vendor performance stan-dards with strict measurement criteria,that include penalties for non-per-formance. As a transition strategy, practices should look at hand-helddevices that can assist the physicianin coding, documentation, hospitalcensus, prescriptions and medicalinformation.

10. Compliance & risk management

In recent times, most practicesfocused on the issues related toHealth Insurance Portability andAccountability Act readiness andimplementation. There are numer-ous businesses, consultants and oth-ers that developed a wide range ofproducts to assist practices in com-plying with this regulation at anaffordable price.

In addition to HIPAA, practicesneed to continue to focus on othercompliance and risk managementissues. An emphasis should beplaced on providing a safe environ-ment for patients and staff, fallingunder the purview of OccupationalSafety and Health Administrationregulations and Workers’Compensation.

Staff, physicians and otherproviders need to maintain theirlicensures and attend appropriatecontinuing education courses. It isessential that the practice keepinformed and up to date on Medicarefraud and abuse regulations.

And finally, hiring practices,infection control, narcotics controland other safety issues need to followlocal, state and federal regulations.

Rick E.Weymier, MBA, FACMPE, isdirector of clinical consulting andphysician services at VHA, Inc., anationwide network of community-owned health care organizations andphysicians. He is based in Irving,Texas and can be reached at 972-830-0298 or at rweymier@vha.com.