Managing Your Managing Your Medical PracticeMedical Practice

Gregory L. Angstman, MDGregory L. Angstman, MD

August 4, 2011August 4, 2011

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““What a privilege it is to What a privilege it is to be able to teach.”be able to teach.”

Dr. Charlie Mayo, Dr. Charlie Mayo, 19191919

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Objectives:Objectives:

The beginning physician should The beginning physician should have a basic understanding of have a basic understanding of management principals to:management principals to:

• Appreciate the importance of Appreciate the importance of maintaining a balanced budget to maintaining a balanced budget to insure practice vitalityinsure practice vitality

• Identify methods of tracking costs Identify methods of tracking costs to increase income and cash flowto increase income and cash flow

• List three resources available to List three resources available to establish benchmarksestablish benchmarks

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Physician Training in Physician Training in Practice ManagementPractice Management

• Residency: limitedResidency: limited

• Prior work experience, financial Prior work experience, financial backgroundbackground

• Personal interestPersonal interest

• Consultants: $$$Consultants: $$$

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Medical practice must be Medical practice must be financially viablefinancially viable• IncomeIncome

• ExpenseExpense

• ProductivityProductivity

• Maintain Mayo qualityMaintain Mayo quality

• Staff moraleStaff morale

• ? Quality-Prices-Customer ? Quality-Prices-Customer Service Service

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It’s About Value:It’s About Value:

Value = Quality/CostValue = Quality/Cost

Prove It !Prove It !

Value = Outcomes/Cost + Value = Outcomes/Cost +

Service/Cost + Service/Cost +

Safety/CostSafety/Cost

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Physician ProductivityPhysician Productivity

• Objective measure of the physician’s Objective measure of the physician’s work and laborwork and labor

• Related to efficiencyRelated to efficiency

• Distinct from quality, serviceDistinct from quality, service

• Used to measure physician Used to measure physician compensationcompensation

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How do we measure How do we measure productivity ?productivity ?

• Traditional: $$, numbers and types of Traditional: $$, numbers and types of patients, hourspatients, hours

• Capitation: panel size, risk Capitation: panel size, risk adjustment, ?adjustment, ?

• More recent: RBRVU More recent: RBRVU

(compare CRVS-1969)(compare CRVS-1969)

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Resourced Based Relative Resourced Based Relative Value ScaleValue Scale

• Evolved from California RVSEvolved from California RVS

• Harvard Study to quantify MC fee Harvard Study to quantify MC fee payments to physicianspayments to physicians

• Each CPT Code is assigned RVUEach CPT Code is assigned RVU

• Advantage: independent of dollar effectAdvantage: independent of dollar effect

• Disadvantage: dependent upon Disadvantage: dependent upon accurate CPT coding, not useful in accurate CPT coding, not useful in capitated environmentcapitated environment

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RVU Reflect :RVU Reflect :

• Time required to perform the serviceTime required to perform the service

• Technical skill and physical effortTechnical skill and physical effort

• Mental effort and judgmentMental effort and judgment

• Psychological stress associated with Psychological stress associated with the physician’s concern about the physician’s concern about iatrogenic risk to the patientiatrogenic risk to the patient

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TOTAL RVU =TOTAL RVU =

WORK RVU X WORK RVU X GPCI GPCI

++ PRACTICE EXPENCE RVU X PRACTICE EXPENCE RVU X GPCIGPCI

++ MALPRACTICE RVU X MALPRACTICE RVU X GPCIGPCI

MULTIPLIER 2009MULTIPLIER 2009 $36.066$36.066

MEDICARE PAYMENT=TOTAL RVU X MEDICARE PAYMENT=TOTAL RVU X MULTIPLIERMULTIPLIERBrought to you by

Physician Compensation:Physician Compensation:

• Fee for service, Productivity %Fee for service, Productivity %

• RVU basedRVU based

• CapitatedCapitated

• SalarySalary

• MixedMixed

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Typical Physician ResponseTypical Physician Response

• Work harder, see more patients, Work harder, see more patients, longer hourslonger hours

• Raise feesRaise fees

• Fire staff, spouse manages officeFire staff, spouse manages office

• Cancel vacations, new car, Cancel vacations, new car, summer camps for childrensummer camps for children

• ““Things will work out”Things will work out”

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Physician SkillsPhysician Skills

• Examine patient, make diagnosis, Examine patient, make diagnosis, prescribe treatmentprescribe treatment

• Use same tools to evaluate Use same tools to evaluate practice’s financial healthpractice’s financial health

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Process:Process:

• Gather dataGather data

• Diagnostic toolsDiagnostic tools

• Normal values, benchmarksNormal values, benchmarks

• Differential diagnosisDifferential diagnosis

• Patient management, practice Patient management, practice managementmanagement

• Periodic re-evaluationPeriodic re-evaluation

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Select BenchmarksSelect Benchmarks

• Medical Economics surveysMedical Economics surveys• AMA surveys Specialty organizationsAMA surveys Specialty organizations• Medical Group Management Medical Group Management

Association (mgma.com) $500.00Association (mgma.com) $500.00• American Medical Group Association American Medical Group Association

(amag.org)(amag.org)• ““Internal”—year to year, compare to Internal”—year to year, compare to

selfself• Purchase benchmarksPurchase benchmarks• No benchmark is exact, expressed in No benchmark is exact, expressed in

quartilesquartiles• Compare to similar practice and Compare to similar practice and

geographygeographyBrought to you by

Practice Management Practice Management ConsultantConsultant

Call for HelpCall for Help

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Evaluate the Monthly Income Evaluate the Monthly Income StatementStatement

• Total RevenueTotal Revenue• ExpensesExpenses

– Salaries, benefitsSalaries, benefits– Medical suppliesMedical supplies– EquipmentEquipment– RentRent– Insurance, legal, accountingInsurance, legal, accounting– Retained earnings, cost of capitalRetained earnings, cost of capital– Lab, X-ray feesLab, X-ray fees– TelephoneTelephone– Administration, marketing, office supplyAdministration, marketing, office supply– Management feesManagement fees– Charity careCharity care

• Physician DistributionPhysician Distribution• Take an Accounting classTake an Accounting class

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Financial MeasuresFinancial Measures• Total gross charges per MD FTE, Total gross charges per MD FTE,

encounter, work RVUencounter, work RVU• Net medical revenue (NMR) per MD Net medical revenue (NMR) per MD

FTE, encounter, work RVUFTE, encounter, work RVU• Total physician expense per MD Total physician expense per MD

FTE, encounter, RVU as a % of FTE, encounter, RVU as a % of NMR---efficiency measureNMR---efficiency measure

• Total staff expenses…Total staff expenses…• Staff compensation…Staff compensation…• Bad debtBad debt• Rent per square footRent per square foot

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Operational MeasuresOperational Measures

• Annual and daily patient encounters, Annual and daily patient encounters, charges, RVU per MD FTEcharges, RVU per MD FTE

• Patient panelPatient panel• RVU and charges per encounterRVU and charges per encounter• Patient care hours per dayPatient care hours per day• New patients per month per MDNew patients per month per MD• Staff per MD FTEStaff per MD FTE• Age of charges enteredAge of charges entered• # Proc per MD per day# Proc per MD per day• Distribution of E & M charges by MDDistribution of E & M charges by MD

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Example:Example:Dr Cortese: Increase productivity 10%Dr Cortese: Increase productivity 10%

20042004

• Work longer daysWork longer days

• See more patientsSee more patients

• Work smarter, not harderWork smarter, not harder

• Use technologyUse technology

• Collective and collaborative Collective and collaborative wisdomwisdom

• Effective practice managementEffective practice management

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Evaluation of operational, Evaluation of operational, production, and financial production, and financial

measures:measures:

• Decreased patient demand, 5 %Decreased patient demand, 5 %• Reduce # level 1, 2 E & M chargesReduce # level 1, 2 E & M charges• Increase # level 4, 5 E & M charges Increase # level 4, 5 E & M charges

(with appropriate documentation)(with appropriate documentation)• Increase # proceduresIncrease # procedures• Add Preventative Medicine E & M Add Preventative Medicine E & M

servicesservices• Add Home Health, Hospice, and Care Add Home Health, Hospice, and Care

Plan Oversight E & M servicesPlan Oversight E & M servicesBrought to you by

Basic FormulaBasic Formula

(Collections/RVU) X (Total RVU) (Collections/RVU) X (Total RVU) [Net Income][Net Income]= =

Practice Expense [overhead] +Practice Expense [overhead] +

Physician Salary + Physician BenefitsPhysician Salary + Physician Benefits

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ResponsibilitiesResponsibilities

• Collections per RVU = Payer Mix & Billing Collections per RVU = Payer Mix & Billing PerformancePerformance

• Overhead management = AdministrationOverhead management = Administration

• RVU = Physician Performance & CodingRVU = Physician Performance & Coding

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Change Practice ParametersChange Practice Parameters

• Periodic monitoring of changes and Periodic monitoring of changes and benchmarks benchmarks

• Is the cost worth the benefitIs the cost worth the benefit• Some medical services for patient Some medical services for patient

satisfaction / fun / MD conveniencesatisfaction / fun / MD convenience• Observe for unintended Observe for unintended

consequencesconsequences• Admit mistakes and move on to Admit mistakes and move on to

next stepnext step

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SummationSummation

• Control OverheadControl Overhead– Compare to National Compare to National

BenchmarksBenchmarks

• Bill For Your ServicesBill For Your Services– Appropriate documentation Appropriate documentation

and coding of E & M and Procand coding of E & M and Proc

• Collect What You BillCollect What You Bill– Know Your $ per RVUKnow Your $ per RVU

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This platform has been started This platform has been started by Parveen Kumar Chadha with by Parveen Kumar Chadha with the vision that nobody should the vision that nobody should suffer the way he has suffered suffer the way he has suffered because of lack and improper because of lack and improper healthcare facilities in India. healthcare facilities in India. We need lots of funds We need lots of funds manpower etc. to make this manpower etc. to make this vision a reality please contact vision a reality please contact us. Join us as a member for a us. Join us as a member for a noble cause.noble cause.

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