In medicine, the mention of the word profit is often viewed or interpreted as a dirty word. It is as if the word does not belong in the lexicon when health care is addressed.
I argue (in the context of the private medical practice setting) that profitability is a medical practice’s responsibility for one simple reason. If the medical practice (also known as a business) doesn’t deliver profits, health care providers are unable to provide for those in need.
Profits pay for infrastructure, technology, education and human resources, all of which translate to superior pediatric care when employed correctly.
Another way I like to put it is by saying,
…a broke doctor does do anybody any good.
Calling vs Profits
Indeed, our medical businesses differ from other companies in that we care for children. And the notion of withholding medical services or restricting access to a sick child merely by the patient’s parents inability to pay for health care services is simply not in a pediatrician’s DNA.
However, it is important to accept the reality that without a way for a doctor or the practice’s income to outpace expenses, health care providers are unable to provide services of any kind. At least not for the long term.
Is there a solution?
How do we reconcile these two competing issues? On one hand, it is necessary for a medical practice to deliver profits if it wants to remain sustainable. On the other, we have an intrinsic motivation to put the patient’s needs first.
I am glad you asked.
These two dichotomies can co-exist – and even flourish – alongside each other. There is indeed numerous tools and principles rooted in business that can help medical practices manage what otherwise appears to be opposing forces.
A Resource You Don’t Want to Miss
Today, I want to tell you about a resource I’ve been working on to help your office obtain financial success, while simultaneously providing unsurpassed pediatric care to your patients.
To help you succeed in your financial success, I’ve written a comprehensive eBook on budgeting that walks you through the process of creating a budget for your medical practice. The materials also cover basic principles necessary to put the exercise into perspective.
Budgeting is a major component of financial success. Moreover, financial success is essential to the continuity of care.
To read more about this offering, click on the image below.
I do hope that you buy the book, but more important, that you find the eBook helpful, useful and valuable.
It is our responsibility as captains of our ships, however, to equip our practices and our staff members with the necessary tools and information if we want to have any chance of overcoming these real threats.
You do not have to be a marine captain to know that there are countless potential dangers navigating waters.
With a little imagination you know there are many risks. Some hidden, like currents, while others are painfully apparent (i.e. howling winds, waves and torrential storms).
We know there isn’t anything the captain can do to eliminate weather conditions or enforce her will on ocean currents.
However, we can all agree the captain has control over the vessel. We can also agree that the captain has the responsibility to equip the ship and its crew member to its maximum potential if they have any intention of overcoming environmental threats.
Running a “profitable” practice is indeed becoming more of a challenge. For many, it is uncharted territory. And while there are many extrinsic reasons – like decreasing insurance payments, high deductible plans, and the increased cost of providing care – that are contributing towards the “remaining profitable” challenge, the truth is, there is little – if anything – we can do to eliminate those threats.
It is our responsibility as captains of our ships, however, to equip our practices and our staff members with the necessary tools and information if we want to have any chance of overcoming these real threats.
Below are 11 STRAIGHTFORWARD and practical tips you can implement immediately to help you navigate these rough waters.
Review fee schedules regularly to ensure your fees reflect market conditions in your region.
Adjust fee schedules for certain procedures to improve providers’ competitiveness.
Review all E&M charges by a certified coder before submitting claims.
Hire coding consultants for annual chart reviews to ensure accurate coding.
Monitor and report payments of your top insurance-payers.
Run reports to understand payments by different networks or other contract types.
Renegotiating (or consider dropping) contracts with payers who have low payments.
Monitor how long it takes for charges to be entered and claims to be submitted to make sure claims are being filed timely.
Consider provider training or implement random audits to ensure billing slips are completed clearly and accurately.
Review your practice’s policies for routing super-bills to ensure claim submissions are sent as soon as possible.
Implement processes so your billing staff works missing super-bills, claims, denials, consistently.
Imagine for a moment navigating open waters without navigation tools. Now, imagine what would happen if conditions were less than excellent?
If your boat ran off course or worse, capsized, would you blame the environmental conditions? Or would you take responsibility because you didn’t have the proper equipment and tools to navigate in challenging conditions?
An important aspect of managing a business is learning how to read financial statements.
It’s no secret, however, that most doctors don’t have formal business training. So reading financial statements to some is like reading in a language you don’t speak.
But that is not an excuse for physicians that own or have a stake in their medical practices not to learn fundamental business principals such as reading financial statements.
Learning how to read just a few financial reports will give you a good idea of the financial health of your practice.
THEY’RE LAB RESULTS
If the financial report talk sounds complicated, think of them as a patient’s lab reports. Imagine your practice is a sensitive patient with an illness.
Just like labs results tell you want’s going on with a patient’s health, financials reports let you know what is going on with the medical practice’s financial condition.
And when you know what’s going on, you can instantly spot potential problems before they get out of control.
Below are four financial reports. Familiarize yourself with them as well as get in the habit of checking/reading them each month.
Keep in mind that I’m not saying these are the only reports you should review. I am suggesting, however, that these are among the most significant and valuable reports for a business/private medical practice.
PROFIT & LOSS STATEMENT (P&L)
Also called the income statement, the P&L shows revenue minus expenses and either your practice’s net profits or loss.
The income statement gives you a snapshot of how different areas of the business is performing. For example, did the practice match revenue projections? Is the practice staying within budget?
The balance sheet is a simple document that shows what your business is worth. It list all of your assets and liabilities.
The report provides a quick and simple way to see what you own, who you owe, and revenues owed to you.
This report – also referred to accounts receivables (AR) – shows you who owes you money, how much they owe, and the age of the debt.
In a perfect world, you would avoid extending credit to anyone. But in the business of private practice, we provide credit to virtually every single patron. Therefore, this report is critical to understand and review frequently.
CASH FLOW REPORT
If you’ve balanced your checkbook before, the cash flow report is a supped up version of that. The report shows you the number of checks you’ve written, your deposits, and your account balance.
This report is the best way to verify that your bank account balance is correct, and there are no unusual charged or errors.
GOOD HEALTH = STRONG PROFITS
You wouldn’t neglect to review a delicate patient’s lab results. So don’t neglect to familiarize yourself with these important financial reports and review them regularly.
The content was excellent, thanks to the fabulous faculty PMI brought in.
The topics varied from customer service principles to fundamental changes happening in the health insurance industry and how those changes are – or soon will be – affecting doctors’ financial bottom line.
Below are a few highlights and notable points that resonated with me.
ANCILLARY SERVICES | INCOME DIVERSIFICATION
Dr. Jeanne Marconi presented an account of how her practice diversifies income streams by incorporating ancillary services into her practice.
Admittedly Dr. Marconi’s comprehensive – almost overwhelming – plethora of services (they even offer in-house exercise training programs for children with high BMI) is probably too much for the standard practice to implement.
But for me, her talk wasn’t an invitation to follow her footsteps, but instead, provide insight into what is possible, what can be done and what is available to practices.
Dr. Marconi dished out several challenges to the physicians in the crowd. But the one that resonated with me the most was her call for pediatric practices to challenge the status quo, expand their minds, think creatively (or to use a cliche, think outside the box) and begin to think about ways to diversify practice’s revenue streams.
HOW HEALTH INSURANCE COMPANIES ARE PAYING DOCTORS
Susanne Madden arrived in Vegas with her extensive knowledge and expertise of the health insurance industry.
She presented attendees the sobering reality of how health insurance companies are adjusting, changing – even experimenting in some cases – with their models to continue delivering value to “their” shareholders. And by value, she means lower cost and higher profits.
Susanne underscored the importance of implementing quality measures such as P4P, HEIDIS, PCMH into our medical practices. But not for the reasons you might think.
While many of these health insurance programs are currently in place as rewards (e.g., enhanced or incentive payments) for medical practices that achieve quality measures thresholds in patient care, Susanne highlighted that these programs will soon become a requirement for practices.
What does this mean exactly? Insurance companies will soon stop offering enhanced payments programs to practices for achieving PCMH level III certification (or other types of incentives). Instead, they will reduce payments to doctors don’t meet PCMH certification.
As if that wasn’t bad enough, she added that many payers are evaluating providers based on how much the provider costs the company in benefits payouts.
How is that different than what they do now?
The difference is that they are not looking at the practice as a whole, but rather evaluating each provider individually.
The implications are that if you have physicians in your practice that don’t adhere to designated quality standards, payors can potentially pay each doctor in the practice different amounts.
HOW MUCH CAN WE AFFORD TO PAY AN EMPLOYED PROVIDER?
PMI’s very own Paul Vanchiere gave two of his hallmark presentations. The first one focused on customer service using the acronym KIDS (Kindness, Integrity, Dignity & Service).
His second talk was my favorite. Why? Because Paul took a complicated, MBA, executive consulting level exercise (determining how much can your practice afford to pay an employed provider) and distilled it into an easy to follow, step-by-step, process, which only requires one to understand a few financial concepts and enter value sets into a spreadsheet.
BROADEN YOUR CODE REPERTUAR
Dr. Rich Lander went over the fundamentals of proper coding. In addition to reviewing the differences between coding Level 2, 3, 4 & 5 for a sick visit, Dr. Lander stressed the importance of documenting “time” correctly in a patient’s chart.
Dr. Lander shared multiple clinical scenarios that we often encounter with patients. But some of the codes he suggested I wasn’t all too familiar with. I couldn’t recall if we used them.
So I wrote down a reminder to myself to check how well (or not) providers at Salud Pediatrics were using the full scope of codes available.
NO PRESENCE, NO INFLUENCE
Dr. John Moore – a new PMI faculty member – brought us up to speed with some of the new social media trends (Are you familiar with SnapChat and how kids are using it?)
One of the points that Dr. Moore articulated that I appreciated the most was the importance for pediatricians to embrace social media.
He said something that I’ve been saying for a long time; which is, had pediatricians adopted social media at a faster clip, the pro-vaccine vs. anti-vaccine arguments would have been balanced. Moreover, there was the potential to stifle the anti-vax movement.
CHANGE IS THE NEW STATUS QUO
You can always count on Chip Hart to deliver great wisdom and insight. Chip also gave two talks.
I’ve heard Chip speak many times, but this time, I felt his talks were different. Chip’s talks had a subtle, tough-love tone to them.
While addressing the challenges practices are facing today, he stressed that pediatricians have faced similar challenges before. He mentioned that during all previous tectonic shifts (aka industry changes) naysayers shouted out the demise of private practices. Much like many are shouting today.
Chip eloquently argued that not only are the doomsayers wrong, but that pediatricians are actually in a better situation than most think.
Chip wasn’t disregarding the challenges or downplaying the potential threats. We are indeed going through tough times. But these tough times were an opportunity to transform and reinvent our practices, he argued.
My takeaway was: If the plan is to defend the status quo and hedge the long-term success of your business on account that you have the initials MD after your name, thus somehow inoculated from change, the end is certainly near for you.
MEETING, CONNECTING, NETWORKING, SOCIAL LEARNING
Attending a seminar like this to learn from the speakers is certainly worth the price and the time. But more often than not, the icing on the cake, at least for me, is the immeasurable, intangible value I glean from networking.
The people who attend these events are the smartest and brightest in my opinion (and I’m not talking about the faculty, although they are good too).
Whether attendees are veterans in managing practices or opened their first private practices last week and believe they have no clue what they are doing, the truth is, there is opportunity to learn from everybody.
The faculty makes the trip worthwhile. But I would say the attendees make the event special.
Next year I hope to see you there. Especially if you didn’t get a chance to attend this year.
I have lucky number 7 reasons why you should not miss this seminar.
1 – YOU’LL BE AWESOMER
I know awesomer is not a word. But it gets’s the point across. Here is the deal, no matter how experienced you are at managing a practice, there is always something new you can learn.
2 – YOU’LL LEARN NEW IDEAS
Managing a private practice can be a lonely world. There aren’t that many of us. And most of the time we are locked up in a back room (used for both your office and storage) trying to figure out how to keep the ship afloat.
Without exposure to a variety of points of view, you will miss new ideas and trends that can impact future results.
3 – YOU’LL GAIN EXPOSURE
Paul and his team at PMI have put together a superb curriculum. The educational materials will certainly expose you to new ways of managing your business (e.g., private medical practice) and help you discover how to be more productive.
4 – YOU’LL MEET COOL & INTERESTING PEOPLE
Here is the way I see it. The practices that tend to go to practice management seminars are precisely the practices I want to learn from. And PMI’s seminar provides a great opportunity to network with the best practice in the country.
5 – TALK TO CONSULTANTS AND VENDORS
Not only will you have access to a community of like-minded people that have similar struggles, have similar challenges and practical, hands-on advice, suggestions, and solutions, you will also have access to the industries top consultants.
Don’t tell them I said this, but if you ask the right questions, to say… Chip Hart, I bet you, you’ll get thousands of dollars worth of practice management advice for <ahem> free.
Keep in mind that experts in the field are some of the best people for you to get to know if you want to learn more about the current health care business climate as it relates to small, private, independent, pediatric practices.
6 – YOU’LL DISCOVER
You will undoubtedly discover innovative ways to help your practice remain competitive in today’s fast-paced, hectic private-practice.
7 – IT’S VEGAS BABAY (NOT A TYPO)
Did I mention it was in Vegas?
All work and no play can get old fast. PMI’s conference can add a layer of enjoyment to managing your career growth by mixing a social aspect into your learning and industry branding efforts.
Never underestimate the power of a little fun mixed with some interesting people!
BUT THAT IS NOT ALL
Use the promo code “PediInc” and save $75 off your conference fee.
When: Friday, January 29, 2016 at 2:00 PM – Saturday, January 30, 2016 at 5:00 PM (PST)
Where: Tropicana- Las Vegas
Sign Up:Click on the Eventbrite logo below to sign up
Don’t forget to use the promo code PediInc to get $75 off
Cost accounting is one of those topics that you either find fascinating (this makes you an accountant) or find it as boring as watching reruns on C-Span.
If you belong to the latter group, don’t worry. I got you covered.
Using a convenient store as the backdrop for the narrative, my friend Paul shares in the video below, the fundamental business principle of cost accounting and how independent pediatric practices can apply these principles.
The video is only 5-minutes long. But the lesson will stay with you for a lifetime.
About the presenter:
Paul Vanchiere is the co-founder of the Pediatric Practice Management Institute. PMI is a consulting group that specializes in helping pediatric practices in a variety of ways. To check out the variety of services Paul and his team offers, click on the link below.
People always ask me if I do practice management consulting.There was a time when I did. But for the past two or so years, I’ve responded by saying no. I enjoy consulting and love to do it, but I had to stop because of the time commitment.
Recently, I was talking with a loyal reader of PediatricInc about this very topic and she suggested I do remote coaching.
My friend, who owns her practice, explained that she doesn’t necessarily need a comprehensive on-site consult. “I just want to ask a question about my practice or run things by someone familiar with practice management,” she said.
She went on to say, “…you know doctors don’t get training on business, management, marketing, collections…. having somebody to reach out to that has the business and practice management training would be valuable.”
“Like a practice management coach?” I asked. And she said, “ yeah, that is a good way to put it.”
We talked a little while longer. By the time we finished up, my loyal reader and friend had convinced me.
Today I’m announcing a new service on PediatricInc called PMB Coaching for those pediatricians and/or managers that want my perspective on practice management, discuss in detail a blog post, run something by me or provide another set of eyes.
This is a guest post by Paul Vanchiere. He is the co-founder of Pediatric Practice Institute, a pediatric centric service company that helps practices and healthcare networks leverage their success and maximize their potential.
Budgeting is no easy task. It is cumbersome, slow, frustrating and most
often wrong by the time you finish with it. Most of us are really bad at budgeting, therefore we avoid it like the plague.
But we should all agree that budgeting is very important and quite frankly a must when running a business.
The way that I’ve approached budgeting for the practice over the years is by keeping it as simple as possible. And then, once I’ve mastered the simple, or at least feel comfortable, I’ll add another level of complexity.
If you are feeling a overwhelmed about this budgeting thing, I’m gonna share my KISS budgeting process. Hopefully, you’ll realize it isn’t that difficult
So here we go.
Start by determining your expenses for the previous year and write that number down. Some people include only the operational cost (ie rent, employee salaries, advertising, medical supplies), while others include owner’s salaries, malpractice health insurance etc.
Because we are keeping it simple, we are not going to debate which one is better than the other. So pick your total yearly expense number – whatever that may be – and don’t worry about which one has more merit than the other.
Think hard about the year ahead. Do you think you will spend more or the same amount of money in the coming year? Things to consider that will increase cost: moving the practice, adding staff, adding a physician, buying equipment, advertising more, buying an EMR, transitioning to another practice management system.
I would also throw in here how much money you’d like to put away for a rainy day. For example, a rainy day fund in case ICD-10 transition goes worse than we anticipate.
NOTE: Always account for more than what you think you’ll need. Remember that cost always rises. So even if you think you are going to replicate the previous year, take into account price increases from your vendors, employee raises or even a payer paying less for a CPT out of the blue.
REVENUE PER PATIENT
Once you have that “cost” number, you’ll need to know your average payment per patient seen.
Formula: Total Revenue (12-month period) / Total Number of Patients Seen (12-month period) = Average Rev Per Patient.
COST/AVG REV PER PATIENT
Take the cost number you came up with and divide it by the average rev per patient. What does this result gives you? Number Of Patients.
Cost / Average Rev = No. of Patients
This Number of Patients result is in essence the amount of patients the practice has to see in order to cover your cost.
If you want to get a little fancy, you can divide the No. of Patients number into number of months, weeks or days the practice is open. This will give your practice specific patient counts that will help your practice stick with the budget.
Few things to keep in mind.
Many things can alter a practice’s Rev Per Patient number. For example, if the practice start seeing more of the patients that carry less than ideal insurance plans, your average will drop.
If you happen to see more of the better paying patients then your average will increase; which may result in having to see less patients a day stay within budget.
If the practice miscalculates cost or doesn’t anticipate a big expense, the numbers will shift as well.
Types of visits will also sway the numbers. Office visits generally pay less than wellness visits.Remember, we are talking about averages. Averages are, well, they are averages.
Now, I’m not suggesting this budgeting method is perfect or comprehensive. But at the very least following these steps will put you on a better path than doing nothing at all.
The point of this exercise is to try to help those of us that struggle with budgeting, or have no idea where to begin, and to think about how to approach this in a less overwhelming way.
Second, the simplistic approach will motivate readers to give it a try. Doing some budgeting is better than none at all.