Are You Making These 5 Financial Mistakes In Your Medical Practice?

We know doctors don’t get finance or accounting training during the time they spend in medical school. As a result, they tend to rely heavily on practice managers, accountants and other financial experts with managing their money.

 

But as medical practice owners (aka small business owners), the buck stops with the doctor. Thus, it is wise not to rely blindly on the “experts” and from time to time take a look at areas of the business for yourself.

screen-shot-2016-03-26-at-11-33-49-amBelow are five areas I’m going to suggest for you to explore. Get acquainted with these suggestions. You never know. Overlooking them may be affecting your practice’s bottom line.

1 – PAYING HIGH-INTEREST RATE LOANS

Loans can be great financial tools to help practices remain liquid (aka have cash in hand) when cash flow is low or if an unexpected expense arise.

But practices that mismanage these loans can end up paying fees and interest that eat up what are already thin margins.

It is important to be aware that not all bank loans are created equal. Equally important is understanding terms – interest rates vary depending on the type of loan – and knowing concepts like the difference between a secured loan vs. a non-secured loan.

Overusing loans, not reevaluating them periodically and failing to adjust to current circumstances or failing to stay informed on interest rates are all things that can erode business’ income.

2 – OVERLOOKING HOW YOUR CREDIT CARD MAY BE CHARGING YOU INTEREST

Doctors love to credit cards to pay for practice expense. Why? For the credit card points, of course. A single doc can potentially accumulate six figures in points by paying for vaccines alone. Free airfare anyone?

Even though you may pay the balance in full every month, I suggest to look carefully at the card’s fine print first to understand how the credit card charges interest. Because some cards charge a daily interest based on the daily balance.

Let’s say you have a credit card that charges 10% monthly interest. But you’re not concern about the interest because no matter how much you charge the card in a month, you pay it off – in full – at the end of the month.

Banks are well aware of this. So to make money off people that pay their balance in full, they divide the monthly interest by 28 (cycle days). So a 10% monthly interest, the credit card will charge you .0357% daily on your balance.

3 – MAXING OUT CREDIT CARDS

Thirty percent of your credit score is based on how much of your available credit you are using. If the card is in your name, and you have cards maxed out, your credit score drops.

Low credit scores can be an issue, of course, when applying for a loan of any kind; high credit card balances often lead to denied applications.

Are you paying a higher interest rate on some of your credit cards because you carry high balances on others? It’s worth checkin.

4 – NOT PLANNING FOR A RAINY DAY

Most practices are tremendously unprepared financially for unforeseen circumstances. Partly because most, if not all, the money that comes into the practice is spent or distributed in full to each partner at the end of the year.

You don’t need to be around long to know the unexpected comes by often. Hence, the practice should always have a reasonable amount of money set aside because sooner or later you’re going to need it.

Not only is it crucial for your business to set money aside for financial emergencies, but it also is good business practice.

Not to mention that with cash reserves, instead of drawing from those high-interest loans or maxing out your credit card, you’ll have what I like to call a cushion fund for times when we need money to get us through a rainy day.

5 – NOT DRAFTING A PARTNERSHIP AGREEMENT

I’ve seen this happen before. A few docs decide to quit their employment to start their medical practice.

The group aligns with the vision of serving patients better, the lure of sticking it to the man and the prospect of increasing their income.

The excitement of opening up your practice with friends or like-minded coworkers and everybody coming together towards a common cause often puts the task of drafting a partnership agreement on the back burner.

Don’t delay a partnership agreement. In fact, do it as soon as possible. Here is why:

a) It’s the wise thing to do.

b) It is better to work out details when everybody tends to be happy excited and looking forward to the future than to work out the details during a nasty, vicious divorce.

Drafting a partnership agreement when you are angry, resentful, feel duped or taken advantage of is… well, I don’t have to tell you it’s bad.

It is also important to review and update your agreement every few years with your attorney to ensure it reflects current circumstances.

 

 

Are Practice Management Consultants Worth Hiring?

In the end, the practices who invest in themselves are, almost always, the top performers. You’ll see among best performing practices, that many have engaged – and continues to engage – consultants on matters that are outside their expertise.

This is a guest post from Chip Hart. Chip is a frequent contributor to PediatricInc and former co-host of the highly revered Pediatric Management Awesomecast. When Chip isn’t protecting independent pediatric practices against evil conglomerates, naysayers, and the League of Shadows, you can find him at PCC doing… something (I’ve never figured out what is it that he does at PCC, exactly). 


I will never forget the scene. I was the lonely consultant in the dark and shag-carpeted basement “conference room” of a large pediatric practice and was giving them a stern lecture about their pricing. The practice hadn’t updated its prices in years and was undoubtedly losing money. Lots of it.

Chip Hart and Brandon Betancourt
Working really, really hard.

After my explanation of RVUs and why 105% of Medicare wouldn’t cut it, the senior partner – well, the loudest one, anyway – looked me in the eye and said, “OK, that sounds smart, let’s just raise our prices.” It was the response I was hoping to get.

The youngest and newest partner jumped in quickly, “What?! How can you listen to this guy?”

Uh oh, I thought. His voice cracked, “…I’ve been telling you this same information for almost two years and he just waltzes in here and says ‘Correct your pricing.’ and you do it just like that?”

I honestly thought he was going to cry in frustration and relief. 10-minutes of back-and-forth among them ensued. I just stayed out of it. At the end of the year, the additional $250,000 they collected erased the discomfort and awkward part of the memory for them.

I didn’t forget, however. I remember sitting there thinking, “This poor practice lost hundreds of thousands of dollars simply because they were unwilling or unable to listen to themselves. They had to hear it from someone else.”

HOW DOES THIS HAPPEN?

The answer is both obvious and convoluted. I have often said that the most important and difficult task for any small business is to find and hire good people. Unquestionably, this challenge extends to the hiring of practice management consultants.

Pediatric practices successfully hire consultants all the time without a tremendous amount of consideration – realtors, attorneys, I/T – but when it comes to getting help on the inner workings of the practice, the majority of pediatric offices too reluctant to ask for help.

And when they do ask for help, it’s often ineffective.

Every practice I visit codes imperfectly, yet some practices lose tens or even hundreds of thousands of dollars a year as a result of their inability to address the problem.

Most practices could use help negotiating with insurance companies, yet remarkably few of them do. Many practices need help with a compensation model or managing a challenging partnership, yet most of them just live with the problems and hope it will go away. And so forth.

Physicians, unfortunately, are uniquely susceptible to mis-using consultants, even if it is simply to not use them enough.

You expect most vendors and consultants to try to take advantage of you – all doctors are rich, right? – while having trouble admitting that you cannot solve all of your own problems.

Combine those aversions with the impecunious nature of most pediatricians, and there is no surprise that I meet practices every week who would rather lose another $15,000 this year due to a poorly designed superbill and bad pricing than pay a consultant half that amount to fix the problems.

HOW AND WHEN DO YOU KNOW YOU NEED A CONSULTANT?

There is no magic formula, but try these parameters on for size:

  • When there is an issue that your partnership cannot resolve, or when a neutral third party can facilitate a necessary change in your practice, consider a consultant.
  • When you are not an expert in the matters that affect your practice or if there is simply another party who might be more effective and efficient at addressing the matters, consider a consultant.
  • When your practice is losing more money on an issue than it would cost you to fix, consider a consultant.
  • When the amount of money you would pay a consultant is less than the amount of money you would generate seeing patients, consider a consultant.

Those last two examples are often conjoined in a death spiral of inaction. Many of you don’t want to pay a consultant $20,000 to renegotiate a contract increase of $50,000 annually because “you can do it yourselves.”

Yet, you don’t do it. Or you start the project and sink 10, 20, 40 hours into the task – often worth more to the practice than what you would pay the consultant – and then never complete the job.

Pediatricians, as business owners, are notoriously bad at examining the return on their potential investments and usually focus far too heavily on only the costs.

Pretending to be 100% self-sufficient serves no one except, perhaps, the insurance companies. Your patients don’t benefit, your lifestyle suffers, and you leave money on the table.

HOW THEN DO YOU HIRE A PRACTICE MANAGEMENT CONSULTANT?

First, hiring a consultant involves a lot of common sense. You want a written contract that spells out the terms of your obligation.

The terms should clearly outline your expectations, identify the fundamental goal, and determine conclusion of the contract. Ultimately, it involves a relationship of trust and confirmation. Some suggestions that go beyond the generic:

1 – Pediatric practices are different, don’t let a potential consultant tell you otherwise.

Most medical practice consultants live in the Medicare world and look for “alternative income sources” that just don’t exist in pediatrics.

More importantly, the attitude and (often unspoken) philosophies of pediatric practices differ from other medical specialties. Find someone who knows pediatrics.

2 – Work with a consultant on one or more smaller projects and build up to a strong relationship.

Before you leap into that full payer-mix and negotiation mission, see how well you work together on something smaller, like simply reviewing the state of your existing contracts. If you are not getting the kind of performance you expected, better to have not committed so heavily.

3 – Don’t be afraid to use different consultants for different needs.

Just as you may not be an expert on RBRVS or pediatric compensation models, your consultant may not know it all, either.

Although some consulting resources pride themselves on their breadth of experience, depth is usually more important. A good consultant might look at your practice and identify work that needs doing. A great consultant can identify work that needs doing, but suggests another resource.

4 – Even after you have chosen a consultant, keep an eye out for conflicts of interest.

Although they are impossible to avoid and sometimes even lead to efficient work (like one consultant recommending another), conflicts are often poorly revealed in the industry.

5 – Use your network of pediatric peers to help vet your consulting needs.

Surely, if your potential consultant expects to work with you, he or she can provide you with pediatric references whom they have helped with similar issues. SOAPM is an excellent place for a sanity check.

In the end, the practices who invest in themselves are, almost always, the top performers. You’ll see among best performing practices, that many have engaged – and continues to engage – consultants on matters that are outside their expertise.

Learn How To Create A Budget For Your Medical Practice

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.
 Broke doctor
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.

Why Profits?

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.

Medical Practice Budgeting
Click on the image

I do hope that you buy the book, but more important, that you find the eBook helpful, useful and valuable.

11 Straightforward And Practical Tips To Improve Your Practice’s Bottom Line

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).

 

Compass Direction GuideWe 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.

  1. Review fee schedules regularly to ensure your fees reflect market conditions in your region.
  2. Adjust fee schedules for certain procedures to improve providers’ competitiveness.
  3. Review all E&M charges by a certified coder before submitting claims.
  4. Hire coding consultants for annual chart reviews to ensure accurate coding.
  5. Monitor and report payments of your top insurance-payers.
  6. Run reports to understand payments by different networks or other contract types.
  7. Renegotiating (or consider dropping) contracts with payers who have low payments.
  8. Monitor how long it takes for charges to be entered and claims to be submitted to make sure claims are being filed timely.
  9. Consider provider training or implement random audits to ensure billing slips are completed clearly and accurately.
  10. Review your practice’s policies for routing super-bills to ensure claim submissions are sent as soon as possible.
  11. 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?

Is It Worth Being A Member Of The American Academy Of Pediatrics?

I asked a newly graduated pediatrician if she was going to renew her membership with the American Academy of Pediatrics.

Her response did not surprise me. She said, “…probably not. I see no point in being a member.”

As far as she was concerned, there wasn’t an upside ( or value ) to belong to the Academy. I knew what she meant because I share her feelings.

Screen Shot 2016-06-05 at 10.48.49 AMRecently I came across an email that challenged my stance regarding the value the American Academy Of Pediatrics provides to pediatricians.

I wanted to share the email just as I read it. Below are the unedited comments from Dr. Suzanne Berman and Dr. Christoph Diasio regarding the meeting.

I had the privilege of attending the 3rd Immunization Congress in Washington DC with some of your favorite SOAPM types: Rich Lander, Geoff Simon, Christoph Diasio, Drew Hertz, Joel Bradley and uber-awesome AAP staffers Lou Terranova and Elizabeth Sobcyzk.

We had an opportunity to describe what works and doesn’t work with pediatric vaccinations, and lessons that can be applied in the adult world (where they do not vaccinate like we do).

Rich Lander spoke eloquently about the need for calling it PAYMENT not REIMBURSEMENT and people listened!

He presented the business case for vaccines. For the whole rest of the time, people would start to say “reimbursement” and then caught themselves and said: I should call it payment! I need to update my slides!

Geoff Simon and Drew Hertz spoke about some of the practical aspects of immunization delivery in large health systems and the implications of alternate payment models in vaccine delivery.

Geoff also talked about the challenges of providing vaccines across state lines (PA/DE).

Joel talked about the need for VFC to turn on 90461 and the need for local Medicaid and VFC programs not to do their little unsupervised strange things.

Suzanne Berman, MD

Dr. Diasio chimed in and added this:

There’s so much the AAP in general, and SOAPM, in particular, does quietly in the background- it is important to share this.

I am sure it will surprise none of you that I was continuing to beat the drum for removing the VFC flu vaccine delivery disparity.

Suzanne is humble- her talk on “the stupid things insurance companies/Medicaid agencies do re: vaccine payment” was terrific and included descriptions of dysfunction that I had never heard!

We touched on 2D barcoding uptake, but this was more related to trying to fix registries and increase communications.

We did discuss trying to create incentives/funding for EMR companies to support barcode readers

Christoph Diasio, MD

I have been particularly vocal about the Academy’s presumably disregard towards the numerous challenges pediatrician face in light of the AAP’s recommendations and children’s advocacy initiatives.

When I read this, the first thought that came to mind was, I think I am misinformed. Then I thought, so are numerous pediatricians, like the newly grad I mentioned.

I then thought to myself, the word needs to get out. Pediatricians need to know what the AAP and committees such as the Section on Administration and Practice Management (SOAPM) are doing on behalf of pediatricians, not just children.

Reached out

I immediately emailed Dr. Suzanne Berman and asked her permission to publish her email. I then spoke to Dr. Christoph Diasio – SOAPM Chairperson – and also asked him if I could add his commentary.

They responded with a resounding:

NO WAY. NOT IN A MILLION YEARS.

I am kidding, I am kidding. It was the opposite. They replied within minutes saying yes.

Times are indeed tough

I am preaching to the choir when I say that independent pediatricians are facing difficult challenges. However, it is reassuring to know that people are working behind the scenes advocating for children by advocating for those that provide for children.

It is my understanding that highly influential people attended the meeting. There were high ranking AAP representatives as well as influential people from the CDC.

Thanks

So, not only did I want to inform those that are not fully aware of what type of initiatives their AAP membership dollars go to support, but also wanted to give a big thanks to all that attended the meeting and all those that worked behind the scenes.

Thanks for looking out for us. And keep up the good work.

For the rest of you, go and renew your AAP Membership.

How Well Do Parents Know What You Do As a Pediatrician?

It’s hard to appreciate the value that pediatricians provide when one is not aware of exactly what it is that pediatricians do.

During the summer months, I posted on our practice’s Facebook page, a note encouraging parents, to schedule their children’s wellness visits.

Although the message was for our entire Facebook community, I wanted to catch the eye of parents with teenagers. Don’t know how well you manage teens in your office, but in our office, we have decent wellness visit numbers with younger patients. The teen population?

Not so much. Once the teen years kick in, we mostly see them when they are sick.Screen Shot 2016-02-26 at 11.48.51 AM

I wanted to encourage parents to make their wellness visits but also throw in a subtle nudge to parents with teens.To get their attention, I opened with this line: Did you know pediatricians are trained to treat children from birth to adolescence? Then I went on to talk about the importance of wellness visits etc.

Something interesting happened. The post outperformed other Facebook post. It received more likes that than the ordinary. But that the surprise me. What surprised me the most, were the comments from parents.

One mom said, “it’s good to know the pediatrician can see my teen.”

Another said, ” Timothy is going to be so happy when I tell him Dr. B can still see him.”

WHAT WAS THE LESSON?

It’s an age-old lesson. It’s a lesson on assumptions and what happens when we make them.

That simple, otherwise ordinary status update, got me thinking about how well (or not) we communicate what it is that we do as pediatricians. If so many people weren’t aware that pediatricians can treat teens and beyond (0-21), what else don’t they know? The irony is that our website is tagged with the line “Pediatric & Adolescent Medicine.”

OPPORTUNITY

We clearly have a communication problem. And I would argue that our lack of proper communication about what it is we do as pediatricians (more than runny noses and giving shots) is why many parents don’t see the distinction between a retail clinic and a pediatrician.


 

It’s hard to appreciate the value that pediatricians provide when one is not aware of exactly what it is that pediatricians do.

 


 

The good news is that there is a significant opportunity for pediatricians to cover a lot of ground. How so? By using social media channels to educate our community about all the great services we are trained to provide.

I also believe that leveraging this opportunity could aid your practice in differentiating itself from the competition.

WHAT IS YOUR COMMUNICATION STRATEGY?

Since I realized there was a chasm between our assumptions and the reality, I’ve been intentional about informing our community about the training, knowledge and expertise our pediatricians can address.

Some of it may seem too obvious for those of us that do this every day. Like explaining the importance of wellness visits.

But the truth is, some parents don’t know about yearly wellness visits. They assume that because the child no longer needs shots, they don’t need to go to the doctor.

Beyond promoting wellness visits, I use many of the things included in the Bright Futures guidelines as a way to highlight that a visit to the pediatricians is highly comprehensive.

And by educating our population, I’m also marketing our practice in a unique way. Instead of mentioning in a promotional piece that we accept most insurance plans, I may mention that how we can provide family support, safety and injury prevention, or mental health.

MARKETING STRATEGY

Not only is promoting and sharing this information relevant and valuable to parents, but I also think it is an excellent way to differentiate ourselves from the MinuteClinics or other medical services that overlap with pediatrics (i.e. Urgent Centers, Family Practice, Telemedicine).

YOUR CHALLENGE

Think about your medical practice’s communication strategy, or lack thereof. What is your practices unique selling proposition? What problems do you solve that others don’t? Then think about how best to communicate your message. Also, consider the channels you’ll be delivering your message. By channels I mean, traditional advertising, email campaigns, social media, etc.

Remember, each channel is unique, thus requires you to craft the message differently.

I’ll leave you with this… times are changing. That is certain. And we have two options, two paths to choose from. Disagree with how things are changing, or find ways to agree with the shifts in a way that benefits you and your practice.

4 Simple Questions That Will Make You A Better Manager To Your Employees

As practice managers and administrators of both large and small practices, we are wired not to see our failures but instead see the shortfall of our employees and attempt to correct them. Nothing wrong with that. It’s part of management.

But let me challenge you on this one. The next time you have difficulties with an employee, take a moment and reflect how you are interpreting the issue using the questions above. Consider where you are placing the blame. On people’s character or the circumstances?

As humans, we have an uncanny ability to justify and explain situations in ways that benefit us.  For example…

When we observe a father shouting, tugging or being overpowering towards their child, we raise an eyebrow and pass judgement on that parent’s poor parenting skills.

Screen Shot 2016-04-10 at 10.45.48 AM

If we lose our temper with our kids, we justify it by blaming the circumstances. We’ll say, “if you knew how challenging my children are, you would understand.”

In a medical practice environment, it may go something like this.

Julie: Nancy is late again.
Michelle: That’s the way she is. She’s so disorganized.
Julie: I know. And she doesn’t take her job seriously.
Michelle: Bill has given her so many opportunities, but she seems not to get the message in that thick head of hers.

Let’s look at it from another viewpoint.

Julie: I’m sorry I’m late. It’s just that my car has been acting up. And with my husband being out of town, I have to get the 3-kids ready, drop them off at my mother-in-law’s house – you know she is still upset about that thing – and just as my luck will have it, there was a fender bender on Route 95 and traffic was backed up all the way to the freeway.

CHARACTER VS CIRCUMSTANCES

Medical practice managers and administrators tend to make similar judgements.

When we have an under-performing staff member, we question their work ethic, make claims about their lack of motivation, engagement or lack of interest. Simply put, we tend to judge their character.

When we fall short, we don’t dare blame our work ethic, lack of motivation or lack of interest. Instead we blame the circumstances.

For example, we’ll blame our underperforming employees, unreasonable parents, the healthcare system, insurance companies, the printer, the network, being overworked and our boss. She’s too demanding and has unrealistic expectations.

REVERSE

What if we reverse the tendency to blame circumstances when we fall short and blame people’s character faults when they make a mistake or underperform? What would it look like if you looked at your character when employees in your practice fall short?

To help you put all of this into perspective, think about a time in the practice when an employee was underperforming. Using that situation in mind, read and think about the four questions I’ve listed below.

1.- Am I measuring a fish by its ability to walk?

Everybody has their strengths, but if you place someone in an environment that is counter to their strengths, they will undoubtedly fail.

Before rushing to judgement, ask this question first. Have I done a disservice to the employee by placing them in a position that they are not naturally good at doing?

2.- Am I telling them instead of leading them?

The best leaders are not the best because of their title. The best leaders are remarkable because they have distinctive character traits. Thus, asking employees to think and see the way you think and see things is often unfair.

Instead of saying, why can’t they just… (they being employees) ask, have I led them?

Consider putting more efforts towards helping them understand – leading them – rather than expecting them to know.

3. – Am I assuming employees remember?

Just because you said it once, doesn’t mean it was heard or retained.

If an employee keeps overlooking necessary task for example, take pause and consider if the reason is that you have not made clear the importance of the tasks.

One important distinction to have present when reminding employees. It is more important to tell employees why their jobs matter than remind them how to do their jobs.

4. – What am I doing about it?

Some hires simply are not a good fit. Others don’t work out. You know that. The entire staff also knows that.

Keeping an employee around that doesn’t fit well into the culture, is disruptive, consistently underperforms, and makes mistakes despite coaching, is a failure of leadership.

In other words, an employee that is out of line is not necessarily your fault, but it is on you if they remain an employee of the practice.

As practice managers and administrators of both large and small practices, we are wired not to see our failures but instead see the shortfall of our employees and attempt to correct them. Nothing wrong with that. It’s part of management.

But let me challenge you on this one. The next time you have difficulties with an employee, take a moment and reflect how you are interpreting the issue using the questions above. Consider where you are placing the blame. On people’s character or the circumstances?

 

Can Your Medical Practice Afford To Drop An Insurance Carrier?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

Screen Shot 2016-01-05 at 11.09.13 AMI received a letter from the University of Chicago Medical Center explaining that effective Jan 2016; they will no longer accept BCBS.

The announcement took me by surprise. Not because the hospital was dropping an insurance plan- but because they were dropping a major plan, BCBS.

BCBS has a significant market share in Chicago; which translates to a lot of patients having BCBS as their insurance carrier.

I can only imagine why the hospital decided to drop BCBS, but I think I can say with a fair amount of certainty that the decision must have been difficult for stakeholders of the hospital. Undoubtedly dropping such a large plan would affect a lot of patients, but also, shake up the hospital’s income.

CAN A PRACTICE AFFORD TO DROP A PLAN?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

INSURANCE DISTRIBUTION

To help them answer their questions, I worked with the practice manager to create a simple spreadsheet that I call an insurance distribution sheet. Below is a version of the spreadsheet already completed.

Screen Shot 2016-01-03 at 6.28.38 PM

To build the spreadsheet, we needed 3-data sets from the practice’s practice management system. Those three data sets were:

  1. Number of Patient Seen by Insurance Plan
  2. Gross Charges by Insurance Plan
  3. Net Receivables by Insurance Plan

The practice management system we were working with did not provide these data sets in one clean report. We had to run individual reports and enter the values into the spreadsheet.

Once the data was aggregated, we added a simple formula to translate the results into percentages. And the results is what the example above shows.


For those that are unfamiliar with Excel, click HERE to see a brief overview of how to calculate the percent of the total.


WHAT DO THE COLUMNS MEAN?

The first column is the insurance company patients had at the time of service. Percent of patients represents the ratio between all the patients seen, versus the patients seen with the corresponding insurance company. For example, let’s say the practice saw 1000 patients and of those, 300 had BCBS.

300 / 1000 = .3*

(*) BCBS represented 30% of the patients seen

Like percent of patients, percent of charges is the ratio of the practices gross charges divided by the gross charges corresponding to each insurance company. Example. Let’s say the practice billed $1,000,000. Of that million, BCBS represented $250,000.

250,000 / 1,000,000 = .25*

(*) Percent of charges for BCBS is 25%

The percent of receivables column follows the same math as percent of patient as well as percent of charges. And the cents/$ column calculates how many cents on the dollar the practice is collecting from the payor.

INTERPRETING THE GRAPH

Let’s look at BCBS and read across from left to right.

We see BCBS has 40% in the percent of patient column. Meaning, of all the patients seen, 40% had BCBS as their primary insurance. The next column is percent of charges. We see the BCBS represented 45%. This indicates that 45% of gross charges for the practice was billed to BCBS.

Percent of receivables is the next column over. It indicates that the revenue from BCBS accounted for 50% of the practice’s total income. And the revenue averaged 73 cents on the dollar. Another way to read it is, for every $1 billed to BCBS, the practice received 73 cents.

In contrast, let’s look at UHC. Only 8% of all the patients the practice saw for the period were UHC patients. UHC represented 9% of the practice’s revenue, and they averaged 60 cents on the dollar.

WHAT CAN WE GLEAN?

With an analysis like this, the practice can begin to find concrete answers to their pressing questions. For example, if UHC was the plan they were planning to drop, the sheet is able to show them what the impact would be from both a patient standpoint and financial standpoint.

UHC represents 10% of their patient panel. Which would have to leave the practice if they drop the plan, taking with them 9% of the practice’s revenue.

If the plan in question is BCBS, the numbers tell a different story. Fifty percent of the practice’s revenue would walk away with 40% of their patient panel.

Another observation is that Medicaid accounted for 37% of patients seen; but the State’s insurance plan accounted for 24% of the practice’s revenue. Something worth pondering.

HOW MUCH IS THE SHORTFALL?

For the sake of argument, let’s say UHC is the plan the practice was considering dropping. Doing so they would lose 9% of their revenue. This is not insignificant. If practice revenue is 1-million dollars, 9% represents $90,000. If practice revenue is 5-million, 9% is near $500,000. It’s less money no matter how you look at it.

PREPARING FOR THE SHORTFALL

When the doctors I was working with realized how much they’d lose, they got cold feet.

Here is what I explained to them…. the practice doesn’t have to see the same amount of patients to recuperate the 9% revenue shortfall. In fact, the practice can see fewer patients and still make up the revenue shortfall. How so?

Because of the cents on the dollar.

BCBS pays .73cents for every dollar billed. That’s 13cents more than UHC. By filling the schedule with better paying plans, like BCBS, Aetna or HFN, the practice will recuperate the 9% revenue loss faster because they are making more per patient than they would treating a UHC customer.

NOT ALWAYS SO CLEAR

Admittedly this graph does not give you a comprehensive picture. There are potentially other variables that a practice may consider. However, in the case of the practice that I worked with, this analysis was all they needed to answer their questions and move forward.

One last thing before you move one… don’t focus on the numbers you see on the graph and use them to compare with your practice numbers. Focus instead on the method, the process and the math with your numbers. Deal?


EDITORIAL UPDATE
The practice reached out to the payer to negotiate better rates. Armed with the data, they felt empowered (not at the mercy of the payor) and firmly request payment increases. The payer agreed. And they signed a contract that was competitive.

 

Benchmarking Evaluation & Management Codes

With the advent of EMRs, doctors are now able to track, monitor and visualize data that was not as easy to obtain as before.

One data set that EMR systems feature, are E/M codes. E/M codes, if you are not familiar with the term, stand for Evaluation and Management. E/Ms are represented by CPT codes 99211-99215.

Evaluating your practice’s CPT data is highly beneficial because the data reveals insights into the practice. For example, gathering E/M codes allows you to analyze each code’s distribution (e.g., how many 99213 is the practice ‘or a provider’ coding in comparison to 99214).

But how does one know if the distribution is a proper distribution? In other words, if a practice’s 99213 is two times greater than 99214s, is that good or bad?

My go-to guy for this sort of questions is Chip Hart. Chip has access to large data sets over the span of many years thanks to his company’s customers. And when it comes to this sort practice management analysis stuff, Chip is the biggest nerd I know.

Coincidentally, Chip posted on SOAPM a response that addressed this very question of E/M code distribution and what is an appropriate benchmark for pediatric practices.

I took Chip’s response (with his permission) and adapted it for the blog post. Enjoy:

 

B: You’ve done some work on E/M distribution, have you not?

C: I’ve done a lot of work on the semi-mythical E/M distribution topic.

B: OK, let’s get to it. What is the E/M distribution benchmark practices should use?

C: I want to mention a few things first.

  1. We are talking about Pediatrics data specifically. What Family Practice does, for example, is interesting or helpful in an argument, but really doesn’t pertain to pediatrics.
  2. I’m assuming that you really want to know what practices are DOING, not in fact what they SHOULD be doing. There is a difference.

B: Anything else we should know before you share the data?

C: Yes, let me remind you that what other people are doing should only act as a mild guidepost…just because a practice’s distribution is different doesn’t mean the practice is safer or losing money or whatever.

B: This sounds like an important point to highlight.

C: I know practices who do a great job with 60% 99214s and I know practices who should be in jail for their 15%.

B: Give me the bottom line then.

C: The bottom line is this, providers should chart what they did [in an exam] and code what they chart. Nothing more, nothing less.

B: Noted. Now, let’s get to the data.

C: Here’s some real pediatric data from millions of pediatric visits.

Screen Shot 2015-11-08 at 4.36.35 PM
2010 – 24% | 2011 – 25% | 2012 – 27% | 2013 – 29% | 2014 – 30% | 2015 – 31%

 

B: I’m confused by the numbers… I thought you were going to share with us a bell curve. What did you do here?

C: To provide a single, simple number, I just add the 99214s+99215s and divide it by the total 99212-99215 set.

B: What about the 99211?

C: In this benchmark, I am only looking at 99212s through 99215s.

B: Why is that? The 99211 are part of the EM codes.

C: Pediatricians shouldn’t be doing 99211s, and the “normal” curve does imply that pediatricians do as many 99214s as 99213s, for example.

B: Your “simple” single number changes the bell curve.

C: The peak [of the bell curve] is between the 99213 and 99214, not the 99213.

B: Let me see if I understand. To calculate my practice’s E/M distribution, I add all the 99214s and 99215; then I add all the 99212 thru 99215; and finally, I divide the total of 99214 and 99215 by the total of 99212-99215. Correct?

C: Yes.

B: Walk us through the interpretation of the result.

C: Looking at the chart above, for 2015, our clients bill a 99214 or 99215 31% of the time they do an E/M.

B: This way of calculating and benchmarking E/M distribution is different. E/M distribution charts traditionally show the percent for each code for a specific time.

C: I think this data is a lot better than the MGMA data for a variety of reasons (namely sample distribution).

B: What about wellness codes that were billed with an E/M code, do you factor them in?

C: This [data] does not include 9921X codes done during a well visit (i.e., 99213-25).

B: Are we talking new and established E/M coded or just established?

C: The data I shared above does not include NEW 9920X codes;

It is important to reiterate that while Chip’s data represents millions of pediatric claims, you should use Chip’s data as a reference among many.

In other words, just like a sailor uses multiple navigation tools and visual aids to determine its position, speed, and course – instead of a single reference point – you should use additional data points to determine how well your practice is doing.

Don’t forget to visit Chip’s blog Confessions of a Pediatric Practice Management Consultant

Can A Mechanic Shop Teach Us Anything About Managing A Pediatric Practice?

I was reminded that to keep Salud Pediatrics focused, on task, an aligned towards our objectives, it is my responsibility to remind, affirm, correct and make adjustments (sometimes this process includes “changing” old worn out parts for new ones that perform better) to ensure the practice performs at its best.

I took my car in for alignment the other day. As I was waiting for the car, I thought about why the car needed alignment in the first place. If the car’s tires were aligned once, why the need for realignment?

My guess is that the car gets misaligned when something happens to it. For example, the car is jolted by a pot hole. I guessed road conditions, weather, vibrations or simply usage tend to mis-align a vehicle as well.

Screen Shot 2014-07-10 at 11.23.21 AM

Regardless of the reason, one thing is for sure; alignment brings a lot of value. Not only does it keep the car from veering off, but it’s also a preventive measure (kind of like a wellness visas). If you don’t care of your car’s alignment, the misalignment can create bigger problems in the future.

You know what else needs alignment?

You and the employees of your practice.

Why?

For the same reasons your car needs alignment.

There are things that cause us to veer off the path. Just like a car, your practice may have been jolted by an event. When this happens, we start to pull a little left. We tend to forget, lose focus or start heading down a path we weren’t intending on going down.

The jolt may have been a big change or a transition that occurred in the practice. But it could have also been subtle, barely noticeable. Anything from an important team member leaving the practice, to opening a new location to hiring a new provider.

Perhaps it was none of those things, but time.

That day at the mechanic shop I said to myself, just because I’ve aligned the staff towards our objectives, our purpose, our goal once, doesn’t mean that the alignment remains. 

I was reminded that to keep Salud Pediatrics focused, on task, an aligned towards our objectives, it is my responsibility to remind, affirm, correct and make adjustments (sometimes this process includes “changing” old worn out parts for new ones that perform better) to ensure the practice performs at its best.

And sometimes, that alignment begins with me.

What needs to be aligned?

I don’t know what those things are for your practice, but for me, areas in which we need to be frequently aligned are: our practice mission and core values.

I always go back to the core values and our mission because in it, I find reminders on why Salud Pediatrics exist in the first place; what’s are purpose as a practice; why do we come to work; who are we there for?

Once those things are in perspective, I know what needs to be done.

What about you?

What are the areas in your practice that need to be realign? Where have you or your staff veered off? Is the  practice pulling to one side more than it should? Has it been a while since you “aligned” the practice?

If so, it may be time to bring it in to the mechanic shop.


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