What Direction Is Your Medical Practice Headed?

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By: David P. Schmiege
By: David P. Schmiege

With a typical day packed with new consults, procedures and patient follow ups, it is no surprise that most physicians have little time to focus on the details of running a successful practice. This article will help you look at the big picture and quickly identify

signs of trouble. I have spent the better part of my career helping physicians understand the key indicators that they should be looking at and understanding what actions, when implemented, will bring a defined resolution. Understanding that every practice is unique, this article will provide a brief explanation of performance indicators that every physician should be aware of.

Accounts Receivable Trends. Have your
office manager or billing company prepare for
you monthly graphs that show you the numbers and trends of charges, contractual adjustments, receipts and outstanding accounts receivable (payer and patient balances). When you see a sudden increase or decrease that is not predictable, based upon historical benchmarks, take a closer look. A sudden increase in adjustments could be an indication that your A/R is not being followed
up on or balances are being written off rather than worked. If payer balances are shifting into the 90+ day aging column, staff may be focused on other areas of the practice or perhaps one of your payers has become delinquent. 30% of claims in the US are denied and of that, 15% are never resubmitted, despite the fact that 70-80% of appealed claims eventually get paid. Be proactive and get what you deserve!

Payroll Costs. If overtime costs are suddenly rising, your office manager needs to explain to you why. Examine the hourly wages for each position to be sure they are in line with your wage scales. You’ll also want to look at overtime trends. Remember, when people work overtime you are paying a premium pay rate for the hours they are tired and likely to be less productive. If day-to-day activities
in the practice are business as usual, overtime hours should be stable and predictable. Sudden increases in overtime can identify absenteeism or staffing issues, which in itself can be an indicator of a bigger problem.

Rising Overhead. If overhead percentages are increasing and your personal income is decreasing, this is a possible indicator of poor financial management and/or lower physician productivity. These problems won’t go away by ignoring them. Start a comprehensive review by looking at prior monthly, quarterly or annual financial statements to identify contributing factors
to this trend. A more detailed overview of the
entire practice will require the assistance of your accountant or a practice management consultant.

Unhappy Patients or Low Staff Morale. When patients start to complain about how they are treated by staff or their inability to schedule appointments within a reasonable timeframe, it is time to start asking questions. If you have employees with “attitude”, perhaps it is coming from yourself or the office manager? Staff will generally emulate the attitude and behavior that they are experiencing. A frequent cause of low staff morale is a feeling of being overworked and underpaid. A high rate of staff turnover increases their workload, frequently without additional compensation. If you are experiencing high staff turnover, something is wrong within your office. It could be unrealistic expectations, poor management or an inability to develop an atmosphere where people feel important and are proud of their accomplishments.

Appointment Schedule. Too often a physician takes for granted that there will be an occasional no-show and they will sometimes run behind. But if this is a pattern, not an exception, something is wrong. It may be a lack of well-designed scheduling templates, overbooking, or not predicting or allotting enough time for procedures. It may also be an indication that patient demands are greater than you are able to meet without compromising patient satisfaction. These issues can be resolved with a little effort, planning and a true commitment to take corrective action.

Month-End Reporting. It is important to review each prior month’s performance and examine
any indicators that affect your current or future competitive position. You should receive practice performance reports each month, within three days of the month-end close. These reports should be reviewed with the practice manager immediately after each month-end close. Standard reports include monthly and year-to-date production activity (charges, receipts and adjustments by provider), accounts receivable performance and aging reports, overhead analysis, and a summary of patients referred by key referral physicians.

Patient Visits. Historical patient data is usually a strong predictor about the number of patients you can expect to treat each month in your practice, both new and established. If the number of visits is dropping, you will want to know why and whether the drop is from physician referrals or self-referred patients. A decline can be a sign of scheduling inefficiency, poor office management or attrition due to poor patient satisfaction.

Appointment No-Shows. Frequent no-shows
can cost your practice a tremendous amount of money. Calling patients with an appointment reminder the day before or day of the appointment (manual or automated), as well as improving your appointment scheduling templates, is an investment that pays off. Most practices find that a well-thought out phone script for patient reminders helps cement
the patient’s commitment to keep the appointment and automated systems reduce the missed rate by
as much as 40-45%. The cost of the automated system and the staff time it saves is easily recuperated when there are fewer holes in the schedule.

Wait Time. This measurement is a reflection of your commitment to patient satisfaction. No one likes to wait and it’s your job to ensure patient wait times are no greater than 5-10 minutes past their scheduled appointment times.

In less than four hours a month, you can review practice performance reports and make data-driven decisions that are prudent for the overall stability and growth of your practice. If you aren’t doing this now, it’s time to get started. If
you are experiencing signs of trouble, start investigating the causes now.

You can obtain an unbiased report of the practice performance by hiring a practice management consultant to conduct a practice assessment. The consultant will look at major aspects of the practice by reviewing reports, conducting an on-site assessment, and examining systems, procedures and the culture of the practice. The costs will vary, depending on whom you hire and how extensive a survey is conducted. Such an assessment provides an excellent base line to guide you in setting and achieving benchmarks for improvement.


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