Elizabeth Woodcock, MBA, FACMPE, CPC

Welcome to Medical Economics' blog section

 which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The opinions expressed here are that of the authors and not UBM / Medical Economics.

Remember when banks granted mortgages to just about anyone who wanted to purchase a home, regardless of their finances? We learned the hard way that this economic model does not work from the legacy of the mortgage catastrophe that took years to mend.

This debacle is being repeated today in healthcare. Patients are sold a product-in this case, a high-deductible health plan-that they cannot afford. Patients simply don't have the disposable income to pay the high deductibles they're being sold. "Less than half of non-elderly, one-person households could pay $2,000 toward cost sharing from current liquid assets, while only about a third could pay $6,000," according to research from the Kaiser Family Foundation. Even Medicare, the federal government's insurance for seniors, provides evidence of the same problem: Medicare beneficiaries’ average out-of-pocket spending on health-related expenses consumed 41 percent of average per capita Social Security income in 2013, according to a January 2018 research study by the Kaiser Family Foundation.

As a nation, we have embraced once again the routine granting of financing to consumers who can’t repay it.

In healthcare, however, it is not financial institutions that are foreclosing on loans. Instead, physicians, who are working tirelessly to care and treat patients, are left with the daunting task of trying to collect money from patients who simply do not have it. Unlike regulated entities, no party oversees the magnitude and extent of the financial loss connected with these high-deductible plans. While employers and insurers benefit mightily from the premiums associated with these high-deductible health plans, physicians are losing their shirts. Sure, they can ask for payment and learn tools and techniques to collect, but many physicians are forced to provide deep discounts to patients or simply write off the patient financial responsibility as bad debt.

The efficacy rate for patient collections is abysmal; data show collections at four to 15 percent on the dollar-and personal experience confirms that. A five-physician practice with which I consult has written off $1.5 million for each of the past two years. And unlike a hospital or other facility that gains a tax advantage for this so-called "charity care," physicians have no tax benefit.

These high-deductible health plans mirror the mortgage disaster of a decade ago as "loans" are being made regardless of the consumer’s ability to repay the debt. Further, there is no systematic tracking of the millions of dollars written off every day on behalf of patients who owe physicians money. Just like the mortgage crisis, the signs are there – but hidden from view. As patient financial responsibility rises, this situation is not sustainable.

While the debate rages about the Affordable Care Act, we may be missing a much larger crisis on our hands that has the potential to take down the U.S. healthcare delivery system as we know it. Employers, insurers, and patients benefit from high-deductible plans, but physicians face potential financial ruin.



, MBA, FACMPE, CPC, is a speaker, trainer and author who is passionately dedicated to helping physician practices achieve and sustain patient satisfaction, practice efficiency, and profitability.

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Physicians face financial ruin if patients continue to access products they simply cannot afford.

Healthcare financing is the next mortgage fiasco

During the past ten years, total support staff costs have fluctuated between 30% and 33% of medical revenue in multispecialty groups, according to the Medical Group Management Association (MGMA). The U.S. Bureau of Labor Statistics reports that wages and salaries totaled approximately 70% of private employers’ staffing expenses in 2014, with benefits accounting for the remaining 30%.

The cost of your support staff includes salaries, and one option for retaining high-performing employees is simply to pay higher wages.

That’s a costly proposition, however. Not only does it mean shelling out more money, but it could also put “golden handcuffs” on employees who may become unmotivated and unproductive-and unwilling ever to leave your employ.

Paying a competitive wage is vital, but don‘t overlook the benefits package you offer to your employees. You may find ways to save money, not by cutting benefits, but by more appropriately targeting benefits to the needs of your staff.

Delegating tasks to practice staff can improve team-based care 

Although it may be tempting to reduce staffing costs by cutting a staff position or two, research by the MGMA reveals the value of adequate staffing. The ratio of staff to full-time-equivalent (FTE) physician tends to be higher in practices that performed better than comparable practices in profitability and cost management, according to the MGMA. The lesson? These practices make better use of their employees than other practices, significantly raising the level of the practice’s productivity and bringing a positive return on their investment.

Most items in an employee benefits package are optional. But consider that whatever you might save by eliminating or severely reducing benefits will come back eventually in the form of an expense to your practice if you can’t retain employees or morale declines, or you can’t effectively compete for the best candidates when new openings occur.

Once your benefit plan is in place, consider framing it for employees. Brochures and forms are nice, but take the time to document all of your benefits on one page and put a dollar value to them. Divide the value by 2,080-the standard hours worked per year by a full-time hourly employee, and you’ll have the per-hour rate of your benefits.

How an employee manual can help control risk, contain costs

Present a benefits statement that delineates the benefits and the associated costs to potential candidates alongside the hourly rate you’re offering. They’ll see the proposed hourly wage ($16.75, for example) but also the value of the benefits (let’s say $5.12.) Potential and existing employees will be pleasantly surprised by the investment you are making in them. An accounting of benefits can be very influential in attracting and retaining employees.

A comprehensive benefits plan is critical to attracting and keeping highly-qualified employees. Even in the largest urban markets, the healthcare community is like a small town. Word will get around quickly if you have built a reputation as a progressive organization. And you will need the flexibility that qualified and motived employees provide in order to meet the many challenges of today’s medical practices The benefits package, in addition to salary, is a key tool to help retain those valued workers.

Take the time to review your benefits package to ensure that it complements, rather than sabotages, your staffing strategy. Below are a number of key benefit options to provide your employees.

Paid vacations, paid time-off, sick leave and attendence bonuses

Typically, paid vacation time increases with seniority. A common arrangement is to offer employees two weeks (10 days) of vacation during their first through fifth years of service, then bumping it up another week to 15 days after five years on the job. Start with five, and try gradually increasing the time-off-with-pay annually by offering, for example, an additional day of vacation each year.

The employee still reaches 15 days of paid time off in year five, but you avoid taking a sudden hit from that large jump in paid leave.

What to know about your benefits before signing an employee contract with a hospital

Most practices provide sick leave because you don’t want ailing workers to come in contact with patients, other employees and you with their illnesses.

Furthermore, there is a cost associated with “presenteeism”-the lost productivity that occurs when staff are present for work but execute their job duties below expectations because they are sick. Provide leave, while encouraging employees to avoid using sick leave inappropriately, by allowing them to carry over unused leave days, or a portion of them, to the following year.

Other options would be to extend the opportunity to convert unused sick leave days into vacation time at a 50% ratio; that is, one day of unused sick leave becomes a half-day of vacation. Some practices offer a day or two of personal leave as well per year-just to enable employees to take a break.

In addition to purchasing unused sick leave, another route to discouraging inappropriate sick leave is to offer attendance bonuses.

Instead of cash, try offering an extra one or two days of leave to those with perfect attendance (no sick days taken) during the year. To reduce disruptions, require that attendance bonuses be used on slow days, such as Friday afternoons.

Rather than hashing out what category of leave is appropriate, consider converting your program to paid time off (PTO), a step that a majority of companies now have taken, according to industry research.

Relatively simple to administer, PTO programs offer flexibility and privacy and allow employees to make their own choices about absences. Pay-outs for unused days work the same way as sick and vacation leave; you have to establish your policy and manage it appropriately.

Of course, regardless of your choice of leave packages, be sure that your practice has policies in place for handling family medical leave, jury duty, military leave, and any other types of leave that your state may require.

Finally, most practices provide paid holidays for New Year’s, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas Day.

 Health insurance, education, and tips on hiring the right people

Health benefits are the crown jewel in the employee compensation package, particularly as you recognize its importance on a personal, daily basis.

Starting in 2015, the Patient Protection and Affordable Care Act and related legislation requires employers with 50 or more full-time employees (or a combination of full- and part-time employees equivalent to 50 full-time employees) to offer adequate health coverage or face an assessment for any employees who receive premium tax credits to buy their own insurance. Offering health insurance to your employees also can provide you with an income tax deduction that effectively reduces your out-of-pocket cost for those benefits. If you employ fewer than 25 employees, your practice may be eligible for a tax credit in return for purchasing health insurance for employees.

Consider providing dental or vision plans as well, if funds allow. Hold down your expenses by providing the insurance but not financing the entire benefit. According to a survey of California companies by human resources consulting firm William M. Mercer, 91% of employers require employee contributions toward health insurance, while 92% require employees to contribute toward the cost of insuring dependents.

Your practice will benefit from extending training incentives to employees in good standing.

Higher education costs can be considerable, but you can keep a lid on this type of benefit by limiting its use to practice-specific training, such as coding recognition for business office staff, phlebotomy certification for medical assistants, technology training for administrative staff, continuing medical education for nurses, and so on. Typical packages include reimbursement for tuition and books.

If training opportunities come up, consider paying for the employee’s travel and meals as well. In addition to professional organizations, there may be opportunities through state and county medical societies, or evening or online courses at a community college.

Make sure to budget for these costs and limit both overall spending and per-employee, so that one or two employees seeking specialized skills don’t gobble up the entire allocation for training. Add a written clause for any assistance towards a certification or degree, so that the employee is required to reimburse you if, for example, he or she leaves within two years of the training’s conclusion.

Although you may not think of this a benefit, employees definitely believe the extent of their work week is a value-add.

Particularly if you are paying overtime, try migrating an employee (or two) to a four 10-hour day, or nine hours per day, followed by a workday with a half-day off. (If you are paying overtime, this may actually save you a great deal of money.)

These aren’t your only choices. Be creative! If you stick with the traditional 8 to 5 workday, consider paying bonuses in the form of “hour-off” rewards, noting that it must be approved in advance.

Or, to save money, but keep your existing staff, migrate everyone to a 35 or 37-hour work week. Of course, set expectations that they’ll get more time off, but their paychecks will be slightly reduced too.

In addition to the above mentioned benefits, practices can consider:

Assist employees in saving for their future, as well as providing aid in the forms of life insurance and disability insurance. Alternatively, offer a cafeteria plan, allowing employees to choose what they value most.

Providing uniforms to employees may be a welcome benefit because it will save them the cost of wear and tear on their own wardrobe, and you benefit because it eliminates at least a portion of potential dress code violations.

Encourage your staff to be healthy; consider a walking club at lunch with small rewards or a “biggest loser” contest. Invite a nutritionist to host a cooking demonstration for your staff-with the resulting lunch or dinner on the house.

Try holding private luncheons off-site now and then for special occasions such as birthdays, employee anniversary dates, or other observances, such as Valentine’s Day. Or support a charity and participate in an event as a team.

Perhaps the greatest benefit of all is coming to a happy workplace; thank your staff every chance you get, and make your practice a positive work environment.

Author | Elizabeth Woodcock, MBA, FACMPE, CPC

Articles

Healthcare financing is the next mortgage fiasco

Creating and maintaining an employee benefits package