It has often been said, and written, that a medical practice is a small business. And as such, it needs to be run like one: profitably. However, in the world of medical practices, the definition of being profitable is complex.
It has often been said, and written, that a medical practice is a small business. And as such, it needs to be run like one: profitably.
Making money sounds simple enough, but in the world of medical practices, the definition of being profitable is a little more complex.
“There’s a range of profitability in every individual doctor situation as well as every group situation that is defined by some market forces,” says Brian White, founder of Competitive Solutions, a firm that provides strategic and operational leadership to physician practices. “How many patients are available to the practice? How many of them can the practice get to come into its fold? And how quickly can they treat them? And then, controlling the overhead costs to maximize that income is critical to the practice’s long-term success.”
The starting point
White says that one of the first strategies toward medical practice profitability is to look at the range of income for each physician. In other words, how much revenue can they produce, within reason, and then set your goals within the framework of exactly how much that doctor wants to work towards those goals.
For example, if a doctor wants to limit his or her time to a 45- or 50-hour workweek, then he or she is going to be limited in terms of earnings. But if you have someone who’s willing to work 75 to 80 hours a week, then the practice will find itself on the higher end of that physician’s potential range.
Simultaneously, says White, it’s critical to look at controlling costs.
“You want to get value out of every dollar that you spend within your practice,” he explains. “You want to take a hard look and make sure that you are getting the benefit you need out of each of those dollars. Practices need to weigh the tradeoffs of every dollar being spent.”
White acknowledges that much of a medical practice’s revenue is tied to third-party reimbursement and, in that regard, there’s little wiggle room. But he says there are still steps practices can take to improve revenue, and it starts with getting complete and accurate information when patients arrive in order to bill their insurance plan.
“We want to make sure that we’re collecting appropriately at the time of service for co-pays, coinsurance, and deductibles,” White says. “After we’ve seen that patient, we want to make sure we have the billing process working at high velocity, in that we want to quickly get the service performed, communicated to the billing staff, and the claim filed in a very short window.”
One thing White says continues to shock him is what he calls “leaky boat syndrome”—a gap in the process where some hospital consults or other services being provided are not being billed. With that in mind, he says it’s critical to set up internal control processes to ensure billing is occurring in a timely fashion; that collections are coming in at a steady pace; and that accounts receivable follow-up occurs in order to maximize practice revenue.
Can using an electronic medical record help? White says it’s not a silver bullet, and much depends on the practice.
“I think some practices are not helping themselves with EMR, because they’re slowing doctors down as they’re seeing patients; it’s reducing the number of patients they can see in a timeframe, and there may not be enough data collection benefit for them in that process,” he says.
See things differently
White says he’s not a fan of clichés like “work smarter, not harder,” but he does believe it’s important to maximize medical practice efficiency in what he calls a downstream velocity. In other words, make certain information can be used efficiently and effectively.
“I need to make sure that the information I gather and present to you is in the most effective manner for you to take and start to use to do your job, so you don’t have to reconfigure everything to figure out where to start,” he explains. “I definitely think that’s important.”
White says expanding service offerings or integrating with accountable care organizations are worth consideration, as long as the practice is sure it will be getting the proper return on investment.
“In a physician practice setting, I think one of the most important things that you do when you integrate new services is to make sure that you’re not cannibalizing existing business in that process,” he says.