How to Thrive Just Not Survive IN A CHANGING HEALTHCARE ENVIRONMENT

How to Thrive  Get Back to Basics – The Old Fashioned Practice Assessment  No such thing as the “perfect” medical practice  Strategic Planning – The Key to Future Success  Have an Integration Strategy  Small Medical Practices  Large Medical Practices  Have a Contracting Strategy  Third Party Payers  ACO Contracting

Practice Assessment  Review the Numbers  Gross Collection Percentage  Net Collection Percentage  Days in A/R  A/R Ratio  A/R in excess of 90 days old  This year better than last year?  Clinical/Procedure/Ancillary Encounters  Provider Work RVUs

Practice Assessment  Review the Numbers  Charges by Payor  Collections by Payor  Payor Collections by Physician  Referring Physician by Physician  Don’t forget the bottom portion of the report  E/M coding comparisons  New to Established Patient Ratio  Closer to zero means you rely on established patients for revenue  Prepare for practice and for each provider  Increase marketing efforts to improve the ratio

Practice Assessment  Review the Numbers  Average Wait Time in Reception Area  Sidebar: Customer Service!!!  Revenue Cycle  Front desk collection success  Copayments  Patients with A/R balances  How quickly visits/procedures are billed  How long does it take to get paid by payors  Percent of scheduled patients vs. available visit/surgery/procedure appointment times  Percent of insurance eligibility verifications vs. total scheduled patients  Recall visits vs. recalls available

Practice Assessment  Review the Numbers  Revenue Cycle  Average number of missing charges vs. services rendered (actual & CPT mistakes)  Percent of denied/rejected claims vs. total claims filed  Percent of denied/rejected claims appealed successfully vs. total denial/rejections  Average days between receipt of payment and payment posted  Average number of unpaid claims resolved by day per collector  Analyze Overhead  Compare to prior year  Compare to industry benchmarks

Practice Assessment  Review the Numbers  Managed Care  Review charges/collections by payor  Payor assessment  Gross collection percentage  Days in A/R  A/R aging  Analyze reimbursement rates  Compare rates to Medicare rates (what % Medicare)  Compare rates to other payor rates  Perform a cost accounting analysis

Practice Assessment  Improve Profitability by Improving Processes  Elements of Process Improvement 1. Recognize the current state of the practice 2. Define what plans must be in place to improve each state 3. Measure the systems that support the plans 4. Analyze gaps (variance) in system performance benchmarks 5. Improve system elements to achieve benchmarks 6. Control system-level characteristics critical to improvement 7. Standardize the systems that prove to be best in class 8. Integrate these systems into the business framework

Practice Assessment  Improve Profitability by Improving Processes  Potential Areas for Process Improvement  Revenue cycle analysis  Patient throughput analysis  Denial analysis  Cost accounting  Code and modifier analysis  Reimbursement analysis  Patient Satisfaction (complaints)  Compliance risk analysis  Physician productivity analysis  Clinical outcomes

Strategic Planning  IT MUST BE DONE! – By All Practices, All Sizes  Experience Indicates  Many are dedicated to a strong future  Only the bold make their future happen  Too many allow their future to be dictated to them and not by them  No one plans to fail – but too many fail to plan – and many more fail to act Strategic Planning is NOT  Sitting in a circle singing Camp Fire Songs expressing Love and Harmony  Spending Hours on a Vision and Mission Statement  Creating a BIG BOOK that sits on a shelf collecting dust.  Making endless lists of “to do’s” – that will not be accomplished

Strategic Planning is All About  Taking Control of Your Future  Engaging the Universe in which Medical Practice Participates  External  Internal  Leveraging Strengths to Advantage  Crafting a Future consistent with all stakeholders and shareholders needs/expectations (professionally and personally)

Strategic Planning is All About  Crafting a Future consistent with defined market realities – opportunities and risks  Developing Specific Actions, with accountability for achievement, by a certain date, that will support Owners’ Goals and Objectives considering the realities of the Universe in which you elect to engage. THIS IS HARD – BUT IMPORTANT WORK

Strategic Planning Meeting Objectives Arrive at Consensus Regarding: Member and Practice Needs; External And Internal Forces To Engage Opportunities to Seize Address Current Issues and Concerns - Develop Action Plan to GET THEM OFF THE TABLE. Develop an Accountable Action Plan

Have an Integration Strategy  Merge with Other Medical Practices (Small Practice Strategy)  Roll Up/In Smaller Medical Practices (Large Practice Strategy)  Should Practice Sell Out to a Hospital or Other Third Party  “You’ve got to pick a team”

Driving Forces Behind Consolidation  Reimbursement  Ability to add Revenue Sources  Increasing Overhead  Declining Physician Incomes  Practice Management  Recruitment  Increasing Competition  Healthcare Reform  Transition (Practice Succession)

Advantages of Consolidation  Increased Revenues From Same Practice Production  Reduced Overhead  Managed Care Contracting  Technology Upgrade Capability  New Revenue Streams  Call Coverage  Clinical Staff Leverage  Reduced Competition  Access to Capital  Real Estate  Enhance Human Capital

Hospital Acquisition  The Strategic Question  What can the hospital do for you that you can’t do for yourself?  Physician Due Diligence Issues  What will stay the same with our office and what will not?  Who will do the billing/credentialing?  Termination clauses/Guarantee period  Malpractice tail cost  Employment agreement  Length & compensation  Work RVUs or Total RVUs  Professional services v. ancillary services

Hospital Acquisition  Physician Due Diligence Issues  Potential impact on referral patterns  How to get practice back and what are details of doing so?  Potential impact on practice employees  Human resource policies (hospital)  Benefits  Comp structure  Spouse employment ongoing  Moving employees around

Hospital Acquisition  Physician Due Diligence Issues  Office Location Issues  Lease & leasehold improvements – What happens?  Lease assumptions  Getting physician’s name off the lease  Is lease transferable?  Tax issue – capital lease of fixed assets  What happens when lease expires?  What if doctor owns building?  What assets will be purchased and related tax consequences

Have a Contracting Strategy  Where are We Headed  New Value Based Financing Methods  Global budgets, global payments  Bundled Payments  Episodes of Care  “Accountable Care”: Clinical Integration as Foundation  Limited (narrow) and Exclusive (closed) Networks  Capitation?

Have a Contracting Strategy  Managed Care  Find Your Leverage Points  Track Quality/Outcome Measures  Find out what the payer wants and deliver it (i.e. what are the cost drivers for the practice’s specialty)  Get a utilization report card from the payer if you can  Engage the Payors - Be Proactive  Negotiate Rates  Negotiate a New Relationship

Have a Contracting Strategy  ACOs  Independent Physician ACO Concerns  Reduced utilization of services  The future of bundled payment structures  Commercial health plans adopting the ACO shared savings format  Increased acquisition of physician practices creating competition for the independent physician  Contracting Concerns

Questions and Answers Reed Tinsley, CPA, CVA, CFP, CHBC