To best run your practice, it's planning, not price, that's going to get the technology you needSpring was a trying time at United Medical Associates in Binghamton, N.Y. The multispecialty practice was waiting an average of 114 days for payment on patient accounts, a lag that was holding up cash flow like a well-built dam.
But in June, that number fell to 94 days, and all signs indicate it is well on its way to dipping lower still.
What generated the seeds of United Medical's apparent turnaround? The answer: a fresh look at management priorities and the purchase of a new information system.
Because of the size of the practice -- 14 office sites, 125 doctors and 400 support staff -- Jerry Shantillo, United Medical's chief operating officer and chief financial officer, decided to call on consultants PricewaterhouseCoopers for advice.
"The pressure we felt (to improve the way the business operated) was from managed-care companies, which were cutting back everywhere," Shantillo says. "It's really important to get every dollar of the receivables."
United Medical collects $55 million in patient revenues annually, 27% of which come from managed care, including discounted fee-for-service.
Though becoming more business and bottom-line oriented has been the focus of physician banter for years, many lack the time, money or skill to make it happen. Or, perhaps worse, they try to make it happen by spending enormous sums of money on the wrong solutions -- typically new computer systems that look good but are too complicated and don't serve physician practices' specific needs.
In total, physician practices, physician practice management companies and related ambulatory healthcare facilities spent about $4 billion on information technology in 1997, the latest year for which figures are available, according to an analysis done by Jewson Enterprises of Menlo Park, Calif. Medical groups alone spent about $1.5 billion, primarily on administrative and financial systems.
The report, known as POMIS or Physician Office Management Information System Report, covers more than 2,000 medical offices and 600 vendors. It estimated that spending for physician information technology will reach more than $6 billion by 2002.
Rather than a spending spree, consultants and practice administrators say the key to a successful turnaround is a viable plan for improving the business aspects of a practice and the right technology to put it in place.
Jane Sarra, a director in the financial advisory services business recovery unit of PricewaterhouseCoopers in Boston, has helped several large practices get their finances in order and identify the right technology to meet their needs. For many practices, the first sign they are in trouble is large accounts receivable, she says.
But a pattern of long waits for payment may be symptomatic of other problems. For example, rather than the billing system, a flawed process of entering patient billing information may lead to rejected claims and growing receivables.
To discover the roots of a practice's problems, Sarra and other practice consultants analyze a number of factors. They interview doctors and billing staff, review patient and payer populations, and examine any other aspects of a practice that might affect accounts receivable. Such an analysis allows them to identify problem areas and assist practices in prioritizing goals. It's not imperative that this process be done by an outside consultant; someone capable and objective within a practice could do the same.
A close look at United Medical revealed its main problem was very high claims rejection rates -- 15% to 20%. But analyzing rejection patterns to reduce the rejection rate was all but impossible with United Medical's computer system, which was more than a decade old. Even if it were possible, the software vendor wasn't providing technical support, and no one at United Medical had the expertise to write the programs necessary to generate appropriate reports.
Finding the system that could perform this and other tasks wasn't easy. First the practice had to identify its specific needs and then it had to find the system that could best meet them. Two years passed from the beginning of the search to implementation. The target time frame had been one year, Shantillo says, but the practice was simultaneously making changes in management, which slowed things down.
In total, United Medical spent approximately $1.5 million, $500,000 of which was used to pay the 30 additional employees hired to ease the inevitable slowdown that would occur as staff learned to operate the new system. The investment in more employees was well worth the cost, Shantillo says. And as time has passed, through normal attrition, the number of staff has returned to its previous level.
The new system allows the practice to track every claim rejection site by site in real time. Reports of rejected claims are sent to the appropriate offices, which have five days to remedy the cause of a rejection. The system also generates reports that show errors in new-patient registration. The current percentage of errors is about 4% and falling, Shantillo says.
Shantillo believes the capability of the system to isolate problems by site, provide immediate feedback and, accordingly, hold each site responsible for its errors, has played a large role in the sharp drop the practice is seeing in claim rejections.
Aside from the financial goals United Medical identified before it purchased the new system, it also wanted to find a way to ensure patients with acute conditions would be seen by their physicians within 24 hours after calling for an appointment. The goal for other patient appointments was a maximum of two weeks.
The first step in achieving these goals was to have the ability to track which doctors most often were unable to meet them, something the new system and software could easily provide. Once identified, the doctors, along with United's management, worked to determine the cause of the delays and how to avoid them.
For example, long waits for appointments sometimes were due to a high number of no-shows, a factor the system can also track. If system reports reveal no-shows are common, the solution can be as simple as making certain a doctor's receptionist diligently calls patients to confirm appointments.
One bonus of the new system was that it allowed the practice to decentralize management, giving individual offices responsibility for creating their own annual budgets, hiring and firing, and making other staff-related decisions.
"In the past, everyone blamed the business office (for procedural problems)," Shantillo says. "Now we're saying it's the physician, the business office and the site, and if all three parties aren't working together, there are going to be problems.
"You need to get buy-in that everybody's responsible for making a new system worthwhile."
Sarra of PricewaterhouseCoopers agrees. "If you have a staff that balks against an information system, you're going to have a white elephant on your hands. Your information system is only as good as your human systems," she says.
At NeuroSource, a Chicago-based neurology practice, a system's capacity to be flexible was a top priority for Amy Malick, director of information systems, as she looked to update the practice's operations to meet an anticipated expansion. The practice has 10 offices in Chicago and plans to open more sites in other cities, including in Philadelphia and Phoenix.
Twenty-five physicians and about 250 support staff work in the Chicago offices.
Malick wanted to make certain the new system could easily accommodate new software for creating electronic patient records, outcome reports and reports that would help NeuroSource have the information it needs to make good business decisions and improve collections.
"As we grow and learn, we'll have ever-changing needs, and to integrate those needs (into our information system), we are going to be constantly changing software," Malick says.
For this reason, NeuroSource chose hardware than runs on Microsoft's NT operating system and uses Microsoft SQL database language, both of which are industry standards. By doing so, the practice will be able to purchase a variety of software as needed that will easily integrate into its system.
Easy integration is crucial, Malick says, because maintaining a system and keeping it up to date can be very expensive. Whether a practice is large or small, using standards as much as possible will save on both cost and aggravation.
Another way to get the most value from an investment in new technology, Malick says, is to specify in contracts that the sale includes not only the installation and debugging of new software but also consulting services from the vendor for a set period of time.
Consultants can train employees to input data, generate reports, back up data, customize applications and perform myriad other tasks. Though vendors often promise the world when making a sale, most of what is said is "just smoke and mirrors," Malick says.
A practice won't get the full benefit of its system if the users are not well trained, Sarra says. Often it's the inability of staff to use a system that causes problems, she says, not an inadequacy of the system.
At United Medical, for example, staff underwent in-depth training in scheduling, registration, charge entry and payment posting on United's new system. New hires receive 4-plus days of training before they're even assigned a log-on name, Shantillo says.
It's clear, consultants say, that the rewards of an informed purchase and an informed staff are well worth a practice's money and time. The right system used the right way is a powerful tool for boosting the bottom line.
For instance, Sarra says, doctors often have no idea whether a particular capitated rate from a particular managed-care company is covering the cost of services. With software that can provide such information, a practice can enter its next contract negotiation better armed to get what it needs.
One practice that has benefited in this way is Hand Surgery Associates in Denver. Hand Surgery has seven doctors and 38 support staff at its five sites.
Peter McNally, administrator of the practice, says the practice is constantly buffeted by new payers, as patients repeatedly switch insurers.
The practice's old computer system provided little information on collections and was linked to a clearinghouse that billed patients and payers and collected fees.
The new system has allowed the practice to bring collection responsibilities in-house. Because the system can quickly generate reports showing cost-per-case by payer, McNally says he now can clearly see where bottlenecks occur, and, therefore, is much better equipped to negotiate contracts with payers.
Before implementing the new system, the practice was racking up about $41,000 a month in "doubtful" receivables -- receivables it was unlikely to collect. And indeed, it was able to collect less than $6,000 of what was due. Now, the amount of doubtful receivables each month has fallen to about $23,000, of which the practice is collecting about $1,000. As a result, write offs have dropped by about $13,000.
The new system also has saved the practice the estimated $84,000 per year it expected to spend on three additional employees to handle in-house billing. As it turns out, the employees weren't needed; much of the billing-related work can be done by the system.
Given the current rate of return, it appears the practice is well on its way to earning back the $275,000 it invested in the technology, McNally says. The doctors are very pleased, he says.
The experience has altered McNally's thinking about the importance of issues such as technology and the ability of a practice to manage contracts. Physician quality alone is not enough to assure survival, he believes.
"I used to be a strong believer in the ability of physician practices to remain solo," McNally says. "But with managed-care contracts and capitation, if you don't have a billing system that can (negotiate the complications managed care and capitation add), your only avenue is to join a large group or to have a management group manage your practice."