Many practices are finding it pays to know how they measure up when it comes to staffing levels, physician compensation and back office practices.
One group that gained by making such a comparison is Family Medicine Associates in Carrollton, Texas. An eight-physician practice, Family Medicine had attributed its high billing costs to its high volume. On closer look, however, the practice found that although it was spending 25 percent more on billing than practices that were doing a good job on collections, some of its accounts were up to 18 months old.
"Our revenue stream was so good we didn't think we had a problem, although we knew we had a backlog of accounts. So we figured we needed more people," says Richard Honaker, M.D., CEO and senior physician at Family Medicine.
The group didn't need to add staff; it needed to change its billing practices to function more efficiently.
Family Medicine identified areas for improvement through a process known as benchmarking, the practice of measuring and comparing key work processes with those of industry leaders in an effort to better performance.
Many practices already benchmark, says Elizabeth Woodcock, an Atlanta-based consultant for Medical Group Management Association, but they may not call it that because they think benchmarking is an elaborate process.
In Family Medicine's case, the practice compared key billing indicators with other practices of its size and specialty. Once the clinic saw how it compared with other groups, its management was able to take a closer look at the group's processes to find out why collections were subpar.
Woodcock, the consultant called in by Family Medicine, found that the practice spent 10.5 cents of every dollar earned on billing, while the generally accepted market rate is 8 cents. Family Medicine's average number of days in accounts receivable was 58.5 days, while that of better performing practices is only 47.2. And while it took the group 10.75 days to submit a claim, better performing practices only take three to six days.
Hiring more billing staff would not have addressed the basic problems. Previously, for instance, accounts were divided alphabetically by the names of patients, and the staff wasn't able to get to some each month. Now the practice splits up accounts by insurance carrier and tackles accounts with the largest dollar amounts first. That way if they don't get to all of the accounts, at least they have hit the ones that will bring in the most money.
The practice also has stopped appealing unpaid bills of less than $10 since the process of sending out a bill and submitting an appeal itself costs $10.
They also changed their accounting system to allow recording of partial payments. Previously, the billing department hadn't been cashing checks for partial payment until all the money for a bill came in. That meant that thousands of dollars were literally sitting in desk drawers. They cashed those checks and one day "became $15,000 richer," says Honaker.
The improvements at Family Medicine were instituted earlier this year so it's too early to say how much more total revenue the group has brought in with these changes.
Benchmarking can take on different forms and doesn't always follow a strict definition. "Sometimes you have to set your own standards and improve from there," says Betty Prescott, administrator of Jefferson Family Physicians in Jefferson City, Tenn.
A four-physician primary care practice, Jefferson started conducting quarterly chart reviews two years ago to determine whether physicians were properly coding visits.
Prescott says a practice should have a near-perfect bell curve when it comes to coding the level of services they're providing. That means the bulk of their visits should be categorized as level 3, some should be 2s and 4s, and very few should be 1s and 5s.
"Our doctors tended to undercode, and only one time did I have an overcharge," Prescott says. "Now they are doing much better." That "much better" translates into an increase of 7%, or $140,000, of annual revenue.
Jefferson improved its performance through monthly training sessions. Providers also were given a coding chart to which to refer in the exam room.
"When you can show (physicians) in dollars and cents what they're losing in not charging the proper level of service, that gets their attention," Prescott says.
External comparison information to use in benchmarking isn't hard to find. Sources of help include professional organizations, such as the AMA or medical specialty societies; industry organizations, like the MGMA and the American Medical Group Association; or healthcare consultants and businesses serving the healthcare industry. Some groups may charge for survey information.
Benchmarking alone isn't a means to an end, though. "It's not to say where you should be," Woodcock says. "It shows you where everybody else is, and gets you to say, 'Let's describe the difference between me and everybody else.' The explanation is the key."
If you were to look to see where your practice fell, for example, in regard to full-time employees per physician, and you had a higher number of FTEs than the median, you shouldn't automatically think of cutting staff. You first need to understand why your rates are higher. In fact, having a higher ratio of support staff than the median might pay off for you, as it does for many successful groups.
Such is the case for Collum and Carney Clinic Association, a 67-physician multispecialty group in Texarkana, Texas. One of Collum and Carney's key benchmark indicators is FTEs per physician. At 5.2 FTEs per physician, its number is higher than the norm of 4.79. But even though the practice's staffing costs are 10 percent more than the median, its productivity is 20 or 30 percent more than the median. "We're still doing more with less," says administrator Tom Simmons.
"Once you've determined where you stand and that you need improvement, look for someone who's doing it better," says John Houser, CEO of Valley Medical Center in Lewiston, Idaho. Houser is a member of MGMA's survey advisory committee, the panel that oversees the design and methodology of the association's industry surveys and reports.
Say you want to improve your collection rate of office visit co-pays and deductibles. You contact a practice you know is doing a good job, but in talking they refer you to another practice doing an even better job. In the process, you learn more about the better performing group's practice of educating on collections expectations.
It's also important to approach benchmarking in a positive way. "The whole focus should be on education and sharing information," says Rich Slavin, M.D., CEO of the Camino Medical Group in Sunnyvale, Calif. "Physicians are very responsive to data that they believe is valid. They are very cognizant of where they fit in a peer group."
For the past three years, Camino physicians have set annual productivity goals based on benchmark data from three sources. All 170 physicians are expected to be at or above the 75th percentile, Slavin says. Setting and working to meet those targets has resulted in a 12 to 15 percent increase in productivity, or a 15 percent increase in physician income, since expenses have remained constant.
"The key thing," Slavin stresses, "is sharing information with physicians. It's not so much a matter of telling them they must do this or that, but (fostering) a group culture of working at or above the 75th percentile."
Make sure you have an apples-to-apples comparison. "You have to have an exact comparison between the benchmark or standard you've chosen and the information you've gathered from within your organization," says Houser. An example: A study that gives median data on gross charges per physician might include Medicare cases. But if your office doesn't participate in Medicare, you have to take that into account when comparing your numbers.
Because financial and productivity data are easier to measure, those two areas are the most common methods of benchmarking. In fact, if you want to benchmark but don't know where to start, Woodcock suggests focusing on physician work RVUs vs. charges or collections, since RVUs are the only measure of productivity that is the same for all physicians across the country.
Another alternative is looking at physician compensation because of the availability of comparable data. Sample sizes are "enormous" for physician compensation surveys, Woodcock says. Simmons, of Collum and Carney, says his practice gathers physician compensation data from four or five different sources, including professional organizations and physician recruitment firms, in setting compensation rates. "It gives us a better comfort range that what we have is correct," he says.
Patient satisfaction data and available measures of quality of care should not be overlooked when benchmarking. Sometimes the physician who generates fewer dollars per patient encounter creates more satisfied patients because he or she spends more time with them. Productivity alone doesn't determine the physician's value to the practice, says Alan Spiro, M.D., a Boston-based consultant in the Towers Perrin health and welfare practice. By the same token, a surgical-oriented practice might consider benchmarking its readmission rates, which would be a way of looking at complications and how to prevent them.
"Financial data is important, but I always think it should be merged with (patient) satisfaction data, and in the best case scenario, would like to see it merged with clinical data," Spiro says. "My own belief is that if you're only using financial benchmarks, you're missing the boat."
Sandy Moretz is an Atlanta-based freelance writer.