For many businesses, increasing the number of midlevel staffers, raising the salaries of the best-paid employees and boosting expenses across the board usually don't translate into a financial windfall.
Not so with America's most successful and profitable medical groups.
A seemingly counterintuitive business model-abundant staff, higher-than-average operating costs, top pay for productive doctors-is typical of the most profitable multispecialty medical groups, according to a recent comprehensive report by the Denver-based Medical Group Management Association.
Largely because of additional staff and higher salaries, America's best-performing medical practices have operating costs that are about 8% higher than those of other multispecialty groups, the MGMA said.
Yet those same practices more than make up for those higher operating costs in both increased productivity and revenue. Indeed, total medical revenue per full-time equivalent physician is 27% higher for better performers than for other medical groups: $589,500, compared with $464,300, according to the MGMA's Performance and Practices of Successful Medical Groups, 2001.
The report, which includes 20 case studies of successful operations, provides a snapshot of how the top medical practices improve efficiency, staffing and patient satisfaction. Officials at the MGMA said the best way to improve operations, especially in tough economic times, is to emulate the well-tested methods of the most effective organizations.
"The No. 1 message is that there are organizations out there that are doing fine, even in difficult times," said David Gans, director of practice-management resources at the MGMA, which has about 18,000 members representing some 6,900 medical groups and calls itself the nation's "principal voice" for medical group practices. "And the success stories in this report illustrate the processes and the actions that regular practices have done to let them stand out from their peers."
With rapid changes affecting all aspects of healthcare, a key goal of many practices is to provide additional information from experts on topics such as the Health Insurance Portability and Accountability Act of 1996, open access, patient safety and staffing.
"There is no single formula for medical group practice success," said Sarah Patterson, vice president of Virginia Mason Medical Center, Seattle, and a member of the MGMA's survey advisory committee. "Every organization has its own mission as well as unique challenges and opportunities. Nonetheless, this survey report highlights a number of important performance benchmarks frequently employed by successful organizations."
Successful medical groups spend money to make money, the survey found, resulting in increased productivity and more effective use of highly profitable ancillary services.
Physicians in the best-run practices earned more than peers elsewhere, the MGMA said. For better-performing practices, median physician costs-or total compensation, including fringe benefits-averaged about $245,200 per doctor. That is about 23% higher than the $198,800 median for other multispecialty practices.
The better-performing groups also had about 13.5% more support staff than other, less successful multispecialty groups, reporting 5.55 total FTE support staff per physician, compared with 4.89 for other groups.
Offsetting those costs, profitable medical practices provided far more ancillary services: about 27% more laboratory procedures and 74% more diagnostic radiology and imaging tests. "The higher level of ancillary production contributes substantially to the overall financial performance of the practice," according to the survey.
The survey includes information from about half of the 1,248 respondents to the MGMA's 2001 Cost Survey. It contained about 30 questions in four management areas, emphasizing profit and production. The best-performing practices met certain indicators within specific areas, including such categories as revenue and cost per physician; in-house professional procedures per square foot; total gross charges per physician; and percentage of total accounts receivable over 120 days, among others.
The survey report can be purchased through the MGMA Web site: www.mgma.com.