The year-end planning season for medical clinics coincides with the holiday season, and groups that have successfully realized their previous year’s planning will find their doctors anxiously awaiting bonuses! These are thriving practices that understand the need to “produce smartly.” Such clinics help their doctors become smart producers and put intelligent activities and business philosophies into place. 

Building business strategies using business principles

One physician group in particular has found remarkable ways to maintain a consistently high-scoring financial profile when compared to all the standard measurable benchmarks. Capitalizing on its patient make-up, it has built a business strategy catering to the needs of its population. Accountability through a compensation system has also helped to motivate doctors to produce smartly.
 
Less than ten years ago, this medical practice had a general overhead rate substantially under the industry norms (around 50 percent at that time), running between 35 to 40 percent of net patient receipts. But stagnant and reduced third-party payer reimbursements, as well as increased operating costs began to affect the group’s general overhead rate and take-home pay.

The practice took the time to focus on what the marketplace was doing and have since taken control of its business future by making appropriate changes. Actual costs to maintain and improve this successful medical practice have increased, but the group’s flexibility over time has allowed it to maintain an extraordinary general overhead expense rate of between 40 to 45 percent. If the group had not addressed its business strategy, its general overhead rate today would be nearly 60 percent.

The business impact of proper coding

Understanding and practicing the business of medicine is part of what makes this and any clinic successful. Doctors should become constant watchdogs over the efficiencies of their productivity and their business systems. This attentiveness is especially important when coding for procedures. One strategic step this medical practice has taken is to educate new associates in the financial effects of their efforts.
 
Case in point, an associate who started at the clinic a few years ago felt somewhat uncomfortable charging patients for level three or four office visits. Even though the documented services he provided called for higher-level billing, he continued to code most procedures as level twos. Trying to build his patient following, he was afraid he would lose patients if he billed higher. He also wanted to protect himself against a Medicare audit, thinking he would be insulated from CMS scrutiny by keeping his charges low.

This practice, called undercoding, does not offer protection from audits. To the contrary, it could conceivably initiate an audit. CMS considers undercoding behavior to be a fraudulent inducement to attract patients. CMS does E&M coding profiling on physicians as part of its enforcement program. Should CMS determine that a doctor's coding profile shows too many level two visits as compared to the averages found in its statistical monitoring, such undercoding could cause an unwanted office visit by CMS to conduct an audit.

Undercoding has additional negative economic effects. It causes other group members to pay more of the practice overhead costs, even if the group physician compensation system is based solely on individual patient charges or collections. What’s more, purposefully undercoding further diminishes already heavily discounted fee reimbursements by insurance companies and reduces the money needed to provide five-star patient service.

Patient partnering through communication

In this "land of managed care,” some medical practices have been able to say no to the low reimbursement rates offered them by managed care plans in their areas. They have been able to do this, in part, because of the excellent service they provide to their patients, and because of the patient relationships they have built over time. Such groups engage in open communication with their patients, and over the years, at appropriate times and in appropriate manners, they have talked about the ongoing low reimbursements from insurance plans despite continued cost spiraling.

Employees have since become more financially responsible for their own health-care consumption, but the wiser groups of doctors have long-since taken a key message to their patients: that quality health care is costly, and we are all responsible for the bill, including the patient. Such open and honest communication results in patient trust and partnering.

Special patient-care programs

To one physician group, a large Medicare patient population is not synonymous with lower profits. This group accepts Medicare assignments but it is not a Medicare participating provider. Long before boutique medicine became a popular term, the clinic created a special patient-care program for its Medicare patients, caring for their special needs and providing them with value-added service. Many of its Medicare patients have opted to receive the personal services and pay for them. These patients continue to sign up for the voluntary program each year, as do many of the other patients who become of Medicare age.

Since this is somewhat like a patient capitation reimbursement program, accounting systems and controls were set up to monitor activity to ensure profitability. While there has been a small reduction in the number of patients seen by the doctors, the special patient-care program is totally compensated for (and then some) by the additional retainer fee and revenues the service provides.

Doctor on board

Doctor buy-in is the key to any group’s business and financial success. Unless the doctors are on board and are completely committed to produce smartly, even obvious ideas to increase revenue or decrease expenses will remain just that--ideas.