Groups Seek to Improve Operations

March 15, 2002
Pharmaceutical Management
John W. McDaniel

High-performance physicians continually explore ways to improve the operational efficiencies of their practices. While most medical practices focus on cutting expenses to improve operating efficiencies, high-performance physicians focus on ways to gain economies of scale through various consolidation or centralization opportunities in the practices. In attempts to do more with less, these practices also explore other initiatives, such as group purchasing and changing the mix of personnel.

Interestingly, high-performance physicians typically have more support staff than the average medical practice, since these physicians view staffing as an investment in human resources.
High-performance practices use cost allocation methodologies to determine the true cost of providing direct and indirect patient care services. These practices review costs on the following bases: fixed versus variable, direct versus indirect, and clinical versus nonclinical.
The basis on which these costs may be allocated varies from patient visits and encounters to work relative value units. Whenever high-performance physicians consider adding a new service or making changes to or eliminating an existing service, they are likely to do a cost-benefit analysis. Administrators in these practices want to know the true cost of providing a particular service.

Many of the most useful technological tools available today address the need to improve medical recordkeeping and manage documentation. Aside from the obvious benefits associated with electronic medical records (EMRs), simple dictation of chart notes is one method for physicians to be more productive, since dictating is faster than handwriting. Dictation also generates chart documentation that is legible and comprehensive, improves quality of care, and better supports CPT-4 coding, since physicians tend to overcode for what they document and undercode for the services that they actually provide. Some systems available today help to simplify dictation processes.

In its publication Performance and Practices of Successful Medical Groups, 2000 Report Based Upon 1999 Data, the Medical Group Management Association (MGMA) reports that highly productive medical groups provide programs for their employees to optimize staff productivity by focusing on formal training programs, cross-training of employees, exit interviews to detect potential problems, timely and meaningful performance evaluations, employee recognition or awards, and bonus opportunities based on group profitability.

High-performance practices also seek to optimize the mix of personnel in the practice, by using mid-level providers in lieu of recruiting additional physicians, for example. Mid-level providers, such as nurse practitioners and physician assistants, can optimize physician productivity. These practices also continually monitor the practice’s payer mix in order to make efficient use of patient scheduling and often seek ways to improve the flow of patients within the office.

For any group making operational improvements, one of the most important areas to evaluate is physician compensation. Better performing medical practices tend to link compensation to each physician’s personal production. While production can be based on patient visits or encounters, many private practice physicians link physician production, and therefore compensation, to a percentage of collection. A system known as work relative value units is becoming an increasingly popular method of physician compensation, since it focuses only on physician production and does not address issues related to business office activity regarding collections or a practice’s operating expenses.

Pay for Performance
Interestingly, physician compensation plans that use gross charges to measure production may be making a comeback. Also, about 21% of medical groups were using adjusted charges in 2000. (Adjusted charges are gross charges minus payer discounts, MGMA says.) At the same time, the percentage of groups using collections to measure productivity fell to approximately 49% in calendar year 2000.

Despite the trend toward using gross or adjusted charges to compensate physicians, most physicians affiliated with high-performance practices are concerned with collections and, furthermore, compensating based on work relative value units detailed on a collection basis. This approach tends to be more accepted by physicians, since some physician compensation plans become extremely complicated, particularly plans dealing with the allocation of various expenses unless all physicians can reach agreement, which can be extremely difficult and in some practices impossible. Most physicians can agree, however, on direct physician-specific or personal expenses (such as continued medical education), equal share expenses (such as rent and utilities), and expenses that are allocated on a production basis (such as percentage of medical supplies used).

Seeking Value
Just as many practices disagree on compensation formulas, many also argue about how much to invest in information systems. Among high-performance practices, however, there may be fewer arguments on this issue. Many of these groups continually evaluate information technology solutions in an effort to improve operational efficiency, such as exploring ways to implement EMRs, either as a stand-alone system or in conjunction with an existing practice information system.
Furthermore, more physicians today are using personal digital assistants (PDAs) to capture charges at the point of care, write prescriptions, comply with coding and documentation rules, gather reference materials, assist in making clinical decisions, facilitate continuing medical education, and help with physician scheduling.
Indeed, as new technology-dependent physicians enter the workforce, integrating technological tools into practices is essential.
In many practices, simple, targeted solutions, not comprehensive complex systems, are used to improve productivity. Many physicians will not hesitate to embrace technologies that ease the regulatory and paperwork burden, ensure compliance, and increase productivity.

C. Everett Koop, MD, the former U.S. Surgeon General, has said that physicians have three basic choices. They can work harder and earn less, they can retire, or they can embrace information technology. Dubbed the three Rs of modern medical practice—retreat, retire, or retool—these choices are reminders that the groups that are most concerned about success will use information technology to do more with less.--By John W. McDaniel, President and CEO of Physician Management Group, Inc.