3 ways to improve your physician practice revenue

Physician groups must look for every opportunity to strengthen financial performance. While improving revenue cycle performance is an essential part of this process, it is equally important to identify ways to improve 3 other critical aspects of the practice that are often overlooked: staffing, business compensation and overhead and payer contracts. Gains made in these areas can contribute to more effective recruitment and retention, as well as boost financial performance in the long run.

1. Solving the staffing puzzle

Physician compensation and benefits represent by far the biggest portion of cash outflow for any physician practice, be it hospital or office based. Physician staffing levels should be assessed in 3 areas: balancing demand for services, current physician workloads and their sustainability, and the financial expectations of physicians. 

Achieving optimum staffing is a constant challenge for many reasons:

• The ebb and flow of demand
• Changes in service sites, facility coverage requirements and group composition (for example, use of midlevel providers)
• Differences in individual physician productivity
• Overall compensation expense, economic conditions and uncertainties about future reimbursement rates. 

It’s important that groups quantify these variables. 

Benchmarking the practice

Physician groups should engage in a systematic assessment of existing group staffing patterns, productivity and future needs.

The process begins by determining whether staffing levels are adequate for demands. One factor in this evaluation is the current annual workload per physician in terms of work relative value units (wRVUs). Other factors include any other clinical responsibilities (for example, preparing for the tumor board, interacting with referring physicians and technologists, teaching residents and any administrative responsibilities (such as medical director or facility meetings).

While evaluating the number of wRVUs per physician, comparisons can be made between physicians and industry benchmarks both regionally and nationally.  Physician groups in certain specialties should be cautioned to not use industry benchmarks related to productivity when such benchmarks are not applicable (for example, anesthesiologists, interventional radiologists).

Understanding the physician mix

Determine whether your partner or partners may be considering a part-time schedule, leaving their position or retiring, and if so, in what time frame. Physician expectations regarding time off, call coverage and income also must be factored into the equation.

Your group may conclude that using locum tenens physicians or part-time physicians to help meet temporary demand spikes may be the most cost- effective path.

2.  Determining compensation 

Physician salaries, benefits and expenses collectively should represent about 85% of practice revenues for hospital-based practices and some specialties. The numbers can differ greatly for primary care and high-patient-contact specialty practices.

Physician-specific expenses that are included in compensation and benefits typically include insurance (malpractice, health, dental, vision, disability and life), retirement plan contributions, dues, licenses, continuing medical education costs and payroll tax expense.

Squeezing overhead

If practice overhead, — excluding physician compensation and benefits expense — is well in excess of 15% for hospital-based practices, key cost components, including administrative staff, may be too high. Practice overhead is considered to be any cost that does not directly contribute to compensation or benefits.

Nonclinician salaries and benefits frequently represent the majority of business overhead, particularly if the practice has in-house billing staff. And the costs can add up once annual raises and health insurance premiums are considered.

Your group should take a hard look at whether it is economically prudent to maintain billing operations in-house, or if it would be better to partner with a billing vendor for all or some of your billing requirements.

3.  Reviewing payer contracts

When it comes to payer contracts, physician groups often neglect these agreements after the initial deal with the payer has been signed. The result can be lost revenue due to a failure to keep pace with reimbursement terms negotiated by physician peers in the market.

Groups also must be proactive and alert when it comes to contract amendments that indicate intent to lower the fee schedule due to a desire to streamline or improve competition. The challenge is that the practice may be given 30 to 45 days to respond, with failure to respond interpreted as acceptance.

Contract renegotiations require similar consideration. Some commercial payers will paint uncertainty around the economy to justify negligible increases in their reimbursement rates or to delay any increases for an additional year.

In conclusion, monitoring productivity versus existing staffing and working to maintain accurate projections of future demand can help your group make sound hiring decisions. Tracking overhead so that overall costs remain within a predefined range helps you focus on opportunities for saving. Finally, revisiting payer contracts can provide your practice with the information needed to negotiate from a position of strength at contract renewal time.

To support your business strategy, below are 10 recommendations for future payer contract negotiations.

Payer contract renegotiation tips

1. Make sure you have copies of your contracts including the current fee schedule(s). If these documents cannot be located, contact your payer representative.
2. Determine how each payer agreement is structured. Is the payer contract with the group or with each individual physician? Know who has the authority to renegotiate and how that process should unfold. You should also check any existing hospital agreements to determine whether managed care participation with all hospital payers is mandatory, although that provision for certain types of providers (for example, hospital based) is no longer relevant due to the No Surprises Act. 
   
3. Examine your payment vouchers and audit your explanation of benefits documents routinely. Verify that you’re being paid correctly by reviewing your top 4 or 5 commercial payers for payment inconsistencies. Also review any government payers whose terms of reimbursement vary from the state (Medicaid HMO paying 110% of the state Medicaid fee schedule) or CMS fee schedules.
   
4. Pay attention to filing timeframes. If you don’t file within the payer’s timeframe, your claims could be denied, meaning you could be forced to write off an account balance. Understand that often provisions exist in certain payer contracts allowing a group to appeal claims denied related to timely filing due to unforeseen and uncontrollable circumstances (For example, cyberattack on hospital).
   
5. Keep the hospital administration informed. Hospital-based practices should request the hospital’s assistance when their payer representative is unresponsive or slow to respond to a group’s proposal. 
   
6. Be relentless. Many payers start with a no-negotiation stance, and practices frequently give up, thinking that pursuing these negotiations will be unproductive. But the longer the current payer rates remain stagnant, the less competitive your group will be while attempting to recruit and retain group members. 
   
7. Be reasonable and realistic in negotiations. Groups that are reasonable (and not too aggressive) typically have better results than groups whose proposals are deemed too aggressive by payers. 
   
8. Often, a payer’s fee schedule is tied to a specific Medicare year or the current year Medicare fee schedule (MFS). However, it is not uncommon for payers to propose an increased percentage of the MFS, using a different Medicare year. If so, groups should determine what the overall change would be in that payer’s fee schedule and be wary that at times, it could result in an overall decrease.  
   
9. Verify termination deadlines. Contract termination can seem like a drastic step when a contract is unfavorable and negotiations have stalled. However, prior to termination, verify how you will be paid as out-of-network providers with regard to the No Surprises Act and any state balance billing laws. 
10. Be prepared for a complex process. Evaluating and renegotiating contracts can be difficult and time-consuming. You should closely consider whether the business office has the time or expertise to perform these responsibilities effectively. If not, discuss with your legal counsel the possibility of bringing in an outside consultant to manage the process. This approach could save the practice time and aggravation and also potentially improve revenues for the group.