Focus on these neglected areas: staffing, business overhead, and payer contracts.
Physician groups must look for every opportunity to strengthen financial performance. While optimizing revenue cycle performance is an essential part of this process, equally important is identifying ways to improve three other critical, but often overlooked, aspects of the practice: staffing, business overhead, and payer contracts.
Gains made in the areas of staffing, overhead, and payer reimbursements can contribute to more effective recruitment and retention as well as boost financial performance in the long run.
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 to balance demand for services and the financial expectations of physicians.
Achieving optimum staffing is a continual challenge, given the ebb and flow of demand, differences in individual physician productivity, overall compensation expense, economic conditions, and uncertainties about future reimbursement rates. It is important that groups quantify these variables.
Benchmarking the Practice
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 way to do this is to calculate the current annual workload per physician in work Relative Value Units (wRVUs).
Generating these values allows for roughly equivalent productivity comparisons between physicians and provides an opportunity to benchmark your practice against information available in the industry as a whole and against similar groups locally, regionally, and nationwide.
Total wRVUs should also be projected for the next several years based on anticipated hospital demand and/or the likelihood of new competition.
Physician salaries, benefits, and physician expenses collectively should represent about 85 percent 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 items such as insurance (malpractice, health, dental, vision, disability, and life), retirement plan contributions, dues, licenses, continuing medical education (CME) costs, and payroll tax expense.
Understanding the Physician Mix
Determine whether your partner or partners may be considering a part-time schedule, leaving 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 costeffective path.
If practice overhead excluding physician compensation and benefits expense is well in excess of 15 percent for hospital-based practices, key cost components may be too high. Practice overhead is considered to be any cost that does not directly contribute to compensation or benefits.
Non-physician 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 taken into account.
Your group should, therefore, take a hard look at whether it is economically prudent to maintain billing operations in-house. You may instead want to consider partnering with a qualified billing vendor.
Physician salaries, benefits, and physician expenses collectively should represent about 85% of practice revenues for hospitalbased practices and some specialties (the numbers can differ greatly for primary care and high-patient-contact specialty practices).