Published 10/1/2008
William R. Pupkis, CMPE

Metrics, benchmarks add value to your practice

Your practice can become a “Better Performing Practice”

For nearly a decade, the Medical Group Management Association (MGMA) has designated “Better Performing Practices,” based on a series of benchmarks and metrics. Capital Region Orthopaedics, where I serve as the chief executive officer, has earned the “Better Performing Practice” distinction from the MGMA in each of the last 6 years. Significant effort is required to earn this distinction. When it comes to best practices, there is no “silver bullet.” Instead, attention to detail and analysis are key.

The basis of the best practice concept is to evaluate your practice’s performance against others to see where your practice might improve. This process is an exercise to learn from others. The American Association of Ortho­paedic Executives (AAOE) Benchmarking Survey Project Team has as a goal to create best practice benchmarks and processes by 2009. So the first step in turning around your practice is to participate in the AAOE annual survey.

Steps to success
Top-performing orthopaedic surgery practices share several characteristics. One is the use of business and strategic planning. Just as a global positioning system can help a driver get from point A to point B, the systematic use of business and strategic planning can be your roadmap to success. As part of this forward-looking process, you could conduct a “SWOT” [Strengths, Weaknesses, Opportunities, and Threats] analysis for the next 12 to 24 months. Trying to forecast beyond that point is difficult given the rapid changes in the business environment of healthcare.

Another characteristic shared by top-performing practices is solid billing and business processes and protocols. Physicians usually do not go to medical school to make money, but they must collect money to stay in business. Analyzing billing reports can help you spot trends, both good and bad. Studies have shown that better performing practices spend a great deal of time assessing and evaluating these processes to ensure financial success.

A physician’s primary source of income is based on the services he or she provides, but there are only so many hours in a day. Declining reimbursements intensify the need to find other ways to improve patient care and enhance the bottom line. Top-performing practices generate additional revenue by offering ancillary services, such as an ambulatory surgery center, physical therapy, durable medical equipment, and/or magnetic resonance imaging.

You might also consider using physician extenders. In the right circumstances, using these additional resources could free you up to see more complex cases, which could generate a higher resource value unit-per-encounter ratio.

Consider your “investments”
I highly recommend that you think of your practice’s payor mix and contracts as an investment portfolio. They are not that dissimilar. Both provide economic returns, and the more diverse they are, the better. Both demand careful management.

One way to manage this portfolio is to calculate the percentage of each payor’s charges to total charges. Then calculate the collection ratio of each payor. This gives you the payor’s impact on your total revenue and enables you to identify the worst payor. If you decide to jettison this worst payor, you shift your payor mix, automatically making a difference in total revenue. Now you can fill the empty appointment slots with better paying patients.

Cutting expenses
No discussion about improving the bottom line is complete without covering cutting expenses. But you must understand the details behind the numbers so that you can analyze your expenses more precisely and compare them to national benchmarks. A line item such as “supplies” does not tell you enough. You should have detailed subcategories such as “medical supplies,” “injectables,” and “office supplies.”

In some areas, cutting back may be costly and result in lost revenue. Staffing is one such area. Adding a medical assistant or cast technician could enable you to see one or two additional patients per day, adding to your bottom line. If you are convinced that your payroll is too high, consider redistributing responsibilities if someone leaves rather than filling the position immediately.

You can also look for savings in other areas. If you have a good referral network, for example, you could reduce or eliminate some of the advertising your practice purchases. Take advantage of AAOS member benefits such as the group purchasing plan to gain better pricing on medical and office supplies. Have your practice manager do some comparison shopping and put all of your cell phones under one contract.

Closing a satellite office may be another way to save. If your satellite office lease is due to renew, do not base your decision on the fact that it is convenient for one of your partners. Have your practice manager run the numbers so that you can make your decision based on objective data. If you have the right numbers to review, most decisions are easy.

The bottom line
Why should you take these steps? Because implementing benchmarks and best practices is smart business. You get to compare your practice to others and by doing so, you identify operational changes that can increase your bottom line.

William R. Pupkis, CMPE, is chief executive officer at Capital Region Orthopaedics, in Albany, N.Y. This article was adapted with permission from “Better performing practices,” which appeared in the May 2008 AAOE newsletter.