In the past, development of a financially successful practice hinged primarily on a physician's clinical expertise, which alone served to attract patients and generate revenue. Nowadays the economic climate is very different. Orthopaedic surgeons must develop new ways to generate revenue while meeting the healthcare needs of their patients.
To be successful, practices must generate revenue from multiple sources. Diversification will help ensure practice viability even if one source of revenue does not meet projected financial expectations. Failure to improve the revenue outlook means that many orthopaedic practices will fail. If that happens—at the exact same time as the baby-boomer generation reaches the age of needing a greater amount of musculoskeletal care—the country will experience a true healthcare crisis.
Just five expenses (salaries, benefi ts, occupancy, supplies and professional liability) constitute more than three quarters of the typical orthopaedist's operating costs, and operating costs now account for more than half of total medical revenue.
The AAOS primer, Enhancing Your Practice's Revenue: Pearls and Pitfalls, outlines several different strategies for generating additional income. It also includes general information relating to the strategies—and these five tips to help orthopaedic surgeons decide which revenue enhancement strategies might make sense for their practices and provide guidance that will ensure that the ventures are financially and operationally successful.
Governance vs. management
Governance and management are not identical and confusing the two can result in operational problems. Governance is something that the owners of a business venture must do. It involves the following:
- making strategic decisions regarding the mission and goals of the enterprise
- executing agreements that allow the business to commence operation and remain in business
- formulating short- and long-term plans
Management, on the other hand, involves oversight of day-to-day operations such as finance and accounting, human resources management, oversight of clinical operations, regulatory compliance, information technology, and marketing. In some cases, one of the doctors may function as the senior manager; in most cases, however, it is wise to recruit and employ someone who has business-related education and experience.
These days, it takes a great deal of knowledge and skill to run even a small practice. To the extent that physicians decide to embark on revenue enhancement activities, they should seriously consider recruiting and employing a professional manager. This individual should have knowledge and skills in negotiating with payers; hiring, training, evaluating and terminating staff; and developing policies and procedures to ensure practice compliance with government regulations.
Managing human resources
Human resources (HR) is something that operates "behind the scenes" and physicians may not think much about. Establishing a full-fledged HR function at the outset, however, is critical to the success of any new or existing business. Human resource management covers a range of activities, including the following:
- recruiting, selecting, and retaining employees
- compensation and payroll
- benefits (medical, dental, life and disability insurance, pension, vacation)
- training and development
- performance management
- policies and procedures (including clinical policies and procedures)
- an employee manual
- legal compliance and federal reporting
Planning is perhaps the key element in the success of any enterprise (all "to do's" identified, responsibilities assigned, and deadlines established). The more detailed the plan, the greater the likelihood of success. Planning, however, is a tedious, detail-oriented process that many people want to dispense with or think about only in broad terms. Orthopaedists tend to be "take charge doers" but many have limited patience with the seemingly-never-ending meetings, email exchanges, negotiations and compromises that are required to develop any comprehensive plan. They must learn a new set of skills if they are to contribute meaningfully to the plan's development.
One element of every successful plan involves planning for the unexpected. Although it is never possible to account for everything, it's useful to think at least about the "known unknowns" even if it is not possible to take into account the "unknown unknowns."
Finally, Academy members who are considering embarking on any new business venture are well-advised to look to the AAOS to determine if information is available regarding that venture. The AAOS has a wide array of resources to help Fellows improve their practices' efficiency and effectiveness. For example, the on-line Practice Management Center contains hundreds of articles, white papers, and spreadsheets on a wide array subjects including options for practice growth.
In addition, the AAOS sponsors two educational courses annually—a one-day course at the Annual Meeting and a 2.5 day course in the fall. This year's Practice Management Seminar for Practicing Orthopaedic Surgeons, on Tuesday, March 1, 8:00 a.m.–5:00 p.m., is designed to help members embrace change and realize opportunities. This educational event provides insight to the current state of orthopaedic practice; including business and technology trends, changes in regulations and laws, and best practices to manage an orthopaedic practice.
Moderated by John Cherf, MD, MPH, MBA; Thomas F. Murray Jr, MD; and Michael C. Albert, MD, the seminar will cover issues such as the following:
- impact of the Medicare Access and CHIP (Children's Health Insurance Program) Reauthorization Act
- the impact of ICD-10 implementation
- how to use social media to benefit your practice
- an update on ambulatory surgery centers and specialty hospitals
- how to retain autonomy through alternative employment models
- maximizing patient satisfaction
- negotiating a hospital contract
- developing an orthopaedic service line
- applying principles to practice in the healthcare value equation
For more information and to register, visit www.aaos.org/annual