Fig. 1 Physician compensation per full-time employee physician
COURTESY OF THE AMERICAN ALLIANCE OF ORTHOPAEDIC EXECUTIVES

AAOS Now

Published 11/1/2019
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John Cherf, MD, MPH, MBA, FAAOS; Vicki Sprague, PhD

AAOE Survey Supplements OPUS with Financial Benchmarking Data

Editor’s note: This is the fourth and final article in a series discussing the results from the 20th American Alliance of Orthopaedic Executives Benchmarking Survey for orthopaedic practices. The article examines orthopaedic financial data in the United States. The previous three installments appeared in the August, September, and October issues of AAOS Now.

Top trends from AAOE’s Benchmarking Survey for orthopaedic practices

The annual American Alliance of Orthopaedic Executives (AAOE) Benchmarking Survey collects data from orthopaedic practices across the country to provide practice professionals with data that may be helpful for strategic planning. The most recent available results are from the Benchmarking Results for Data Year 2017 and include four years of trend data from more than 300 orthopaedic practices, representing a full range of practice sizes, specialties, population sizes, and regions.

The survey’s top trends provide key insights into the unique challenges orthopaedic practices are facing today and help practices compare their performance to a broader market.

Physician compensation remained lower than 2014 but increased from 2015

Benchmarking physician compensation across orthopaedic practices and specialties is essential for discussing compensation levels and developing compensation models. When used in combination with other available benchmarks (e.g., net collections, productivity, payer mix), compensation benchmarks can provide the data needed to make effective compensation decisions.

Average compensation for orthopaedic physicians, across all subspecialties, increased from $497,714 in 2015 to $542,414 in 2017. However, compensation in 2017 remained lower than the average reported in 2014 ($576,820) (Fig. 1).

Office visits by physicians decreased, whereas office visits by PAs and NPs increased

Several measures of productivity for both physician and nonphysician professionals can help provide context for the revenue and compensation trends observed within and across practices. The number of office visits is one of those measures and, as illustrated in Fig. 2, can have differing trends based on healthcare professional type. Reimbursement amounts for office visits may have contributed to the trends.

The average number of office visits for physicians decreased from 3,462 in 2014 to 3,218 in 2017, whereas the number of visits conducted by physician assistants (PAs) and nurse practitioners (NPs) increased from 1,235 to 1,600 during the same period. The average number of surgical cases increased slightly from 443 in 2014 to 503 in 2017.

Work RVUs per physician increased, whereas price per work RVU decreased

Work relative value units (RVUs) are another measure of productivity used in benchmarking. The trends observed for both work RVUs per physician and net collections per work RVU illustrate the importance of looking at a variety of available metrics when making decisions within an orthopaedic practice.

The average number of work RVUs reported for physicians increased from 10,004 in 2014 to 11,797 (18 percent) in 2017, whereas net collections per work RVU decreased from $138 to $100 (28 percent) during the same period (Fig. 3).

Staff cost and overhead as percentages of revenue increased

Effectively managing overhead expenses, which include employee salaries and facility, medical, office, and other expenses not directly allocated to physicians, is important for all medical practices. Benchmarks related to staff costs and overhead can help practices determine what the optimal level of overhead should be, understanding that overhead rates that are too high or too low can result in negative outcomes for practices and providers.

Fig. 1 Physician compensation per full-time employee physician
COURTESY OF THE AMERICAN ALLIANCE OF ORTHOPAEDIC EXECUTIVES
Fig. 2 Office visits by healthcare professional type
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Fig. 3 Work relative value unit trends
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Fig. 4 Staff cost as a percentage of revenue
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Fig. 5 Percentage of overhead by total revenue
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Fig. 6 Zero to 30 days
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Fig. 7 Greater than 120 days
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Fig. 8 Payer mix
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Staff costs as a percentage of revenue increased from 34.4 percent in 2014 to 37.0 percent (8 percent) in 2017 (Fig. 4). Percentage of overhead by total revenue increased from 58.8 percent to 60.0 percent during the same period (Fig. 5, available online).

Improvement in collection processes

Monitoring the efficiency with which a practice is able to collect payments for services is important to the practice’s overall financial health. The benchmarking trends appearing in Figs. 6 and 7, available online, indicate improvement in collection processes used by orthopaedic practices over the past four years.

Percentage of total accounts receivable in the zero- to 30-day aging category was 51.7 percent—the highest level since 2014 (48.6 percent). Percentage of total accounts receivable at greater than 120 days was 17.8 percent—lower than 2014 (20.9 percent) and slightly higher than 2016 (17.0 percent).

Commercial insurance is the primary payer for orthopaedic care

Understanding the mix of payers represented within a practice is important because of the implications it has for net collections, productivity levels, and overall revenue.

According to the 2017 AAOE Benchmarking Survey, commercial insurance is the primary payer for orthopaedic care, representing 50.8 percent of net collections in 2017. Medicare (22.5 percent), workers’ compensation (8.9 percent), and other payers (8.2 percent) comprised the next highest payer categories (Fig. 8, available online).

Benchmark your practice

This article provides only a glimpse at the data from the complete Benchmarking Results for Data Year 2017. Viewing the top trends is a great way to see how your practice stacks up against others. The complete results of this survey are housed in an interactive online data portal that allows visitors to create custom reports based on factors such as practice size, specialty, region, and state. This drills down the data to help provide answers as you make strategic decisions for your practice.

The 2018 Benchmarking Results were made available on Oct. 1. To receive the AAOE Benchmarking Results for free, orthopaedic practices should contact AAOE for details on how to participate.

The full 2018 Orthopaedic Practice in the United States (OPUS) report is available to AAOS members at www.aaos.org/aaoscensus. AAOS members must log in to read the report. It is also available for purchase by AAOS nonmembers.

John Cherf, MD, MPH, MBA, FAAOS, is the practice and payment section leader of the Health Care Systems Committee, a member of the Council on Education, and a member of the AAOS Now Editorial Board.

Vicki Sprague, PhD, is the senior director of data solutions and operations at AAOE.