Has your cash flow weakened over the last few quarters? As we approach the holidays and the end of the year, many practices notice a decline in revenues. Even if your cash flows are good, you may be wondering how your practice can maintain a steady stream of cash month over month.
In this Peak Practice Performance series of blog posts, we will discuss several key strategies that will assist you in collecting every dollar and saving a penny or two, by investigating how the five areas of performance impact your practice metrics. In part one of our five-part series, we will focus on finance.
To gauge your practice’s’ financial standing, first examine your current revenue and expenses to determine what improvements you can make to achieve a steady cash flow.
Here are some points to consider when evaluating the strength of your revenue and considerations for streamlining expenses to ensure a higher profit margin.
Patient responsibility – What is your mix of self-pay and patient deductibles?
In 2016, 83% of patients had a deductible of $1,478, an increase of nearly 50% since 2011, and the average patient deductible was over $2,000. These steep numbers underscore the importance of knowing your payer mix and percentage of patient responsibility. For primary care providers and many specialists, the average patient visit reimburses at much less than $2,000. If your patients haven’t met their annual deductible during their visit, they will owe you the entire cost of the visit. This cost can total $300 or more.
Are you collecting from patients with high deductible plans? Are they aware of their deductibles and how much is owed prior to insurance paying their portion? A useful tactic many groups employ is reviewing patient eligibility and deductibles prior to appointments and notifying patients of their balances via a quick phone call. This ensures that you have a payment strategy in place prior the patient visiting your office. Another tactic is scheduling patients for routine physicals and Medicare annual wellness visits at the start of the year. Doing so can also decrease amounts owed via patient deductibles, as these visits are covered services.
Payer contracts – How robust are yours?
Have your payer contracts remained flat year-over-year? Or worse, are your rates lower than in years past? Compare your commercial contract performance to peers in your region and specialty, and make it a goal to increase your contracted rates at each renewal period.
Another point to consider is your high volume CPT codes and the diversity of procedures offered in your practice. Are they being reimbursed at a rate that allows you to fully cover the cost of performing the procedure? Are you relying on one type of procedure that dominates your current practice? In medical group practices, lack of diversity in your procedures can be risky, especially as payers continue to reduce reimbursements year over year. These lowered rates reaffirm the need to ensure strong contracted rates with commercial payers.
Practice expenses – Are you negotiating your office and medical supply expenses each year?
Small groups often miss out on negotiated rates for office and medical supply expenses due to a lack of collective bargaining power. If that’s your predicament, consider joining forces with a local medical society to establish a private Group Purchasing Organization (GPO) to negotiate the best rates for office expenses, medical expenses, vaccines and medical malpractice insurance.
Try switching preferred vendors for your office and medical supplies if your current vendor is not providing competitive pricing or top notch customer service. An astute vendor will be proactive in presenting new products and updated pricing to ensure that all of your needs are met. If you’re choosing a new vendor, make sure they perform a price evaluation to ensure that they can offer you a better rate.
Practice benefits and compensation – What is your provider compensation benchmark?
When evaluating practice expenses, many medical groups do not consider physician compensation in their formula for success, but this is an oversight.
Some practices compensate physician partners by allocating any profits from revenue after expenses have been paid. Often, employed physicians are salaried in the same manner as the medical group office staff.
However, forward-thinking groups have started to base employed physician compensation on productivity metrics that are directly tied to the revenue that each physician generates. In those groups, physicians must achieve a minimum amount of revenue to reach a target level of compensation, which ensures that each physician is covering their own pay. If targets aren’t met, pay is adjusted accordingly.
Under this compensation model, employed physicians aren’t paid more than the revenue they generate, and high performing providers have the opportunity to earn higher pay. This strategy aligns with healthcare’s inevitable shift toward compensation based on value.
Implementing the tactics offered above should help streamline your current financial strategy so your practice can experience improved financial success. Keep an eye out for our next segment, where I’ll be addressing the topic of revenue cycle.
At Privia, our Performance Management team is fully committed to providing feedback on the five areas of performance for our care centers on a regular basis. We consistently evaluate how each care center compares to industry benchmarks and provide feedback on how to make significant improvements. For more information, contact us.