false
Catalog
Medical Practice Operations - Business Fundamental ...
255193 - Video 7
255193 - Video 7
Back to course
[Please upgrade your browser to play this video content]
Video Transcription
Hello everyone and welcome to the AOA, AOIA sponsored medical practice operations business fundamentals 101. If this is your first time joining this is a part five of a 10 part series and this module will be looking specifically at practice operations in the clinic setting and I will dig into the detail of that really for me the mindset is this is regardless of the delivery platform if you will. So whether you're an academic med center as we contemplated or you're in a private practice the operations pieces are basically for lack of a better phrase 90% generic and I will get into that. I appreciate you spending what should amount to the next 30 to 45 minutes with me as we walk through module five clinic operations. As with prior modules I have nothing to disclose and this presentation does not offer legal advice and should not be construed as such. Any decisions involving legal aspects of health care should be vetted by qualified counsel and that is to say I am giving you a broad lay of the land vis-a-vis practice operations. I am not advocating for any model in particular and I am not offering you contractual or legal counsel relative to delivering of health care or practice operations. So with that preamble aside and the AOA disclaimer aside move on to a little bit about Whitley and a little bit of background about me. Whitley is a 105 year old accounting firm with 3,800 employees in 50 locations in the United States and some locations in India and the Philippines. We do accounting audit and tax or perform accounting audit and tax services for a variety of different business verticals. One of those is health care and in that space I run the physician enterprise. The physician enterprise deals with operational work which for me equals revenue cycle, coding, audit, physician compensation, patient flow, etc. So I'm the director of the physician enterprise nationally. I've been in health care for 30 plus years and have really split my time about the first half of my career running private practices and the second half has been ensconced in advisory consulting for health systems regardless the platform. So academic med centers I've worked in, I've worked in rural clinics, critical access hospitals, FQs, I've done work for tribes, have done work in private practices with MSOs, etc. So I have pretty much a broad brush of care delivery on the operations side and my client size ranges from three FTEs to 2,700. So I'm thankful to be here with you today and appreciate your time and I hope you will find this valuable as we discuss practice operations module 5. Again this is a 10 module series but modules 2 and 3 were so large that we really felt it necessary to to parse those out into two different presentations. So without further ado we'll get into the learning objectives for today's 30 to 45 minute presentation. Wanted to give attendees a basic overview of medical practice operations not clinical care delivery even though they're intertwined but instead the operational piece. Again this isn't all encompassing we cannot cover practice operations in 30 to 45 minutes and it's not overly granular but what it will do is it will take some of the component pieces such as the P&Ls that we contemplated in module 1 in order to get a little bit more into the detail of what makes makes up those profit and loss or income statements to give you a sense of how the math works and when we talk about when we talk about in the private practice specifically revenue falling above or below the line we'll look at that a little and how the different machinations and operational nuance impacts the revenue that flows into the practice. So really the crux of this is to give you an education on some of the drivers in the healthcare business operations space and as I've said before healthcare operations really are just office operations it's business management with a healthcare twist and so a lot of the rules and regs that apply to practice management also apply to your local Ford assembly line or to Tesla or to Google there are certain requirements that must be met on state and federal levels and that's outside and exclusive of the requirements the legal requirements that must be met in the healthcare delivery space so you have on one hand you have business management human resources legal requirements that we covered in the legal module and you also have coupled to those medical practice legal operational constraints that must be considered on a daily basis so the fact that you're performing delivery of care is a business but it's also got the legal piece which adds a whole different nuance to care delivery in the management of a medical practice or a health system. So if you've joined on other modules you will have seen my tried and true patient visit diagram and this is these are the component pieces that make up the operations continuum as well as the care continuum so your patient flow follows this ecosystem and your operations follow it as well so when we contemplate the operations piece of the clinic we're talking about the front desk we're talking about the actual patient flow and how the staff interacts with the patient we're talking about the finances the human resources the data and analytics the marketing strategy and reporting this is a business and whether you like that or not I'm indifferent and you can certainly have your opinion that healthcare shouldn't be a business or it should or whatever but the reality is to make it work financially it needs to function with some business parameters and so all of these component pieces must be contemplated whether you're in a private practice or you're in a health system or you are in an academic medical center revenue must be generated to pay the bills and each of these component pieces has a cost and revenue aspect to it that must be contemplated for optimal operational efficiency. So when we think about the front desk it's simply not a matter of of bringing a person on board and then having them check people in I mean you can do that but there's decidedly a lack of efficiency I would argue you could be over paying losing money or you could be not collecting revenues etc etc and the analytic side of this and what I do in the operation side is understanding the number of people relative to the number of clinicians in other words we stated it's understanding the support staff side relative to the number of clinicians who are providing care and finding the balance there I have said this in other modules before and I will probably go to my grave believing this in the private practice side one of the struggles that clinicians have in running the business in my opinion is that historically there's been an under-investment in let's call it infrastructure relative to staff or relative to your EMR and I say that first of all because I've experienced it and seen it but secondly remember in our other modules on physician compensation and module one unemployment opportunities revenue that comes into the clinic that doesn't get spent on operations goes to the shareholders so if it costs me ten dollars for an employee then that's ten dollars that I don't receive to the bottom line again ten dollars being an absurd example but the point being whatever doesn't get spent and we'll get into this when we when we really kind of peel back the onion on the profit and loss statement later the P&L you'll you'll get a sense for what that means now the downside of that is you know hiring the right people helps to make the clinic run and people who are thoughtful and have aptitude will help you generate revenue and should help you manage the expenses at that end but it also comes with treating employees the way you want to be treated so when we think about the front desk there's a lot of different components and I'll make a blanket statement that involves scheduling that involves check-in that can involve patient follow up and calls those types of things it involves from a quote-unquote revenue cycle perspective which as you'll recall in our other modules we contemplated the revenue cycle actually starting before the patient visit and so at the front desk they the staff can impact the revenue cycle and the profitability practice by collecting co-pays past due balances etc handling data collection the data elements that are keyed into the system at the beginning are important for quality of care or for data mining and contracting with insurance companies it helps you to understand what what levers you can pull to better negotiate um contracts um and contracts you might want to get out of do you have the right staff for the right job do you have training in place and we've we've contemplated this before do you have training in place for your staff that shows them and explains to them um what you need accomplished and is very clear about what the job expectation is so in the graphic here um this is just a little bit of a of a an advisor's look at staffing so what we've done here is you take encounters and these are basically looking at work rvus which you understand from the earlier modules go into a kind of broad definitionally uh definitional understanding of what quote-unquote work clinicians are doing and so what we're doing here is we're trying to understand the staff and we're trying to understand the staff relative to the work that is being performed by the clinicians do i need 10 front desk people for one physician i mean that on its face isn't it's an absurd example but the answer obviously is no so what we've done here is okay you've got 4,890 encounters which if you're doing about 1.41 work rvus per encounter that's about 7,092 uh work encounters or work rvus and that is about 69 of the median so then what we do is we look at support staff at the median level and we adjust those based on the clinic and we come with our variance here that you could see based on that work if this clinic is seeing 4,890 encounters a year which is 7,092 work rvus and they are they have this much staff they are overstaffed roughly 11 people now this is not a hard and fast mathematical exercise there are nuances to this i just got off the phone with a large health system and we talked about some of the nuance in why they would ebb and flow in their patient volumes that could be a function of too many employees excuse me ebb and flow on their employee volume that might be a function of too many employees who are static fixed cost where their money through friday but you've got two ftes on monday 10 ftes on tuesday three ftes on wednesday it's those type of things where this data is directionally appropriate i could tell you you could knock eight people off of this number and say they're at 8.25 they're still overstaffed so it's taking this data and its directional application and understanding what is it telling us relative to our clinic and remember right now at thirty thousand dollars per person if these are accurate numbers this clinic is is overpaying roughly three hundred thirty thousand dollars for their or excuse me their front office staff 5.17 they'd be overpaying about eighty thousand dollars for the front desk staff so not hard and fast but it gives you a sense of front desk and this is an operational look at the math behind finding staffing nirvana for the front desk so likewise we're going to take our same model and look at the clinical support and here you can see they're overstaffed 1.13 in the clinic so again that could be a function of people sitting around a little bit or the clinician not as aggressive or not not doing as much quote unquote work as he or she should it's it's understanding all of these component pieces to paint a picture of okay we're overstaffed i'm not going to fire people that doesn't get me you can't cut your way to profitability how do i better manage what i have going on right now so that's an operational question right person right job i don't need an rn performing um h and h and p's or doing blood pressures and taking weights before a patient gets in the room i need them focused on care delivery and focused on working to their optimal scope of medical practice of their licensure right so who's doing the workups rns um i think i've said this before my my rns when i ran my cardiology clinic did specialty clinic work like congestive heart failure or coumadin clinic with parameters in place that if they had outliers they go to our physician leaders in those areas um and and here's a question i have it seems to me everyone now is becoming a quote unquote doctor you'll get a doctor of nurse practitioner ness or whatever um or a doctor of physical therapy candidly sidebar i'm not sold that everyone needs to be a doctor in care delivery nonetheless we are now in the position where we're getting where we're getting medical assistance certified and and i do not know that there is a value add to certification of an ma necessarily aside from an extra credential and maybe them getting more hourly wage that is purely a jeff opinion and i'll leave that where it is but a lot of what happens when you're talking about the right person right job is you finding the right person or your health system and giving them the tools and training someone who's got aptitude who's a thinker and gets things done um and can move and and is malleable that's the right person and a certification doesn't make them a better employee it's your training and their aptitude i would i've been in a lot of instances where i would take someone with an undergrad degree over a phd just based on the person's pure grit and intelligence and aptitude and applicability of their skill sets we've talked about this numerous times but i'll reiterate policies and procedures to ensure clinicians deliver the care that's needed it's patient workup who's rooming and what the clinician needs are etc so finances i won't belabor this because we covered it in great detail in the revenue cycle piece we will also talk about it a little more in the um billing and coding uh module um that i believe is module seven so but again we have we have belabored this that the finances and the operational efficiency of the quote unquote revenue cycle play a huge role in the profitability of the clinic whether you're an employed ambulatory outpatient clinic or you're a private practice or private equity it really doesn't matter you have the flow of the patients even if you have revenue cycle if you're a clinic that's owned by a health system usually the health system will do the revenue cycle at some corporate location but there still will be interaction with the clinics to ensure that the or there should be to ensure that the system is efficient and running smoothly so the financials when we when we've spoken before about the pnl um what i what i'm doing here in this um uh in these examples on the right we we talked about the pnls earlier in some of the employment models and and and i did allude to a phrase you know above or below the line and i'm kind of painting that picture here again where you are if you hearken to module one where where you are employed really is predicated or will dictate excuse me how how the money flows or how it's recognized so in these two examples painting a picture broadly speaking of a cash-based medical practice you see in version one on the pnl or the income statement the practice has generated 2.5 million dollars and their expenses equate to 1.75 million as we look at this um and you think that from a KPI performance metrics and look at how the clinic's performing, 25% on your employee cost. So right, you look at on the far side percent of income, 25% of your collected money, your actual cash money going out the door to employee comp is actually in this day and age, really good. That's a really nice figure. Not the dollars necessarily, not the real terms, but as a percentage of the revenue, that's a really good number. And so as we look at this, the net cost or excuse me, the aggregated cost of 1.17 million in expenses means that the clinic is running a 47% overhead, right? So 47 cents of every dollar goes out the door in cost. That's a really, really good number on a percentage basis. And so that expense money is above the line. And then if you're in a private practice, the line is the profitability piece, right? So below the line is the distribution of partners. So if I've spent 1.1 million on stuff, I have 1.3 to distro out to all my shareholders. 2.5 million less 1.175 leaves me 1.3 in profitability or dollars to either reinvest or to parse out in profit sharing or bonuses or regular compensation. So let's say we're managing, in example two below, we are managing our expenses really well. And we've cut employee costs. Now you can make an argument that you want to invest in employee costs. I think we talked about some of the models where you're spending more on employee costs, but there needs to be an iterative or geometric growth in the revenue to justify those added expenses, right? I can't just add bodies, spend another $300,000 a year and continue to make just 2.5 million. We have to understand the dynamic and the give and take how those two mash together and work together or don't. So in this case, what we've done is we've reduced our overhead by about $200,000. And you can see our rent stayed the same. That's static. That's going to be there as a fixed cost. Whether or not we see patients, we're paying rent until that lease runs out. Medical malpractice, likewise, that's not going to ebb and flow based on our volumes and equipment. So what I've done here is I've had some staff members leave. I didn't fire anybody. And through that attrition, we managed to reallocate positions, maybe tighten some positions, maybe some managers are managing a few more employees, what have you. And so you can see that our overhead rate has now dropped to 39%. That improved our profitability from 1.3 million distribution to 1.5. So actually, the reduced employee cost dropped straight through to our physicians. And so you can see, here's the bizarre dynamic there or the give-get. This is where people sometimes don't invest in the employees because that's $200,000. It went straight through to the bottom line that I like having the extra $1.5 million coming to my purse. And you can't cut your nose off to spite your face. At some point, cutting back too far is going to negatively impact the operations of the medical clinic. And as we talked about, the overhead percent is a pure function of the revenue and expenses. It's not rocket science. It's purely the expenses divided by the actual revenue gives you your overhead percent. And here's just an example, again, a little bit absurd, but it shows you overhead problems that can occur. Basically, you should understand this graphic or something akin to it on an ongoing basis. But what we see here are expenses, January, the pink line is expenses. So January, February, March, those were our expenses. They were on the aggregate about $100. They went up to $300, went to $400, went to $800. And you can see our revenue line. And at some point, the lines cross. And right here, when your expenses exceed your revenues, like in April, you've got a problem. You're upside down. There's not enough money coming in to pay the bills. This is a graphical representation of what we had considered in a couple of the earlier modules, where this is not bad necessarily in the short term. But in the long term, this is a huge problem because now you've got to pay back if you're borrowing money. Or if you're not borrowing money, the shareholders will not be getting compensation here. Here, we get back to normal. But have you paid back in June what you borrowed in April to cover the cost? And then you can see September, October, November, December, we're in deep disrepair because we are upside down, and that is aggregating. So things to consider. And we do talk about some performance metrics to keep an eye on within the practice operations. And we'll get to those later. So that a graphic image like this graph here, September, October, November, the hope is you're managing or your administrative staff or the hospital is managing the nuts and bolts on an ongoing basis and for the longer term. So you avoid this kind of disrepair. So benchmarking data provides an opportunity to look at what's going on in the P&L, but you can also do it relative to office visits. And those do drive revenue in diagnostic imaging. If you're an orthopedic surgeon, you might look at patient visits, new patient visits relative to surgical procedures. I am not advocating for performing surgery on every fifth patient just because that's some benchmark. If you don't have to perform surgery, obviously that's in the best interest of the patient not to perform surgery. But there may be a benchmark where as an orthopod, you're doing one surgical case for every 10 new patient visits or something like that. And that becomes your metric of, okay, if I'm not doing that, why is that? But that needs to be, that's where you're looking at, what is the data telling me about the health of my practice? So benchmarking displays the changes in certain measures. And we talked about earlier in other modules, the value of understanding external benchmarks, specifically with regard to specialty, but also internal benchmarks that may be key metrics and measures within your clinic space. And that will speak to value-based care or bundled care. It could speak to compensation. If you think about our physician compensation module, how is my comp derived? Do I have quality aspects that have to be measured and monitored? All of those come into play, not purely from a revenue or a dollars and cents, but they will impact the dollars and cents. I mean, it empowers leadership and clinicians to understand annual and seasonal flux in their delivery of care. I won't get into the weeds on this, but I do want to talk about what this says, basically. This is a benchmarking exercise. Again, could be made of anything in particular. This is a three physician practice. And what we're looking at here is monthly, what's going on in June, year to date, what that looks like. And then we're going to compare those versus the prior year, month and the prior year to date to give us a sense of what's going on in June with Dr. Wan. What did he do last year in June? And if there's an anomaly, why is it? If this number for this year goes to zero, that's an issue. Did Dr. Wan leave or did he decide to take all of June off? But that data is going to tell you things. And then you aggregate it. So it's either year to date or it's on a running 12-month period. So you can see a 12-month flux of what's going on. And what we see is the monthly change was 5.3%. The real change in dollars was $5,000. His year to date change was zero and his year to date real was zero. Now, is that good or bad? I don't know. Did we want him to do $700,000 in budgeted revenue when he did 600? Then that's an issue. We have to talk to Dr. Wan. But this will tell you in an objective format where we are and are we hitting the numbers we want to hit. And again, you can play that whole exercise out for each clinician and then look at it in total. If you look at it in total, we are 10% down for June or $45,000 for the month. In the year, we're 8% up and $150,000 up. So this just tells you we're in really good shape relative to what we did. Is our target to be up a million dollars? If so, then we're in bad shape. So there could be a column versus budget or something like that. But this gives you an example of understanding what's going on. Then for us in this example, a key element to understand is our new patient visits. That drives a lot of what we do in the clinic space. I won't get into the weeds of this, but you can see our new patients, if you follow the numbers to the right, are up and we're happy with that. Why is Dr. 3 up 15? Well, he might have had a load of referrals that flowed through because he's out pressing the flesh, meeting referring providers, taking folks out to dinner, talking about a new care modality, whatever the case may be. In this case, Dr. 3 is a surgeon. So we also want to understand his work RVUs. You can see here how we've discussed those previously. Here's where they come into play. And oh, by the way, if he gets paid based on his work RVUs, he's taking a pay cut because he is down 10 or 22%. So this paints you a picture, again, absurd, and these are fabricated data elements, but it gives you an understanding of the value of the data and what it can tell us. Likewise, you've seen this in revenue cycle. I would suggest to you that the practice snapshot above should include some element of revenue cycle. But we do address revenue here. You can see if it's a large practice or even a small practice, there should be a carve out. And I won't spend a lot of time on this today because we have covered this in the revenue cycle module of evaluating these component pieces based on our benchmark. You can see on the far right hand side, I have a benchmark for the clinic of where we want to be. So while some of the component pieces are better than we expected or better than we were shooting for, or the change was an improvement, maybe they're not better than where we want to be. So it gives you an idea on the macro level of changes in revenue flow. So when we think of practice operations, these are very simplistic organization charts. So if I'm in a small system or a small practice, I might not even be a CEO, I might be an administrator or a practice manager. Truly in a private practice, the quote unquote CEO is going to be the physician leader. So your clinical or your non-clinical leader, your administrative person might be the term I see a lot of is chief administrative officer or executive director. And they might call him a CEO, but where the rubber meets the road is that management dyad. So the executive director co-managing the practice with a physician leader, where they work together, physician leader handles clinical aspects of the practice. And some of those prickly discussion topics you have to have with other clinicians. And the executive director handles all the operational pieces that we've discussed and conveys to the physician leader and leadership, maybe an exec committee or something like that. Here's what's going on with the numbers and here's what it means. And oh, by the way, here's what you can do to positively impact these numbers. And in a larger practice, a private practice, maybe 10 to 20 to 30 clinicians or owners, you may also have other levels of management authority that report to a physician CEO. So there could be an executive committee and that executive committee could have a congestive heart failure group that reports up to it, or it could have a other modality exploratory group or something that reports up to it. You might have an employed physician group that reports to a committee of some sort. So just to give you a layout, my advice is don't overly complicate it. I have a physician client I worked with. He's a one owner of like five different entities and has all these different reporting structures that really just make it from a tax perspective, cumbersome. And from a reporting and management perspective, kind of sort of nonsensical. Keep it simple. You're not probably not running Coca-Cola at that level. So let's make it nimble, make it authoritative, give the right people the right marching orders, policies, procedures, et cetera. And then you can see in a larger practice or larger system, it does get more complicated. In a health system, you might have advisory physicians, multi-specialty physicians of a different makeup with a defined tenure and marching orders who manage all the service line for CVMed, for Surge, for OB-GYN, for Peds, for GI, what have you. And then the employed physicians under say surgery, all the surgeons report to the head of the surgery unit. All the CT surgeons report up to the CVMed doc, whatever the case may be. This just paints you a picture. There needs to be a defined thing is the bottom line. And that gets to what I have talked about ad nauseam, which is there needs to be structure. Leadership structures vary based on organization side. Obviously, if you're in a 2,500 physician employed model, academic medical center, what have you, there is by definition going to be larger and more nuanced reporting structures. The question is how big is too big? And do really take a look at, do these things make sense the way that we have them structured? Can we flatten this out or provide other avenues for people to offer their input? Just like any business, all that goes with running a business and some laws, we talked about this earlier. And if you're going into a private practice, we've talked about all of the questions to ask, be curious about the partnership, track staff tenure, those types of things, ask the questions. And if you forgot what those are, the fine folks in the administrative team at AOA are making these modules available on demand. So if you haven't listened to it, go back to the provider employment module and get a really good understanding of what the different models offer to you in terms of management structure and partnership, et cetera. HR, we've covered this at length and I won't spend a lot of time on this slide. You all can review this slide and these items are contemplated in the healthcare law module, module four. So please be sure to listen to that. And then that is all I have for you today for module five. I hope you found it valuable if for no other reason than to give you a macro sense of the practice operations piece and to really solidify in your mind that regardless of the model that you will work in and deliver care in, there needs to be an operational piece to it. There needs to be structure, there need to be policies and procedures in place so that everyone knows their part. And so again, I can go at length about this topic. I'm very passionate about it. In fact, I wrote a book that is 150 pages long. So as you can see, you can really get into the weeds on this. So in light of what this series is designed for, I hope you've gotten value out of this in the 35 or so minutes we've spent together. I will reiterate that if you have any questions, the leadership at AOA has decided that they would have a live WebEx and we would welcome any questions you have. Whether they're addressed in these modules or not, please submit them to physicianservicesatosteopathic.org. If you would, please send these in before May 10th of 2023. We are going to build out a module similar to these that will have the questions embedded. The module will lead us to a live WebEx or lead us through a live WebEx at 7 p.m. Eastern time on the 10th. And for those of you who are on the West Coast Pacific time and can't join us at 4 o'clock Pacific, the module will be recorded and available for viewing and listening on demand sometime after the 10th. And again, we are going to attempt to make this dynamic and questions that can't be answered live or require a little bit of research will be answered after the live WebEx. So again, my thanks to you. Please get your questions together, whether we've contemplated them in these modules or not. And certainly there are a lot of topics we haven't gotten into in detail, as you know. So please feel free to ask. And once again, I thank you so much for your time. I know that it is valuable and you are busy. And so with that, I appreciate your time and thank you again.
Video Summary
This segment is part five of a ten-part series presented by the AOA, focusing on medical practice operations in clinical settings. Regardless of the delivery platform, such as academic medical centers or private practices, 90% of the operations are generic. This session provides a broad overview of practice operations, including revenue cycle, coding, auditing, physician compensation, and patient flow, emphasizing that medical practice is a business intertwined with legalities. The speaker, Jeff, director of the physician enterprise at Whitley, with over 30 years of healthcare experience, discusses staffing dynamics and operational efficiencies, stressing the importance of finding a balance in staffing to optimize profitability without overstaffing. An analysis of profit and loss (P&L) statements illustrates how expenses impact profitability, emphasizing the need for investment in employees and infrastructure. The discussion also covers benchmarking as a tool to assess practice efficiency and align operational goals. The segment concludes with a focus on leadership structures and human resources as integral components of medical practice operations, while soliciting audience questions for further exploration in a live WebEx session.
Keywords
medical practice operations
revenue cycle
physician compensation
staffing dynamics
profit and loss statements
benchmarking
leadership structures
×
Please select your language
1
English