A Look Inside Your Practice
First, I want to wish everyone a Happy New Year. In December, we evaluated the external elements of your emergency physician practice and focused primarily on aligning yourself with “business partners” rather than vendors. Now, we need to evaluate the internal variables of your Emergency Medicine Practice. While I firmly believe that aligning your practice with the most competent group of business partners is fundamental to your success, continual evaluation of the internal variables of your practice is equally important. For the purposes of our discussion, we are going to focus only on the internal business aspects of your practice such as such as group structure, goals, budgets, physician payment methodologies, managed care contract performance, and physician documentation compliance. We will leave the issues of patient care, physician utilization, hospital relations, etc. for later discussions.
As I audit Emergency Physician Practices, I see a good many practices that have only one or two physicians involved in the business functions of their practice. In some arrangements, this is done by group design. However, in others, physicians choose to let other group members take the leadership roles in these areas. With the current state of Emergency Medicine, I recommend that all Emergency Physicians become involved with the internal and external variables that affect their business.
To effectively evaluate your internal practice, each practice needs to determine their direction. In business terms, you need a Mission and a designed set of plans how you are going to accomplish that Mission. During initial discussions this might seem like Mission Impossible; however, a properly instituted plan of action will yield positive outcomes that far outweigh the time spent in meetings. As the old saying goes, “people don't plan to fail, they fail to plan”.
Who are we? How are we structured?
Regardless of whether you are a new group just starting practice or an existing group, I would recommend your first examine your group structure and answer some or all of the following questions:
Where are we going? How are we going to get there?
After evaluating the structure of your group, look to develop a vision for your group by establishing a plan for your future. When determining “where are we going”, I would recommend that you ask the following questions:
The Budget
Once the aforementioned structural decisions have been made and goals developed, your practice can begin allocating financial resources by establishing the annual budget. While budgeting may not seem important, I believe it is an integral part of the planning process that allows a group to accomplish their stated goals. Budgeting enables the group to forecast their annual revenues and expenses as well as allocate resources to areas of need. The reliability of these forecasts is predicated upon performance of both internal and external variables; therefore, you need the assistance and commitment of your physicians and business partners. The last and most important benefit of the budget process is the communication of a realistic financial projection to all group members.
Physician Payment Methodology
Physician payment methodology is an internal issue that relates directly to your structure, goals, and budget. As you might guess, there are several schools of thought regarding physician payment. Payment methods include a variety of options such salary, hourly, productivity and/or a combination of any of the above.
In the good old days prior to EMTALA, managed care reimbursement reductions, and complex physician documentation regulations, most physicians were compensated at straight hourly rates or provided a salary. The fortunate groups might have excess money to bonus at the end of the year and would use hours worked, patients treated, or some other formula as their method of bonus. When thinking about payment methodology, I advise groups to create a productivity system that encourages their physicians to actively participate in the business portion of their practice. Regardless of whether you are a democratic group or one owner, aligning the incentives of individual physicians with the goals of your practice is critical to your success or failure. Having been privy to several productivity based systems, some of which the formulas were beyond my ability to calculate, I found that productivity based on relative value units seems to be most equitable to all physicians.
Relative value units, technically termed Resource-Based Relative Value Scale or RBRVS, are established by CMS (formerly HCFA) and assigned to each CPT code based on work, overhead, and malpractice expense. Therefore, every code that a billing entity uses to describe the work performed by a physician has it's own predetermined value that is established and updated by CMS rather than other arbitrary formulas. To receive full credit for work performed, the physician must document all services in compliance with current standards. Charts documented improperly would either be downcoded to the appropriate level of documentation or returned for an appropriate addendum. Since downcoded charts carry lower relative value levels, this system encourages the physician to timely and accurately document all work. Thus, you have the physician with an active interest in the business end of his/her practice.
The debate regarding the degree to which you compensate your physicians on productivity has many opinions. In my opinion, when the degree of productivity-based compensation is insignificant (usually less than 5%), your system will fail to yield the desired results. Conversely, if physician pay is based solely on productivity, payroll can be difficult to administer due to the availability and timeliness of the necessary physician productivity data. My recommendation is a hybrid system with 70-75% of compensation based on hourly rates or salary, leaving the remaining 25-30% as productivity-based compensation. With 25-30% of compensation at risk, the physician will be very focused on productivity, efficiency, and compliance. Additionally, the most productive physicians will be rewarded at a greater level.
Managed Care Contract Performance
Monitoring your managed care contract performance is very critical to financial viability. Since you have already agreed to a reduced reimbursement rate, constant monitoring of their performance of the contractual terms will enable your group to make certain you receive correct and timely payments. To perform this evaluation, you will need assistance from your billing partner as well as copies of your current contracts. Many billing partners provide feedback regarding your managed care contracts. Ideally, you should be notified immediately if the managed care plan is not paying according to the terms of your contract; therefore, you need to be certain your billing partner has copies of all managed care agreements. Additionally, annual or semi-annual reports of each managed care contract will provide the detail needed to evaluate each contract. After reviewing payments from managed care plans, I am continually amazed at the number of mistakes. With the implementation of timely payment and prudent layperson laws in many states, your ability to require managed care plans to comply with contractual terms and laws is greater now than ever before. When reviewing managed care plan performance, I recommend particular scrutiny for correct payment amounts, timeliness of payment, inappropriate bundling of charges, and inappropriate denials. If you want to perform your own review, ask your billing partner to forward explanation of benefits copies for the plans of interest.
Physician Documentation
Physician documentation is the only internal variable solely in control of each and every physician. As you know, appropriate documentation is the engine that drives the CPT codes selected to describe the services provided. Since CPT codes determine your charges and eventually your reimbursement with each payor, proper documentation is essential to achieve maximize reimbursement under the terms of your contracts. A close working relationship with your billing partner or consultant can foster proper documentation by identifying areas of weakness developing measures for correction. Furthermore, I encourage each group to establish a benchmark for documentation compliance while developing goals and payment structures. The power of peer pressure is great; therefore, providing comparison among group physicians can be a very beneficial tool to facilitate behavior modification.
Division of Duties
The comprehensive evaluation of internal practice variables can be an enormous project; therefore, I recommend division of duties among physicians in the group. Some larger groups I consult with have two-three physicians that work predominately on the business aspects; therefore, they have reduced their shift work to assume these business responsibilities. For other groups, simple division of duties will address the issues of internal evaluation. Regardless of your group size, division of duties is postive since it tends to empower the physician group while promoting participating. Goal achievement will be much more likely as each physician increases his/her understanding of the business aspects of the practice. If your practice is one that desires to outsource most or all business functions, I highly recommend contracting with business partners that can adequately provide these services. These services won't be free; therefore, ask questions if someone promises you the Moon lower-end market prices. Neglecting the internal business aspects has resulted in many groups losing their contracts. As you go back to the emergency department, remember that success is accomplished through planning and action rather than chance and accident. Examine the internal business variables as closely as you would a critical patient.