American College of Physicians: Internal Medicine — Doctors for Adults ®

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Does your practice measure up? Try benchmarking

Collecting and analyzing data can help uncover problems—and make your practice run more smoothly

From the March 2000 ACP–ASIM Observer, copyright © 2000 by the American College of Physicians–American Society of Internal Medicine.

By Bryan Walpert

Gateway Medical Associates in Chester County, Pa., suspected its outside billing service of doing a poor job. It took just a little comparative data to give the 20-physician practice the proof it needed and the impetus to make changes to boost its collections.

While Gateway had used the billing firm for about three years, the practice always had problems billing certain carriers, and its bills sat in accounts receivable for months at a time. When the situation suddenly got worse, Gateway decided to compare its collection numbers with median figures from the Medical Group Management Association (MGMA) for similar practices. That process—known as benchmarking—revealed that Gateway's accounts receivable were as much as 15% higher than similar practices.

So in January 1999, Gateway dropped its billing firm and brought those functions in-house. Now, the group's accounts receivable are nearly 15% better than comparable practices.

"External benchmarking really lets you know how you're doing in comparison to the outside world," said Kenneth D. Goldblum, ACP­ASIM Member, medical director of Gateway, a mix of internists and family practice physicians. "If you're not doing as well as outside groups, you still have a way to go."

While limited benchmarking data is available from a number of sources, the real trick is to find information that is useful enough to help build a better practice. According to Carl Cunningham, Director of the College's Center for A Competitive Advantage (CCA), benchmarking numbers by themselves tell you only where you differ, not whether that difference is important or whether it means you're doing better or worse. The real work—looking around for trouble spots—is up to you.

"Benchmarking shouldn't make any decisions for you, but it should be part of your decision matrix," said Elizabeth Woodcock, an Atlanta-based consultant with MGMA Health Care Consulting Group.

If you're getting year-end 1999 financials from your accountant—as many practices do this time of year—now is a perfect time to start the benchmarking process. Here are some tips to make the most of your efforts.

Interpreting the numbers

Your best bet is to compare your numbers to those of practices in similar specialties and similar size. Some benchmarking sources also break down the numbers by geographical location.

The AMA, MGMA and other organizations publish data that you can draw on to compare your practice to similar groups. The College's Practice Management Check Up product not only helps you measure your practice against benchmarks, but it also helps you analyze the results. (See "Four sources to help you benchmark your practice's performance," below).

Be sure that you know what is and isn't included in your benchmarking data. For example, if you're looking at benchmark numbers for oncology that include drug sales but your oncology practice revenues exclude those sales, you can expect a variance in revenue.

"You need to be careful of subtle variations," said Sandra E.D. McGraw, principle with The Health Care Group, a consulting firm in Plymouth Meeting, Pa., and ACP­ASIM's partner in the Practice Management Check Up product.

Remember also that because comparative figures represent means and medians, you don't necessarily want to use them as goals. "The caveat of using benchmarks is that you shouldn't be striving to be average," said C. David Carpenter, a partner with PCSi HealthCare Consultants in Southern Pines, N.C. "You want your overhead to be lower than the average, of course, and your production to be higher."

Looking for treasure

It's important to compare everything, including revenue, collections, expenses, production and so forth. But keep in mind that no single category will point directly to problems with your practice.

Instead, think of benchmarking as a treasure hunt where one benchmark leads to another. If your practice revenue is lower than the median, for example, you might not be seeing enough patients per day, so you should look at your schedules. On the other hand, the problem may be that your charges are too low, so you should also pull out your fee schedule.

Every variance is an opportunity to drill down further for information. Are your personnel costs higher than average? Look at the benchmark for staff ratios. Perhaps you have too many nurses or administrative staff per full-time-equivalent physician.

When you find a variance, look at it carefully. You need to examine your practice to determine whether individual variances call for a change in operations or policy.

Gateway Medical Associates, for example, found that its nursing costs were high compared with other practices. So it is now moving toward using nurses for higher end tasks—such as phone triage—and lower cost medical assistants for tasks such as taking vital signs and giving shots, said Timothy Rodgers, the group's executive director.

A single variance could mean any number of operational problems. "If you're spending more on supplies than you should, it can mean 25 different things," said Gary Matthews, president of Physicians HealthCare Advisors, a consulting firm in Atlanta, and president of the Society of Medical-Dental Management Consultants.

You might simply be paying too much for everything from gloves to gauze and need to negotiate better contracts with suppliers. Then again, a surprisingly high supply cost could mean you're getting billed twice for some items. At the very worst, it could mean that an employee is embezzling.

Using MGMA data, Internal Medicine Associates, a seven-physician practice in Frederick, Md., discovered last year that too many of its accounts receivable were more than 90 days old. A look at its billing office revealed some employees who did not have the right skills for the job, said Ali J. Afrookteh, FACP, managing partner. As a result, the practice got rid of some weaker employees and hired an experienced billing person who was able to reduce the number of old accounts receivable.

The answer, however, isn't always that obvious. Upper Valley Professional Corp., with 20 physicians and nine offices in and around Troy, Ohio, discovered that gross collections at four of its family practice and internal medicine sites were significantly higher than ACP­ASIM's benchmark.

"Our initial reaction on looking at that was, 'Oh, that's great,' " said B. Mark Hess, FACP, internist and medical director. "The next reaction was, 'Wait a minute. We can't be that much better at collecting than everybody else.' "

The practice quickly discovered that it was charging too little for some procedures, so it raised some of its fees. "We were getting paid very large percentages of what we charged," Dr. Hess said. "A number of payers would have been willing to pay us more."

Analysis

Before you jump to any conclusions, remember that a variance in itself may not indicate poor performance. Your staff costs might be higher because you practice in a tight labor market, not because you're overstaffed. Maybe revenue is lower because you're in a market heavily saturated by managed care.

Richard J. Baron, FACP, was concerned that profits at Greenhouse Internists, a three-physician practice in Philadelphia, weren't up to par. He turned to ACP­ASIM's Practice Management Check-Up, which confirmed his suspicions.

A closer look at the benchmarks revealed why. While typical three-physician practices see patients 96 hours each week, Greenhouse Internists saw patients only 73 hours a week.

But Dr. Baron and his partners had chosen to use some of their time to pursue other interests—Dr. Baron works part time as a consultant, while another physician is director of community health at a local hospital—and thereby forfeit some patient revenue. When they looked at the benchmarking numbers a little more closely, they found that the practice was on target as far as the amount of revenue generated for each hour the physicians worked. "It turned out we were doing just fine," said Dr. Baron.

The benchmarks, however, also indicated that costs were high relative to revenue, a problem the practice plans to solve by adding a provider to expand revenue rather than by cutting overhead. "It meant it was not a matter of efficiency when we were here," Dr. Baron said.

Internal benchmarks

Consultants say one of the best sources of comparative data to use in benchmarking is your own practice. Have your revenues gone up or down? Have expenses remained steady, or have they spiked up? "Looking internally will show you how far you've come," said Robert B. Connelly, a consultant with The Health Care Group.

Internal benchmarking also allows you to conduct detailed comparisons between different practice sites. For example, Pennsylvania's Gateway Medical Associates uses internal benchmarks to determine which of its offices are spending more or less on any given expense line.

Internal benchmarking last year showed that one office, for example, spent more on transcription costs than the others. "The physicians there seemed to dictate more lines per patient than other offices," said Gateway's Dr. Goldblum, noting the practice pays for transcription per line. "We haven't decreased our costs yet, but we're working with that practice."

In the end, if you're looking to make changes, internal and external benchmarks can go a long way in convincing colleagues that change is needed. "There's a friendly degree of competitiveness. I think physicians have the desire to do as good a job as their colleagues for both productivity and controlling costs," Dr. Goldblum said. Using benchmarks "is a way to show you are able to keep up and surpass colleagues and partners."

Bryan Walpert is a freelance writer in Denver


Four sources to help you benchmark your practice's performance

If you're looking to benchmark your practice, consultants suggest using more than one source. Here are some to choose from:

M ACP­ASIM offers the Practice Management Check Up, a tool for benchmarking—and improving—your practice. A four-page questionnaire provides the basis for you to receive a customized report that compares 24 key indicators—income per provider, staffing ratios, etc.—against industry benchmarks and helps you analyze variances. The report also includes a graph that shows how closely your practice's coding matches ideal patterns.

Cost: $149 for members/$175 for nonmembers. Information: www.acponline.org/cca.

  • The AMA's "Physician Socioeconomic Statistics" provides comparative data in categories such as revenue, expenses, profit, revenue by payer and other data broken down by specialty and geography. The publication is available in print and electronic versions.

Cost: The print version is $445 for members/$495 for nonmembers; the electronic version is $495 for members/$545 for nonmembers. Information: www.ama-assn.org/physinfo/products.htm or call 800-621-8335.

  • The Medical Group Management Association (MGMA) publishes three survey reports based on interviews with a sampling of members that may help in the benchmarking process: "Cost Survey Report," "Physician Compensation and Production Survey" and "Academic Faculty Compensation and Production Survey." The compensation surveys analyze pay by factors such as group type, geographic location, years in practice and payer mix. The cost survey offers detailed medians by specialty for charges, revenue, overhead, staffing numbers per physician, accounts receivable figures, profit and other items. Each report costs $200 for members/$300 for nonmembers.

MGMA also publishes "Performance and Practices of Successful Medical Groups," which provides medians of best practices. Cost: $225 for members/$350 for nonmembers.

In addition, MGMA and the Association of American Medical Colleges jointly publish the "Faculty Practice Activities Survey," which provides data on revenue, expenses, staffing levels, patient visits and relative value units for academic practices. Cost: $160 for members/$200 for nonmembers

For information on these MGMA products, go to the Web at www.mgma.com/surveys or call 877-275-6462.

  • The Professional Association of Health Care Office Managers in Pensacola, Fla., produces two annual nonphysician salary surveys, one for office managers and one for clinical and support staff. Each is broken down by practice specialty and by geographic area.

Cost: Free. Information: 800-451-9311.

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