it takes more than medical school to practice medicine

Kristy A. Nolze & Andrew D. McDonald, FACHE

it takes more than medical school to practice medicine
New physicians spend four years in medical school followed by three to seven years training as residents and fellows. All of this education qualifies a physician in the practice of medicine; however, it may not provide the knowledge or experience in the business of medicine.

A projected physician shortage of 85,000 to 200,000 by the year 2020 is a huge concern in the healthcare industry as 79 million baby boomers reach retirement age. Further, recent physician graduates are insisting on working more reasonable hours to allow more time with family and for leisure. As the demand for physicians continues to explode, new physicians can be more selective when deciding which medical group practice to join.

There are many factors to consider when assessing whether or not to join a particular medical group practice. Most would evaluate salary, benefits and location. While these are important areas to consider, one must also consider the overall business operations of the practice. A practice assessment that details the billing/collection practices, coding, IT, staffing, leadership structure and the overall compensation model would be extremely beneficial in making the decision.
An operational assessment of the practice would allow the new physician to receive a clear picture of the current condition of the practice and the strategic goals in place for growth and opportunity. An assessment should be conducted by an outside, objective reviewer with experience in medical practice management. Once the assessment is completed, the physician should clearly see if the practice’s goals and objectives are in line with the personal and professional goals of the physician.

The prospective physician should also understand the governance structure of the practice. Does the group have documentation to support the roles of the governing body, shareholders, directors and managers through bylaws, partnership agreements and articles of organization? Is the governing board appointed or nominated to serve terms? How are the decisions made in the practice? Does the practice’s administrator have a voice in operational decisions? How many physicians will be retiring in the near future, and how will that affect how much call will be shared by the new physician?

The issue of compensation could provide the greatest opportunity—or failure—within a practice. There are innumerable variations in determining physician compensation. Outside assistance in developing the appropriate formula could be provided by accountants or physician group practice administrators and consultants who have had experience in creating successful compensation formulas. The primary areas of a compensation formula are salary, salary plus a productivity bonus, and productivity without salary base. Benchmarks from organizations such as the Medical Group Management Association (MGMA) are available to assist with salary information per specialty and area in order to glean what a competitive salary package would be for a certain market.

During discussions of the compensation model, overhead must be considered. Are the costs divided according to production or equally amongst the providers? New physicians might cost the practice more as they tend to order more tests and diagnostic procedures to reach the patient diagnosis as compared to a more experienced physician. Are these differences considered in the model? The methodology for division of costs must be negotiated and a compromise determined that is considered fair and reasonable for all providers in the group.
Staffing in the practice should be efficient and effective for the practice. The level of staffing varies between the size of group, ancillary services offered, and specialty.

MGMA offers a cost survey to assist with appropriate staffing levels per full time physician. The staffing levels are broken down by clinical and administrative staff. It should be noted that many of the better performing (from a financial perspective) practices are usually “overstaffed” compared to many of the aforementioned survey benchmarks. In order to be effective with recruitment and retention of quality support staff, salaries should be competitive with the market. Salary surveys (such as the HORNE
Salary Survey) are available to research the most up-to-date salary ranges for positions within the practice. A practice should also have a performance management system in place to provide an objective overview.

Billing can be processed in house or outsourced to a billing company. If it is outsourced, processes must be in place for the management staff to routinely monitor the productivity and results of the billing company to ensure prompt reimbursement for services rendered. Periodic coding reviews should be scheduled with certified coders to evaluate the documentation in patient records compared to the billed codes to maximize reimbursement and meet compliance.

Regardless of where the billing and collection activities are performed, these functions should be closely scrutinized and monitored. When was the fee schedule last updated? What is the methodology used for calculating the fees? The fee schedule should be updated on an annual basis to ensure that billed charges exceed reimbursement from various payers. Gross and net collection percentages should be calculated and benchmarked. Is the net collection percentage deceiving due to high contractual adjustments and/or write-offs? An analysis of the explanation of benefits (EOB), patient billing cycle and accounts receivable management should provide insight into the practice’s billing and collections efforts.

These are a few of the key items that should be reviewed when a physician is thinking of joining a particular practice. The opportunities are ripe for new physicians, and making a solid, educated decision will allow for a much more successful practice startup and provide the foundation for an enjoyable career practicing medicine.