Working in Five Areas Gets Results

October 15, 2001
Practice Management
John W. McDaniel

In every field of endeavor, benchmarks exist to judge the performers. In sports, there are benchmarks attesting to the outstanding performances of baseball player Cal Ripken Jr., golf pro Tiger Woods, and basketball player Michael Jordan. In business, consistently outstanding stock performance is a benchmark of high-performing companies, which often achieve such success because they have recognized high-performance executives at the helm. So, in medicine, what benchmarks can be used to recognize high-performance physicians?

Setting Standards
Utilization standards exist, against which quality medical care can be compared, such as the incidence of Cesarean section rates for obstetricians, nosocomial infection rates for pulmonologists, and postoperative complication rates for surgeons. The business of medicine also has benchmarks for judging both financial and operational excellence. Indeed, even though many successful physicians are at maximum capacity for their patient volume, some have shown that they can improve financial performance, even in an era of increasing governmental regulations and declining reimbursement.

In medicine, high-performance physicians constantly review, develop, and implement performance improvement opportunities for their practice in five areas of financial and operational performance: reimbursement systems, billing and collections processes, accounts receivable management, operations improvement, and practice growth. This is the first in a series of articles that examine these areas in relation to high-performance physicians.

Over the last year, the High Performance Physician Institute in Davidson, N.C., was developed for physicians who have decided to become high-performance physicians by applying new technologies and processes in order to practice more effectively and efficiently. The institute, which sponsors regional conferences in major cities, focuses on how physicians can automate workflow to make their practices run more efficiently, avoid external intrusions, increase patient satisfaction, and make practice more enjoyable.

The institute has determined that high-performance physicians share four characteristics: They want practical solutions; they know how other physicians think; they recognize what physicians need and want in order to succeed; and they can achieve superior financial performance.

To ensure long-term success, physicians must compare themselves to and learn from organizations that have a record of achieving excellent results. Like other businesses, medical practices must adopt business solutions from other industries, such as workflow production models and customer service strategies, in order to differentiate themselves as high-performance practices.

Benchmarking criteria are available from the Medical Group Management Association, in Englewood, Colo. (at www.mgma.com) for primary care and specialty medical practices. While most medical groups find it beneficial to compare their historical performance, they must also compare themselves against their most successful peer groups in order to determine their overall level of performance and to evaluate further opportunities for improvement.

Seeking Improvement
One of the first areas of excellence to examine involves reimbursement systems, focusing primarily on evaluating coding patterns, practice fee schedules, managed care contracts, fixed-fee payer analyses, and compliance program management.

While physicians in most medical groups believe the single most important priority for improved profitability is managing overhead, expenses are only one of the five levers for improving medical practice profitability. The other four areas focus on revenue improvement and practice growth. Expense management is important for practices seeking a short-term way to increase profit, but appropriate revenue cycle management can lead to sustained financial improvement for years to come.

Coding compliance is an area of management that is of particular concern to all physicians today. Most doctors tend to undercode claims by underbilling for the services they provide. High-performance physicians, however, conduct ongoing analyses of levels of service utilization for major evaluation and management codes against the audit standards established by the federal Centers for Medicare and Medicaid Services. CMS uses these audit standards to determine potential undercoding or overcoding. The results of these analyses enable physicians to conduct (or contract for) chart audits to ensure that the documentation of medical necessity supports the levels of service provided. This information can then be presented to individual physicians to improve coding accuracy, if necessary, and provide evidence for coding compliance in the event of a government audit.

Revenue Management
Another revenue cycle management technique that high-performance physicians use involves consistent review of managed care contract terms and reimbursement rates. These physicians also compare the charge and collection ratios of all major payers to determine the effectiveness of various managed care contracts and whether the contracts should be renegotiated or renewed.

Few practices conduct managed care contract compliance audits, and of those that do, many physicians are amazed at the rate of errors uncovered. In such audits, a random sample of patient accounts is reviewed to ensure that the managed care companies involved are reimbursing properly under the contracted fee schedule. Today, practice management software is available that includes modules to ensure that appropriate payments are received from payers.

For physicians who want to benchmark their performance in this area, experts recommend that they follow the 80-20 principle, which holds that 80% of a practice’s income comes from 20% of its procedural (CPT-4) codes or 20% of its diagnosis (ICD-9-CM) codes. To be a high-performance physician, it is therefore imperative to know as much as possible about the 20% of the business that represents 80% of the income.

According to the MGMA report, Performance and Practices of Successful Medical Groups: 2000 Report Based on 1999 Data, successful medical groups manage all contracts comprehensively by seeking areas that could affect the financial, clinical, and operational aspects of the practice. A focused approach to contract management permits early, deliberate intervention to resolve any problems or issues that could have a detrimental effect on a medical group. The types of questions addressed by successful medical groups include the following:
• Have we attracted the patients we expected in terms of volume and type and severity of illness?
• Did we receive the expected level of reimbursement?
• Are we competitive with our peers in the scope of our services and the quality of our clinical practice delivery?
• Did we comply with contract provisions related to such issues as access and timely filing?
• Was the health plan in compliance with contract provisions, such as those involving prior authorization and timeliness of payment?
• Have we developed effective partnerships with the health plan?
• Are we positioning ourselves for successful future contracts and renegotiation and renewal?

As high-performance physicians seek solutions to promote efficiency in their day-to-day practice, especially solutions that relate to reimbursement, they should consider taking advantage of new technology such as that offered by James Weintrub, MD, a plastic surgeon in Providence, R.I., who has developed Paladin Coding Software (at www.dpnx.com) that allows physicians to determine within minutes precisely the right codes for clinical situations involving CPT-4 codes and E&M guidelines.

Other examples include Allen Wenner, MD, a family physician in Columbia, S.C., who is the founder of Primetime Medical Software Inc. and who helped develop a program called The Instant Medical History that assists physicians in collecting patient-generated medical history information. Lloyd Hey, MD, an associate professor of orthopedics at Duke University and founder of mdeverywhere.com, has developed a charge capture system using a handheld device that allows physicians to capture the codes required for billing accurately. David Bright, MD, a solo family physician in Stuart, Fla., has developed an electronic medical record system that uses speech recognition software.

These are just a few of the companies aimed at improving reimbursement systems, one of the business areas that physicians need to consistently focus on in order to become high-performing doctors.