Welcome To The Digital Learning Center. Benchmarking Practice Productivity & Profitability. Today s Presentation. Course Faculty.

Transcription

1 Welcome To The Digital Learning Center Presented by Your Partner In Building High Performance Practices Today s Presentation Benchmarking Practice Productivity & Profitability Course Faculty R. Thomas (Tom) Loughrey, MBA, CCS-P Chairman, CEO & Co-Founder of Economedix Certified Coding Specialist BS Degree from Pennsylvania State University Earned an MBA in Health & Hospital Administration from the University of Florida Former Hospital Administrator Former Owner of a Medical Billing Company Consultant to Physician Practices & Medical Societies Member of Various Professional Organizations Dealing with Medical Practice Management Developed and Presented Thousands of Seminars & Workshops Dealing with Practice Management 1

2 Today s Course Key Productivity Measures Non-Financial Productivity Measures Benchmarking A Case Study Summary Key Productivity Measures Gross and Net Collection Percentages Accounts Receivable Ratios Resource Based Relative Value Unit Measures Cost Accounting Methodologies Payer Analysis Gross Collection Percentage Compares payments to charges Very good way to compare the practice from one time to another or different aspects of the practice. Not a very good way to compare one practice to another One practice charges $100 and collects $75. Another charges $150 for the same thing and collects the same $75. Which is the better practice? 2

3 Gross Collection Percentage Gross Collection Percent equals Total Payments divided by charges Measurement should include a minimum of three months data and preferably six months A moving average based on the most recent twelve months, six months and three months will be the most informative Gross Collection Percentage Charges: $100,000 Payments: $60,000 Gross collection Percent = Payments Charges Gross collection Percent = $60,000 $100,000 Gross Collection Percent =.60 = 60% Gross Collection Percentage Charges: $50,000 Payments: $20,000 Gross Collection Percent = Payments Charges Gross Collection Percent = $20,000 $50,000 Gross Collection Percent = 1. 50% 2. 40% 3. 60% % 3

4 Net Collection Percent Net Collection Percent equals payments divided by adjusted charges. Net Collection Percent = Payments (Charges minus Adjustments) Better measure for comparisons Can now compare one practice with another Net Collection Percent Measurements should use same time periods as the gross collection percentage 3 months, 6 months and 12 months A moving average of all three will provide the most information Net Collection Percent Net Collection Percent = Payments (Charges Adjustments) Example: Payments = $60,000 Adjustments = $35,000 and Charges = $100,000 $60,000 ($100,000 - $35,000) = 92.3% 4

5 Net Collection Percent Net Collection Percent = Payments (Charges Adjustments) Payments = $25,000 Adjustments = $20,000 and Charges = $55,000 $25,000 ($55,000 - $20,000) =? % % % 4. 25% Accounts Receivable Ratio Measures the number of months of charges in the accounts receivable A/R Ratio = Total A/R Average monthly charges Total A/R = $90,000 Average monthly charges = $30,000 A/R Ratio = $90,000 30,000 = 3 There are 3 months of average charges held in the A/R Accounts Receivable Ratio Average monthly charges should be based on at least three months data A moving average of the previous twelve months will be the best measure The A/R Ratio can be expressed in terms of days by determining average daily charges instead of monthly charges Most published benchmarks are based on months 5

6 A/R Ratio Total A/R = $125,000 Total charges for the past 6 months are $150,000 What is the A/R Ratio? 1. $25, % 4. 5 A/R Aging The total A/R can be broken into groups based on the age of the individual accounts Most commonly, the aging is based on 30 day increments <30, 31-60, 61-90, , 121> Aging should start from the date of service not from the posting date The amount over 90 days is the delinquent A/R A/R Aging Current Total $31,000 $24,000 $12,000 $8,000 $25,000 $100,000 31% 24% 12% 8% 25% 100% 6

7 RBRVS Measures Resource Based Relative Value Scale Relative Value Units Based on: Physician cost Practice overhead Malpractice cost Assigns unit values to each component RBRVS Measures CPT Description Physician Cost Overhead Malpractice Total Office visit T&A CABG RBRVS Measures RBRVS can be used as basis for cost accounting First requirement is to measure total RVUs for the practice Second step is to divide the desired parameter by the Total RVUs 7

8 RBRVS Measures Example Family practitioner produces 8,000 RVUs per year Total non-physician cost of the practice is $160,000 Cost per RVU is $160,000 8,000 = $ office visit is worth.91 units then the cost to provide this is.91 x $20 = $18.20 RBRVS Measures Example Cardiovascular surgeon produces 15,000 RVUs per year Total non-physician cost of the practice is $150,000 Cost per RVU is $150,000 15,000 = $ CABG is worth units then the cost to provide this is x $10 = $ What Is Your RVU Cost? Total RVUs = 10,000 Total non-physician costs = $180,000 What is your cost per RVU? 1. $90 2. $18 3. $ $9 8

9 Using RVUs Instead of total cost any parameter can be measured: Occupancy cost per RVU Physician cost per RVU Non-physician labor cost per RVU Facility A costs vs. B costs Time period 1 vs. Time period 2 Or any other cost measurement Using RVUs Examples Occupancy Cost $12,000 8,000 = $1.50 per RVU Labor Cost $96,000 8,000 = $12 per RVU Facility A vs. Facility B $18 per RVU vs. $21 per RVU Payer Analysis Compares various payers based on performance measures Payers can then be ranked on various parameters Problem payers can be easily identified Makes it easier to focus collection efforts 9

10 Payer Analysis Plan Charges Payments Adjustments Gross Coll % Net Coll % RVUs Medicare $125,000 $50,000 $75,000 40% 100% 1300 Blues $90,000 $55,000 $30,000 61% 91.6% 1000 Foundation $60,000 $33,000 $10,000 55% 66% 700 IPA $90,000 $30,000 $55, % 85.7% 950 PPOs $200,000 $120,000 $85,000 60% 104.3% 2000 Payer Analysis Who is the most profitable payer? 1. Medicare 2. The Blues 3. PPOs Who is the biggest problem payer? 1. The Blues 2. Foundation 3. Medicare Non-Financial Productivity Measures Patient Analysis Referral Analysis Labor Analysis 10

11 Patient Analysis New Patients Procedures Patients per hour (day) Waiting times To get an appointment In the reception area In the exam area New Patients Revenues are a function of the number of new patients Higher charges More services More likely to need procedures Should be tracked monthly, by provider and year-to-date Procedures Applies primarily to surgical practices Inpatient vs. outpatient and total Number of new patients per procedure Average time from first visit to procedure 11

12 Patient Volume Patients per day Particularly important for primary care Patients per hour May vary from one day to another and one doctor to another Patient Wait Times Time to get an appointment New patient urgent problem New patient non-urgent exam Established patient chronic problem Established patient new acute Established patient follow-up Time waiting in reception area Time waiting in exam room Referral Analysis Other doctors Other patients Yellow pages Advertising Cost 12

13 Labor Analysis Staff Ratios Full Time Equivalent Employees (FTEs) per doctor FTEs per pay period Example: Total hours worked by all employees last month: 1,100 FTEs = (1,100 x 12) 2,080 = 6.35 FTEs Labor Analysis If there are two doctors in the practice: 6.35 FTEs for 2 doctors = 3.18 for each doctor If 100 of the hours paid were for overtime:.57 FTEs were expended doing just overtime work. Paid at time and one-half: it is the equivalent of.86 FTEs Benchmarks Medical Group Management Association MGMA Annual Cost Survey Physcape comparative benchmarking

14 Doing Your Own Benchmarks Based on ideal income Based on desired payer profiles Based on historic actuals Key Benchmarks Gross Collection Percent Based on charges at 2 times Medicare allowed 60% Net Collection Percent 95% + and not less than 90% A/R Ratio Less than 3 Delinquency Rate Less than 20% not to exceed 25% Financial Analysis Example A practice reports the following financial activity over the past twelve month period: Opening Accounts Receivable $120,000 Charges $460,000 Payments $345,000 Adjustments $110,000 Closing Accounts Receivable $125,000 Gross Collection Percentage $345,000 / $460,000 = 75 % Net Collection Percentage ($345,000) / ($460,000-$110,000) = % Accounts Receivable Ratio $125,000 / ($460,000 / 12) = 3.26 months 14

15 What About Overhead? Can be misleading when looked at as a percent Need to focus on bottom-line profitability in dollars not percentages High overhead practices can be very profitable Low overhead with small volumes may be unprofitable Summary Sophisticated practices and practice managers manage their decisions based on data Most data comes back to charges, payments, adjustments, A/R, patient contacts and RVUs A simple analysis paves the way to a sophisticated analysis Thank you for participating in this seminar presentation from Economedix! Please direct questions to tloughrey@economedix.com To earn CME credits for this course please complete the Evaluation / CME Form and FAX it back to Economedix within 7 days of the teleconference. 15