A recent healthcare industry article revisited some opportunities for physician organizations to improve their operational and financial performance. These performance reviews typically highlight opportunities for improvement and what differentiates your practice from your competition.
In an integrated health system, many aspects of a medical group’s performance hinge on system-level decisions that are outside the group’s control. By examining specific areas, the group can focus on viable improvement opportunities.
Medical groups have been hit hard during the COVID-19 pandemic, putting the long-term viability of some groups in question. As health systems and medical groups face heightened pressure to improve financially, a key question is how to gauge performance.
By examining five high-leverage areas within medical group operations, organizations can identify nearly all available improvement opportunities. Comparing these five areas against benchmarks helps pinpoint aspects of operations that can be addressed to improve performance.
- Provider productivity
Provider productivity is key to the financial viability of a medical group, whether in a fee-for-service environment or further along on the continuum to a value-based system. The move to value has not progressed as quickly as expected for many organizations, and wRVU’s remain the gold standard by which to measure performance for clinicians.
Benchmarking provider productivity by specialty, can support group performance in multiple ways. Benefits include:
- Setting realistic expectations for production at both the individual and department levels
- Highlighting provider capacity restrictions and opportunities
- Establishing appropriate clinic staffing levels based on volume
It is important to regularly share with providers how their productivity compares with like specialties regionally and nationally. That line of sight helps with the conversation if a provider’s productivity is below organizational targets.
A new consideration for provider productivity is the rapid deployment of telemedicine due to COVID-19. This modality needs to be evaluated to determine what percentage of face-to-face visits it will permanently replace, as well as the reimbursement variance once post-COVID-19 fee structures are finalized.
- Provider compensation
Alignment between provider compensation and productivity is critical, and not only for the sake of regulatory compliance. Remaining market-competitive is important for recruitment and retention and for maintaining stability in your provider workforce, especially as volume ramps back up after the COVID-19 peak.
As with production, provider compensation benchmarks such as those in the exhibit above can be organized by specialty and viewed at national or regional levels. Benchmark surveys also show emerging trends such as the percent of compensation that is at risk in value-based contracts or paid according to nonproductivity incentives (e.g., patient satisfaction, clinical quality, citizenship, patient access, care coordination).
- Net professional revenue
Examination of net professional revenue provides multiple angles for identifying opportunities in health plan contracting and revenue cycle performance. In negotiations with payers, integrated systems often suppress or flatten rates for medical group services to obtain better rates for hospital services, which typically represent higher revenues.
Identifying variances in net professional revenue also can clarify opportunities to improve revenue cycle performance. If a negative variance to the net-revenue benchmark exists, the organization should conduct a deeper dive into front-end and back-end revenue cycle processes by examining:
- Accounts receivable metrics
- Collection and denial rates
- Lag time to billing
- Service-level agreements
- Clinic staffing
Even within organizations that strive to use a standard staffing matrix across their clinics, there can be a great deal of variation in staffing levels. Just as provider production can tell a story about capacity and efficiency, clinic staffing should be adjusted for patient volume to enable maximum provider productivity.
As telemedicine becomes more central after COVID-19, clinic staffing models may change due to a shifting of roles and responsibilities. Staffing ratios thus may change or need to be adjusted.
- Operational expenses
Operational expenses should be adjusted for volume and compared with market metrics on a line-item basis to ensure no savings opportunities are left on the table. Beyond staffing and compensation, opportunities typically can be found in the following areas:
- Drugs – If drug expenses are higher than the benchmark, organizations should analyze payment to ensure it covers cost. A review of inventory management should be conducted to ensure over-ordering or drug waste through expiration is not contributing to the higher costs. In addition, the medical group may be able to take advantage of health system contracts that provide lower pricing.
- Medical/surgical supplies – Any negative variance to the benchmark should be addressed through both price and utilization approaches. Contracting opportunities for supplies often are centralized within a health system, but individual clinics do not always follow the rules, and compliance with purchasing standards requires a partnership among different areas of the organization.
- Expense Utilization – Internal and historical trends are useful in identifying issues with inventory management and office supplies.
- Building and occupancy expenses – Facility costs could change dramatically coming out of the pandemic. Less exam-room space may be needed depending on the degree to which telemedicine is adopted, for example, but on the other hand, waiting rooms may need to be reconfigured to accommodate social distancing.
- Next Steps
After reviewing the five high-leverage areas and identifying opportunities, organizations should establish a team, composed of both medical group and health system administrators, to evaluate variances and prioritize additional analysis or a plan of action.
A project plan should be created to ensure the initiative remains on track and that appropriate individuals and departments are assigned to each area of opportunity. A defined process to ensure coordination between the medical group and the health system is critical to avoid wasted efforts and finger pointing, given that system-level decisions commonly create situations that are outside the control of medical group operations.
Our experience with performance reviews have resulted in identifying improvement opportunities and educating management on trends within their business. An informed management team will result in better decision making and help the organization continue to grow and prosper.