Improved Data and Security Can Position Your Physician Practice for Success

With the time remaining in the year, physicians and practice executives should ask themselves certain questions:

• Do you have the data you need to understand practice performance and compensation?
• Is your practice positioned to finish the year strong?
• Are there risks to your practice you haven’t addressed or even thought about?

Understanding and answering these questions can help you identify improvement areas, measure success, and make informed decisions for your practice’s future.

Has physician compensation met expectations this year?

Physician workload has increased over the years, partially due to rising patient expectations, administrative tasks, and technology changes. If the number of patients seen per day has reduced to acclimate to a new system or for work-life balance — or if the number of days worked have been reduced — these programmatic changes to a physician’s schedule can have a significant impact.

Tracking the effect of when a physician is out of the clinic or out of the surgery schedule and how that relates to progress toward compensation goals is time consuming. That’s why practice management processes should be in place to regularly track, monitor, and communicate that data.

Using data to understand practice performance and compensation

To help avoid a gap between what a physician is being paid and what they expect, your practice should consistently gather data on:

• Progress on annual production, financial, and compensation goals
• Days scheduled, days worked, compared to projected days worked
• Current year compared to prior year numbers
• Significant expense variations to budget
• How many days are (or aren’t) revenue producing
• Number of patients seen in the current year compared to prior year

The above data should be updated and reviewed by physicians and administration as frequently as desired, but at least monthly. This can help make necessary adjustments, set realistic targets, and prioritize actions to bring about a successful end to the year.

Another recommended practice is reviewing how compensation structure relates to days worked, production, and fixed costs. For example, a decline in production doesn’t usually have a 1:1 ratio with a decline in compensation. Reflecting on compensation structures, revenues, and fixed costs can help you develop stronger strategic plans and allocate resources effectively.

Is your practice positioned to finish the year strong?

Knowing how your practice is performing throughout the year is crucial for maintaining strong financial performance, strong relationships, and trust. These three steps can help you evaluate your current methods, goals, and resources and build strategies for the rest of the year:

1. Review, understand, and communicate fixed expenses

Fixed expenses such as rent, employee salaries, and technology costs make up most medical practice expenses. Once revenue exceeds these costs, the remainder is profit or physician compensation.

Typically, the last part of a physician’s production is mostly profit and falls disproportionately to the bottom line because expenses are covered. However, if the physician never reaches the point where the fixed costs are accounted for, then a production decline has an inordinately larger impact on compensation.

To avoid surprises, educate your people and encourage them to take steps to cover the fixed costs allocated to them.

2. Look for additional revenue and reduce overhead creep

Overhead creep is a real issue, and physicians generally rely on administration to prevent it. Rising expenses — particularly salaries and wages — can cause the overhead percentage to increase faster than revenue.

To help avoid this, practices look for ways to potentially increase revenue, such as:

• Tracking and identifying the cause of denied claims
• Verifying payments from insurance companies against negotiated rates
• Following up on patient balances
• Collecting payments at the time of service
• Using revenue cycle software to its full capacity

3. Consider the role of advanced practice providers (APPs)

Practices should consider the role of advanced practice providers (APPs) or other health care providers in delivering follow-up care. By transitioning follow-up care to APPs, physicians can focus on new patients. This could potentially increase revenues since new patients generate more charges and ancillary services than established patients.

Transitioning may require a change in how the physician has historically practiced, but thoughtfully assessing and using APPs can improve a practice’s financial performance for this year and beyond.

Are there risks your practice hasn’t thought about?

Is your clinic prepared to face a cyber threat? Are your network and devices secure?

Not planning, investing, and preparing for cyberattacks leaves you open to reputational damage or, even worse, lawsuits. Have an annual planning session with your internal/external information technology (IT) professionals ahead of the budget process to plan for potential cyber improvements.

Updating your systems to improve cybersecurity can be a significant multi-year investment. The costs and underlying benefits should be communicated to the physicians as a required investment and not just one more rising cost reducing physician compensation.

Some of the most effective strategies in preventing cyberthreats in health care are penetration testing, risk assessments, breach response simulations, and governance oversight. Using these resources can help you uncover potential challenges affecting your practice’s stability or growth — and allow you to proactively address and mitigate risks to reduce their impact on your practice.