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Grand Rounds-Practice Management Part II: 30 Tips to Boost Your Bottom Line

Kim Pollock and Derek Cantrell

September 04, 2012

Transcript

- Hi, this is Kim Pollock. I'm a consultant with KarenZupko and Associates and my moderator is Derek Cantrell, the Executive Director at Goodman Campbell Brain and Spine. Thank you, Derek, for being with us today.

- My pleasure, Kim. It's exciting to be part of this series to teach young neurosurgeons how to run their practice.

- Great, so we've just finished the first webinar on Practice Management 101. And now we're going to look at how to measure the health of the success of your practice. I would like to talk about a couple of financial indicators that we recommend you monitor on a monthly basis. The first one is the gross collection percentage and this is really a measure of what percentage of your fee, your gross charges are you collecting. Now, back in the old days, this number used to be very meaningful. When I say old days, I mean before managed care because we weren't getting any discounts off of our fee. But nowadays, we look at the gross collection percentage and it doesn't surprise me to see a gross collection percent of, you know, below 30% depending on your payor mix. If you have a lot of Medicare and Medicaid, where your, you know, your fees are set at a, you know, reasonably higher percentage than Medicare allows, then your gross collection rate is going to be low. So I don't get all worried about a gross collection rate. Derek, do you use the gross collection rate in your practice?

- Yeah, I agree, Kim. I think this is one where it probably means something internally to you, but probably not compared at an outside benchmark. It's all based on what you've set your own fees at and then what you've managed to negotiate for your own managed care contracting. So, you know your own history so you can look at this monthly or quarterly and say, "Oh, we have a variation here. Something's happened to either our payor mix or our collection efforts" and that it gives you an indication of where to look.

- Exactly, and we can manipulate the gross collection percentage by decreasing your fees. So I agree it's not very meaningful, but it is something to monitor and look for trends. I think in the KZA, we use the net collection percentage as a much more meaningful indicator of how successful we are at collecting collectable dollars. You can see that the numerator is your total receipts, your total collections, or gross collections minus refunds so that becomes your net collections and it's divided by your total charges, your gross charges minus contractual adjustments. So this contractual adjustment is the discount off of your fee you agreed to when you signed the managed care contract. So if your fee is a $100 dollars and the payer pays $80 and you write that $20 off to contractual adjustment, so what percentage of the $80 did we collect? We should be collecting $80. So we expect this number to be as close to 100% as you can get it. There are gonna be occasions when patients can't afford to pay and you have bad debt write-offs. And so again, we try to get as close to 100% as much as we can. Some months you go over 100% because you're collecting all the money, some months you'll be under 100%. But the point is to look for trends and as with all of these benchmarks, ideally, you're looking at things on a rolling 12-month basis.

- Kim, this is another one where technologies has come a long way to help practices understand where they're at on this benchmark, because there are some softwares now that can relate all the payments made back to the original charge and the adjustments so that you're not kind of doing this either at a gross level or even at a payor level, that you can make sure month by month how well you're doing based on what you're really owed after adjustment. So, if you're looking at computer software, practice management systems, or even claims processing or clearing house systems, some of these have these tools that help you calculate this at a more close level to your accounts and you don't have to do kind of a gross calculation.

- Yeah. In the old days, you really couldn't get that. But now, now you can.

- Yeah, very good. The next two benchmarks are about your receivables. Your accounts receivables is money that is due to you. The first indicator is your days and receivables and this basically measures how long on average it takes a claim to be paid. So how often are you turning over your accounts receivables? Remember, Medicare is contractually obligated to pay you within 10 to 14 business days. So for every Medicare patient you have, maybe you've got a Medicaid patient where it takes 120 days to get paid and the average is somewhere in the middle. But we take our total accounts receivables, what it is at a moment in time and then we divide that by your average daily charges. And your average daily charges or your gross charges for a year divided by 365 days. And so we expect that claims would be paid within 35 to 40 days now. Again, you know not too long ago, four, five, six years ago, where we didn't have as much electronic payment, many payers paying electronically, our days in A/R were 60, 70, 80 days in accounts receivables. And now we've got practices who actually are in the 30. So every month, their A/R turns over. They've got good collection processes from patients because we would much rather write a refund check to a patient than we would send a patient statement out. And then your percent of A/R over 90 days. So again take that accounts receivables snapshot, what is your A/R today and what percentage of that is greater than 90 days. And so it's the greater than 90 days that is usually a problem. Once a claim is older than 90 days, it tends to be more difficult to collect. So, 90 days is usually that magic amount. I've got some clients who look at their greater than 60 days because they say, "No, 60 days, we're gonna be all over this claim at 60 days, forget 90 days." And then from an expense standpoint, we wanna look at the overhead expense. What percentage of the revenue is used for operating expense? So we look at your operating expense amount, divide that by your net collection rate. And your operating expenses would not include things like physician's salary, physician benefits, things like that. It's strictly operating expenses, support staff, salary benefits, rent, malpractice, paperclips, gauze pads, et cetera. And then-

- Yeah, this is a common benchmark that seems intuitive probably to a lot of physicians. So this is what I was gonna say. There are published benchmarks, you can look at your practice against and here's a table that Kim can talk to us about.

- Yeah, absolutely. So the couple of targets to look at or benchmarks to look at, one is the Medical Group Management Association who actually has information about neurosurgery practices. Although Derek, I think you would agree. I don't think that data is as robust as the NERVES data, Neurosurgery Executives' Resource Value and Education Society. Surgeons, if your office manager does not belong to NERVES, I highly encourage you to spring for the membership fee. And actually, I think Derek correct me if I'm wrong, but Judy Rossman from RossmanSearch is still paying the membership dues for every new office manager for the first year. So you can't beat that and it's a very worthwhile organization.

- Yeah, that's true, Kim. Judy still has that offer out there for first time members. She'll pay the first year and I believe that registration to become a member is less than $200. The NERVES survey represents about 450 neurosurgeon and compared to MGMA, which is under 300. So it's almost double the amount of data collected on individual neurosurgeons and has become the kind of the de facto benchmarking tool for neurosurgeons.

- Yeah, I agree. And Derek, I know you and the committee do a lot of work on that every year.

- Yes, we do.

- And then in terms of addressing your bottom line and the overhead expense in these last couple of years with the recession, I've collected about 30 different tips that I'd like to share with you on reducing your expenses and Derek, please jump in if this is something that you've done in your practice or at the end, if there's some thing that you've done to reduce expenses that you can share that I haven't talked about.

- Okay.

- The first one is looking at your telephone bill. Oh my gosh, I can't tell you how many unused phone lines that we've eliminated. Just changing from an analog phone line to voice over the internet can bring a whole host of savings. So again, just look at that telephone bill and call your provider to see what discounts are out there. Long distance calls. Again with voiceover internet, it's just a flat fee so no separate long distance calls, no more 411 to the staff, they can Google or go to whitepages.com to find phone numbers. This seems kind of silly, but one of my practices saved $7,500 a year by not putting fresh flowers at the receptionist's desk. They bought really nice silk arrangements. So they had a one-time fee of a couple hundred dollars and nobody knew the difference. And so, you know, for a solo practice, $7,500 was a lot of money. Group discounts for clinical supplies. There are some websites out there, perfectpurchase.com or pipelinemedical.com or check with your county medical association or your state medical association to see what kinds of group purchasing discounts there are. Subscriptions to magazines. Again cost a lot of money and half the time patients take the magazines with them. People are always on their phone now. So I would actually rather invest in a wireless for our patients, or I have been to practices where they put a TV in the waiting room, and then they run a PowerPoint show of the physicians. Introducing the physicians, talking about the types of procedures they do. So there's some subliminal self-marketing going on rather than People magazine and Fortune magazine and Reader's Digest mags that are six years old. Save the letterhead for important correspondence. Use electronic, use a word document with your logo on it for referring physician letters. One neurosurgery, eight doctor neurosurgery practice I went to, the secretaries were printing out all of the referring physician letters on this very expensive, thick letterhead. And when we switched over and just used regular office Depot paper, they saved thousands of dollars a year in that. Reevaluate your credit card processing providers to see who can give you the best rate. This was an analysis I did for a solo neurosurgeon, and you can go into the computer system, should be able to go into the computer system, and find out how many transactions, how much in payments for each card, for each type of card Visa, MasterCard. I took Discover American Express and look at your current expense and then availity expense, which was one of the options. And we came up with, you know, we came up with a couple hundred dollars in savings. Now you'll say, "Oh, well, that's just one doctor." Well, if you've got 10 doctors, that's several thousand dollars a year. We found that American Express was a very expensive credit card to take just because of their processing fees. And so he chose to eliminate American Express as an option, and that saved $600 a year. Again, one of the other things to think about, I mentioned the phone lines, your credit card terminal right now is probably hooked up to a telephone line. And that telephone line you might be sharing with your fax line. So one very large neurosurgery group that I went to, that was the case. Their credit card line was hooked up with a fax line. The fax machine was going constantly. Pages were coming in. We were sending faxes out and we could not process patient's credit card payments because that line was always in use. So A, we said, you know first of all, go to electronic fax because we've got an electronic medical record. All of those faxes should be coming into a fax hub electronically to the medical record. Secondly, eliminate the phone line. You can have a remote credit. You can have remote credit card terminals that go in through a USB port over the internet, saves a phone line. So that's at least 60 to $70 a month. Negotiating rent. Your office building probably doesn't want you to leave. So, this might be a good time to negotiate the rent. Rent is one of your top three expenses. Support staff, salaries and benefits is your first, rent and malpractice are also high expenses for practices. Using business rewards credit card. So we've got, you know, your American Express, your bank cards, things like that, where you can use the points for travel. You can use them for your own travel, for staff education travel, things like that. Pay bills electronically and save the $0.44 stamp, that can also help. So-

- Kim, it's amazing. It's amazing how much on this one, we just recently, I've started doing this on our practice and many, many vendors want you to pay electronically now. And it just saves the time and the paper and the checks and the postage and the time to sign checks. You just have to have safeguards in place to verify that the people paying these bills electronically are doing that honestly. And you're not going to get them paying off one of their own credit cards with your credit card, but this is a great idea. And one we never really thought of just 'til the last couple of months.

- Very good. Another one is having the accountant do everything for you. So, you know, I've got clients who the accountant does their payroll every week, and it just gets to be a lot of money. So think about a bookkeeper instead of the accounting firm. And when it comes to accountants, I wanna make sure you're using an accountant who understands healthcare and physician practices and not some accountant who is, you know, does more commercial work. One of my clients recently got really burned because the accountant they used was a friend. My client was the first physician practice that the accountant had ever used. And everything was being kept in accrual accounting rather than cash accounting. And then he had to pay for it to be converted to cash at the end of the year so that his taxes could be filed and it was just a big mess. So you wanna ask around to your colleagues and see which accountant that they use. Thinking about employee benefits, this is a major cost to practices these days for health insurance. So consider high deductible health plans, and then you can do some sort of payment back to the employee for that high deductible. Derek, you have a huge group. Your health costs plus just be astronomical.

- Yeah, it's one of our top five line items in total. So what I would recommend is, based on your size, don't just feel like you're pigeonholed into a fully insured plan or a self-funded plan. Find somebody you trust, other people using that in the market and, you know, get a broker involved or an agent and really look at all your options. Just don't listen that this is the way it's always been done. We look at it, we shop at every way every year to see what the lowest cost is based on the kind of benefits we wanna provide.

- And I agree, Derek. Shopping around, there's nothing wrong with that. And comparing notes. Looking at payroll. I've got several clients who pay their employees and the physicians every week. And this, you know what, for a manager, it feels like you're always doing payroll and you can't get ahead. So I recommend that you pay your support staff every other week. And I say, pay the physicians once a month because it can be a detriment to the cashflow if we're trying to pay the physicians every week. I mean, that gets to be tight. How do you guys do this in your practice, Derek?

- We pay staff and physicians every other Friday, every other week. That seems to work for us.

- Yeah, I think that's reasonable. In small practices, you know, depending on the cash flow and when Medicare pays, et cetera, physicians might have to go to once a month. Automated timekeeping in using payroll software, whether that's a software you have on your computer system or you have time for, or whether you hire ADP or Paychex. Either way, the point is that support staff have to be held accountable for their time. I was just at an academic group and the secretaries were grousing about the fact that they now have to clock-in and clock-out on their PC at their desk. And I said, "Gosh, where I used to work 20 years ago, we had to clock in and clock out. I think you're pretty lucky that you haven't had to do that up until now."

- Yeah, that's pretty standard in all industries today.

- Yeah, exactly. Exactly. Which gets to my point about overtime. So overtime can be a big expense in some practices. And I find that this really needs to be monitored extremely well, otherwise, it can get out of control. So there's lots of reasons for overtime, you know, they could be legitimate reasons. You know, we were seeing a ton of patients today. We were running late because the doctor was like coming from the operating room. But it, you know, there could be other reasons like, you know, support staff was just hanging around while the doctor was in the OR this morning. And then all of a sudden, the work started and they couldn't get caught up. So I think it's important to watch what the staff are doing and have any overtime prior authorized. Unfortunately, sometimes a hard choice has to be made and you have to look at laying off some staff or not replacing certain positions. And again, this is not necessarily a do-it-yourself project. I told you about the practice I was with, who cut two people from the billing staff and that was a huge mistake. So it's worthwhile getting an outside opinion from a consultant, someone who has been to lots of practices and understands the work that needs to be done and how many people it takes.

- Kim, that's another one where benchmarking is out there and that you can compare your practice to a benchmark. So what we look at is staff per physician. So you can find benchmarks in MGMA and NERVES and other places. KZA probably has those same benchmarks too to say, on average for a physician practice, they have so many staff per position, so many clinical staff, so many administrative staff, but it's kind of broken down to. So that's a good place to start. And then you can see in your practice where you need to make some changes.

- Yeah, I agree. And as you know, as with all benchmarks, you have to kind of qualify them. For example, I've got one neurosurgery practice where between the three full-time physicians, they do only 300 cases a year, which is what NERVES says is the average for one physician. And then I've got other practices where the doctors are doing 500 cases a year. And so the staffing has gotta be modified based on the physician productivity. Upgrading your hardware. One practice I worked with, the hardware was so old it kept freezing up, everything kept freezing up. And so the staff kept track and at one point, some of the nurses were having to reboot 10 and 15 times a day. And so that just lost time, frustration, just wasn't worth it anymore. So every couple of years, unfortunately, you do have to upgrade the hardware. Employing enhancing your website to cut costs on postage, take fewer phone calls by allowing patients to communicate with certain staff via email, giving patient quick access to information helps you stay competitive and helps the patient. I know for somebody like me, I travel a lot. I'm in physician practices every week. And I communicate a lot with my doctors, staff if I want an appointment, or I have a question I can do that by email. And you know, the calling back and forth just waste time on both parties. Looking at technology to help your answering service. So many physicians complained that the answering service took the message wrong, took the phone number wrong. And there are other options out there that completely automate the experience and typically cost less. Transcription. So even if you're using an electronic medical record, you can use Dragon to dictate into your electronic medical record and forget the transcriptionist who is still typing on paper or worse, typing into your electronic medical record. I've seen that more than once. There's a staffing company out there called Physicians Angels. It's a novel idea, but this company actually does scribing for you via a camera that's in the exam room. And so the physician would speak to the scribe on the camera while they're examining the patient, and so the scribe puts everything right into the medical record so when at the end of the service, the doctor can go to the electronic medical record and sign off on it. They also do scanning remotely, et cetera. So think out of the box that staff person or somebody to help doesn't have to necessarily be in your office. For example, this group also, one of my clients wants the phone to be answered after three rings. And when the phone doesn't get answered after three rings, Physicians Angels gets the phone because it rings there. And so the phone is always guaranteed to be answered on the fourth ring. Paper is expensive so go paperless. And paperless isn't just your electronic medical record. I've got a client EENT group, their PA they're on electronic medical record and they think they're paperless, but they didn't have a PDF maker. They didn't have file maker pro and so everything, all their insurance verification information that they downloaded from the internet was printed and then scanned into the EMR. So they went through reams and reams of paper every week. So remember, going paperless means doing things like no more message pads, using the electronic medical record messaging system. when patients call. Scanning things right away, getting your faxes electronically instead of getting in them via paper and then converting them to a scanned document. So just have that fax brought into an electronic fax, going straight to your electronic medical record and then someone will just assign everything from the inbox directly to the patient's record.

- Kim, that one sounds like a daunting process. So I suspect people are trying to check those off one at a time.

- Yes.

- You don't really have to go all in all at once to do that. It'd be almost impossible.

- Right. No, I agree. One at a time is good. Just keep whittling away at the paper. The other one that I didn't mention here on that paper is all of the EOBs that you get. If you're still using paper encounter forms, try to go electronic there, but we can scan all of that in at the end of the day and create a new electronic file for a day of the week. So you still have all of your daily close documents. They're just electronic in a shared file. That saves a huge amount of paper and storage space. So we get rid of that expense for iron mountain. Automated appointment reminders. So we've got many clinics using text reminders, email reminders, this saves your staff time on the phone. There are companies like TeleVox who do this, and their claim's at 69% of patient surveys say they're more likely to respond to text message versus a phone call. And you know, I think it's just like your kids these days. If you try to call them, they don't answer the phone, but a minute you text them, you get a response right back. SolutionReach is a company that does this for a fixed fee a month. And you'd be surprised at how low that fee is. And it can help completely reduce your no-show rate, which actually helps you see more patients and generate more money. And it saves in your staff time. And this was a return on investment calculation that one of the consultants at KZA created for a solo client. And interestingly enough, this person was spending three hours a day, not a solo neurosurgeon. It was a group of five neurosurgeons, but they were spending three hours a day making reminder calls, verifying all of that. So that really added up. And then of course, the cost of no-shows can be daunting, particularly if you think of the lost revenue there. I talked about using a remote credit card terminal and using the internet as opposed to a phone line. So the savings there is in your phone line, but then if each receptionist or surgery scheduler can have their own and so we don't have to always go to the front desk to use the credit card terminal. And again, check with your bank to see if your bank offers this type of service. Otherwise, Solveras is a company that does offer a remote credit card terminals. Waste, disposal, sharps, et cetera. Again, look at the look at who is taking that out right now and see if we can find another company with somebody cheaper to do that. Maybe if you're in a hospital-based, if your office is near a hospital, sometimes the hospitals will help you with that and provide that service for a reduced fee. Saving money on the electric bill. Just doing things like we do at home, turning the lights out all the time. Turning off workstation, printers, scanners, et cetera. Replacing incandescent bublbs with fluorescents. Motion-activated lights switch in exam rooms, and offices are a must these days. And then keeping the blinds closed much like when you get on an airplane these days, they're always asking you to shut the blinds. Even just recycling paper, magazines, mail, purchasing energy star rated technology. Even if it might not be a savings expense to you, you're helping the environment. Professional liability. I recommend you ask your malpractice carrier if they have any electronic health record discount. One of my clients who has me come back annually to do a checkup on the practice gets a reduced rate on their malpractice because it's a risk management incentive that they have qualified for because they have an outside look at the practice every year. The risk management seminar, like attending a coding seminar, these things pay off. And just in general, it's worthwhile shopping around from professional liability insurance. Derek, this must be in a group your size and expense too that is something that you pay attention to.

- Yeah, it's one of our top five, probably again. And I think you can fall into the pattern of you've always been with a certain carrier, but it's one of those things, I think, you probably benefit from quoting an out to however many carriers you have in your area and just see what kind of reductions you can get. And we've done that in the past and it paid off for us.

- Very good. Simple things like water cooler. So no more water cooler, just a filter on the faucet can help. Phone book ads and advertising. So, you know, I don't know what you do with your phone books, but I've got one at home, it goes into my recycle bin. I always use the internet now. So I would much rather practice spend money in a search engine option as opposed to yellow pages. Collection agencies. So the collection agency nowadays is first of all, we have to turn things over to the collection agency. So that meant we didn't have a good process in place for collecting from the patients. So I want you to beef up the processes for collecting from patients so you won't have to turn anything over to the collection agency. If you do have to turn over to the collection agency, it needs to go earlier rather than later. And I would encourage you to look at GreenFlag, which I believe is a company that is endorsed by the Medical Group Management Association. Our clients have had good success with collection aid using GreenFlag. And then finally, ask your staff where we can save some money because your staff probably have some really good ideas, and you'd be surprised at the waste they see in that and you know that they wanna help the practice be successful.

- Yeah, I think we've talked about these last 30 items as they're the classic kind of low hanging fruit items. And the one thing I'd recommend is just don't do that once and then say it didn't go away. You need to revisit that probably every year or just do a few every year. And that way you're always kind of whittling your costs down.

- That's a good suggestion. And finally to wrap up this series, I like to just share with you some very good resources. Obviously, the AANS is a great resource. Particularly, the professional/educational society meetings, the coding courses. I mentioned NERVES earlier, the neurosurgery practice administrator/manager professional society at nervesadmin.com. We'd love for you to go to the karenzupko.com website. We have forms and things that you can download for free, sign up for our KZA alerts. We answer frequently asked coding questions twice a month and then Medicare's website is also a good resource, although it can be a little difficult to navigate. And the KarenZupko has some great practice coding and practice management resources as well. And those aren't listed on the slide. And this concludes our series of Practice Management 101 for the neurosurgeon. I hope that you all have found at least three ways to help you improve your practice revenue or decrease your expense. Thank you, Derek, for moderating this session. I appreciate it.

- You're welcome, Kim, thank you.

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