The rapid pace of change within the healthcare industry places a wide range of demands on the time and attention of physicians working in a practice setting. The business of medicine and the operation of a practice can understandably take a back seat to the demands of patient care. Yet, not unlike the periodic check-up, an examination to determine the health of the business through a comprehensive practice review should not be delayed or ignored.
In reality, a practice review is less of a graded appraisal and more of an opportunity to fully evaluate a practice and build a more successful practice through cost-saving or revenue-generating opportunities. Even for a practice considering an offer from a hospital or other group, it will be in a better negotiating position if the practice is as successful as possible. Given the continued squeeze of diminishing reimbursements and the direct relationship to reduced physician take-home pay, it makes smart business sense for physicians to focus on their practices’ bottom lines. A comprehensive practice review is among the most important business actions that owners of a practice can take.
The timing of a practice review can often coincide with a transitional event, such as the retirement of practice member or the departure of a partner. As change is taking place in a practice, opportunities arise to maximize the value of a practice and realize any hidden liabilities. Points of transition within a practice offer optimum opportunities to review outstanding accounts payable and long-term lease obligations.
In addition to reviewing key performance indicators related to the business health of the practice, the comprehensive practice review identifies areas of improvement where the practice may be leaving money on the table. Typically, physicians who have completed practice reviews are receiving a higher value of their work on a go-forward basis, and that improved of revenue helps to combat existing pressures on reimbursements.
Taking the Steps for a Comprehensive Practice Review
While it far from a complex or invasive procedure, a review will require some time commitment from the practice owners. A comprehensive practice review does demand participation and dedication to detail throughout what is a straightforward process.
The starting point for the practice review is gathering the necessary data, including billing, coding and financial information on a month-by-month basis. Launching a practice review will also involve collecting data on key contracts, material expense commitments and a list of all employees, their dates of hire, duties and compensation. A practice review utilizes accountant prepared financial statements or tax returns for the practice and the individual physician — if a sole proprietor owns the practice.
Once the initial information collection process is complete, the data is then verified through interviews and observations. Practice review specialists frequently discover areas where simple changes in existing business processes and procedures can create major savings. For example, one of the ways to maximize compensation is through an examination of the accuracy found in the coding systems responsible for billings, collections and reimbursements. Due to the fact that one single number incorrectly entered into a billing system can result in a significant difference in reimbursement, the practice review process will include a comparison between the coding and physician charts to ensure all results properly match. And if issues are identified, the practice will have options for addressing them.
In order to operate at peak efficiency with maximum earnings potential, a practice assessment should be tailored to not only the individual nature of each practice, but also to the unique costs of each specialty. For example, a primary care practice which offers patients injections will have very different purchasing and dispensing protocols than an oncology practice which offers patients access to chemotherapy infusions.
Consider the following: Often times, the effort placed into the adjustment of the purchasing structure or the vendor will net a practice considerable savings. At a minimum, a comprehensive practice review should lead to the introduction of internal controls and processes focused on improvement. Some of the issues covered in a review may include:
- Staffing levels by positions including the use of mid-level providers
- Hours of operation
- Overhead consumption, such as lease, maintenance
- Efficiency of the revenue cycle (i.e. time to bill and time to payment)
- With a focus on delays in the billing cycle or higher than expected denials or non-payment
- Managing high deductible plans and cash collections
- Current managed care contracts
- Use of ancillary services such as lab, radiology, etc.
- Payer mix
The changes resulting from a practice review could be as simple as dividing the responsibilities for who writes the checks and who reconciles the checkbook between two employees. Practice reviews can also address more complex issues. A thorough practice review will assist management and ownership with in-depth looks into human resources, use of office space, overhead costs as well as staffing levels and costs. A portion of a comprehensive practice reviews can even be designed to provide an analysis of employee benefits and health plans.
For those physicians working in a practice setting, a comprehensive practice review serves as a booster shot designed to promote good business health. Without the periodic examination that the practice review offers, practice owners and administration run the risk ignoring warning signs and develop some business practices that can become costly in both the short and long term.
We Can Help!
How long has it been since your practice conducted a comprehensive review? The Elliott Davis Decosimo Healthcare Team features the resources and expertise necessary to provide your practice with an in-depth and detailed review. We can help your practice in identifying revenue opportunities, controlling costs and creating greater efficiencies. To learn more about our approach to comprehensive practice reviews, contact the at Elliott Davis Decosimo healthcare valuation team at 866-417-4059.