Understanding Physician Profitability and Driving Better ...

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Understanding Physician Profitability and Driving Better Results

Transcript of Understanding Physician Profitability and Driving Better ...

Understanding Physician Profitability and Driving

Better Results

Quick Intro• Have been practicing for 17 years• Previously VP/Shareholder of Butler and

Company CPAs PC in Albuquerque, NM• Had a stint in firm relations for the American

Institute of CPAs (AICPA)• Currently Director of Tax Planning at Cook Wealth

Management Group• Married for 16 years (to the most amazing person

I know - Tina) with three kiddos – Levi (7), Micah (5) and Glory (1)

Today’s Agenda• Various forms of modeling your internal

financials

• Modifiers for any model

• Financial metrics

• Accounting platforms and issues to consider

• Q&A

FINDING THE RIGHT MODEL

• Everyone is treated equally

• All revenues are shared equally based on ownership

• Costs are shared in the same percentage that revenue is

• No correlation to production, but simplistic to understand

• Values production/collection over anything else

• Providers are often considered profit center

• Overhead is a cost center allocated to providers

• Without modifiers, non-production business activities not rewarded

• Places value to procedures based on CPT codes

• Collections are split according to everyone’s percentage of RVUs

• Monthly versus year-to-date

“HALFIES”

KEEP WHAT YOU KILL

RVUs

SO MANY OPTIONS

The easy way out• Does not tie financial compensation to any

efforts• Bad producers are equally rewarded as good

ones

What do you do with non-owner providers?• Without some measurement tool, you don’t

have a way to properly compensate your non-owner providers other than “here’s some cash”

Only appropriate in my eyes for sole providers who only have to split the pot with themselves

Practice model that allocates financial resources equally

without consideration of individual efforts or use

of resources

“HALFIES”

This is the model that many practices workwith, mostly because it allows providers to be“semi-independent” while getting the benefitof cost sharing with other providers.Generationally, this is a model that manyprofessional service companies (lawyers,accountants, engineers, consultants, etc…)owned by baby boomers seem to work wellin.

Given the direct impact of specific types ofpatients with a more favorable pay mix,there are many ways to game the system byencouraging staff to schedule higher dollarprocedures with better paying insurance orself pay. There is very little incentive toconsider what is best for the practice.

More traditional model What are some of the pitfalls?

KEEP WHAT YOU KILL

• Revenue by provider is based on collections (not billings)

• Call money can be directly allocated to providers

• Other forms of income beyond billed charges (medical directorship, etc…)

• Physician compensation and benefits (health insurance, retirement, etc.)

• Nurses and support staff directly assigned to a provider

• Other costs tied to the provider – malpractice insurance, donations, marketing

• Cost center that includes all of the non-provider specific costs to run the practice

• Various ways to allocate to the profit centers

• Consider fixed and variable components to overhead

DIRECT REVENUES

DIRECT EXPENSES

OVERHEAD

FINANCIAL BREAKDOWN

• Attach units of value to CPT codes

• Apply those units to overall collections

• Somewhat ties production to collections

• Removes the “gamesmanship” by tying

overall collections to RVU efforts

• Requires upfront time by the physicians

to attach value on each CPT code

RVUs

Building and training next generation

physicians; coaching on meeting metrics

Mentoring

Modifiers

Modifiers

Targets that align production to bonuses

and other forms of compensation

Production Goals

Handles in-practice testing, quality control

and regulatory reporting

Clinical Director

Leads the overall business operation of

the practice

Practice President

MODIFIERS

Are the physicians incentivized to think about what makes sense for the

practice beyond their personal benefit?

Are practice cash flow needs being met by the model? Retention, funding profit sharing/retirement, etc..

Is the practice adequately prepared for future retirements

and incoming doctors?

Do the providers understand the model? How often are they exposed to it beyond bonus

time?

OTHER CONSIDERATIONS

QUESTIONONE

QUESTIONTWO

QUESTIONTHREE

QUESTIONFOUR

• Needs to be practical and easy to explain (to everyone!)

• Tie it directly to the financials – numbers (generally) are impartial

• All new providers need a “Financial Model 101” class

• If the practice undergoes a change, take a fresh look at

whether the model is appropriate anymore

• Address concerns with providers sooner than later

PICKING THE RIGHT MODEL

MAINTAINING THE MODEL

OUR RECOMMENDATIONS

Patient visits

Monthly charges and collections

(including coding)

Number of provider work days

Freshness of your accounts receivable

Patient and payer mix

PRACTICE METRICS

Presenter
Presentation Notes
Story about Wexler and the cost seg review notes

ACCOUNTING PLATFORMS

• Leverage departments within your payroll service

• Unless you are a professional accountant, leverage an outside CPA/accountant for financial accounting

• Your CPA should be more than just the “tax guy”

• Financial strategy should NOT be solely driven by taxes

• Encourage collaboration between your professional advisors (CPA, attorney, banker, financial planner, payroll provider, etc…)

OTHER CONSIDERATIONS

• Your financials are more powerful in driving practice behavior than most will give them credit for

• Not all models are appropriate for all practices – take the time to find the right one for you, and don’t be afraid to adjust as circumstances change

• Leverage your professional advisors to support your practice

WRAP UP

www.cookwealth.com

[email protected]

(919) 784 9100

4101 Lake Boone Trail, Ste 210Raleigh, NC 27607

THANK YOUFOR LISTENING