Concocting a recipe for practice success
Practice management
Concocting a recipe for practice success
New MGMA survey looks at the best of the best
There always have been hints in the Medical Group Management Association (MGMA) surveys of how the best practices operate. But now MGMA has taken the information from its annual Cost Survey, asked some of the better performers more specific questions, and come up with a survey that closely analyzes the strategies of superior practices.
The new Performances and Practices of Successful Medical Groups survey includes in-depth information on profitability and operating costs; production, capacity, and staffing; and accounts receivable and collections. It also includes profiles of 19 practices to paint a clearer picture for readers of just what it takes to become a better performer.
Among the findings of the survey:
The best groups use formal strategic planning, rigorous financial management, and customer-focused innovations.
Superior practices have open communication, a high level of physician job satisfaction, and trust between administrators and physicians.
Better-performing practices work harder, doing about a quarter more procedures than all multispecialty groups in general.
Compensation for physicians is based at least partly on productivity (for more on productivity-based pay, see related story, p. 37).
The best practices are willing to invest heavily in information systems and quality management programs.
Most of the better performers have at least basic clinical laboratory and radiology services. Others have more extensive ancillary services, including pharmacy, outpatient surgery centers, physical therapy, and cardiac stress testing.
Physicians at better practices have a good grasp of their finances, competitive positions, and performance goals — without having to dig them out of files.
Customers — patients, insurers, employers, and group physicians — are all paramount to the superior practices.
7 key steps
The survey points out seven steps to better performance that all practices can adopt. They are:
1. Detailed cost accounting.
This helps the practice figure out how much a particular procedure or treatment costs them. Practices that do this can prepare reports outlining revenue and costs according to treatment categories. Cost accounting also helps managers determine what expenses actually relate to activities that generate revenue.
2. Transaction costing.
Also called activity-based costing, this allows practices to allocate expenses to each function. Most frequently, these systems are based on relative value units. The information generated by transaction costing can help a practice in contracting by showing to payers in black and white what a particular treatment costs.
3. Zero-based budgeting.
In zero-based budgeting, each manager justifies his or her proposed activities and expense budget as if they were being performed for the first time, without reference to any previous year. It is an attempt to minimize slack that may result through incremental budgeting that simply adds a uniform inflation factor to last year’s numbers.
4. Physician incentives.
Physicians are rewarded for efficiency and cost control while still maintaining high-quality care.
5. Effective managed care contracting.
Key to this step is understanding all aspects of managed care — from discounted fee for service to capitation. Better performers often have contract review committees that look at contracts. They also understand their cost structures enough to negotiate favorable reimbursement rates and make shrewd contracting decisions.
6. Effective coding.
Superior groups will emphasize coding procedure training and explicit coding processes. Improper coding can result in lost revenue. The better performers regularly review their systems, and many opt to have that review conducted by an outside firm.
7. Improved service delivery.
By optimizing each provider’s particular style — for example, varying schedules according to need and practice patterns — better performers provide more efficient care. The better performers also believe in quality management and improvement, and are willing to invest in support staff as a way to make their practices run smoothly.
[Editor’s note: The Performance and Practices of Successful Medical Groups survey is available from the MGMA for $225 for members, $275 for affiliates, and $350 for non-members. For more information, contact the MGMA at (888) 608-5602.]
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