Top Ten Challenges Facing Medical Practices
The Most Critical Challenges Confronting Medical Practices
Physician practices face a common set of challenges today, and Reed Tinsley explains key issues that practice owners, valuators, and financial consultants should focus on together in order to control costs, build incentives, ease management, and strengthen growth.
Based on surveys of physicians and feedback Iâ€™ve gotten in my own practice work, I believe these are top challenges facing physician practices today. They are listed below with my commentary. Physician executives should take a look at them closely and ask themselves, â€śAre these the challenges my own practice faces?â€ť and valuators should be aware of these issues as they help physician practices grow value and prepare exit plans.
1. Managing finances with the uncertainty of Medicare reimbursement rates. Will there ever be an sustainable growth rate (SGR) fix by Congress? Who knows? In the meantime, work hard to diversify your patient base and add other revenue streams.
2. Preparing for reimbursement models that place a greater share of financial risk on the practice. Is some form of capitation risk going to rear its head in the near future? Bundled payment models and how physicians fit in with them are a real concern.
3. Preparing for the transition to ICD-10 (International Statistical Classification of Diseases and Related Health Problems, Tenth Revision) diagnosis coding. Is your practice ready? Have you had a group meeting to specifically discuss the ICD-10 transition? If not, expect a severe drop in your cash flow when this new coding system takes place.
4. Dealing with rising operating costs. Every physician practice should have its overhead at a lean and efficient level. This way the emphasis can be on growing the top line to improve your practiceâ€™s bottom line. However, I often see physicians randomly cut overhead as a short term way to improve practice cash flow often to the detriment of the practice in the long term. Make sure this doesnâ€™t happen to you.
5. Participating in the Centers for Medicare and Medicaid Services (CMS) electronic health records (EHR) meaningful use incentive program. The money is there for the taking, but you are going to need to invest in an electronic medical record (EMR) system and go through the aches and pains transitioning to it. However, after helping and observing my clients who have implemented an EMR system, it is well worth the money and effort.
6. Understanding the total cost of an episode of care from the payer’s perspective. Pay attention to the clinical protocol for each of your most common diagnoses. Once you break down the protocol, attaching costs is not that difficult.
7. Collecting from self-pay, high-deductible health plan, and/or health savings account patients. Itâ€™s called training, monitoring, and accountability. Train the front desk on how to successfully collect, monitor daily collection success, and make front desk personnel accountable for their efforts and management for the lack thereof.
8. Maintaining physician compensation models. Emphasize the goals of the compensation model and rememberâ€”never change a model as a knee-jerk reaction to managementâ€™s failure to do what is necessary to improve the bottom line.
9. Managing finances. Cash flow is king, and it is becoming more unpredictable. However, I see well-managed, proactive practices controlling their financesâ€”they are on top of every aspect of financial management that can and does impact the monetary fortunes of the practice.
10. Recruiting physicians. This is a big issue, and Iâ€™m surprised it wasnâ€™t ranked higher. You need new physicians to grow a practice, and you need new physicians to transition out older physicians. I hear all the time from my clients how difficult it has become to recruit, even to large metropolitan areas like Houston. Every practice needs a viable recruitment strategy for the future.
Reed Tinsley, CPA, is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. Â He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. Â His entire practice is concentrated in the health care industry. Â Please visit www.rtacpa.com.