Four Ways to Boost Income at Your Medical Practice

Medical practices are already feeling squeezed between decreasing reimbursements and increasing costs, and the conventional wisdom is that it is only going to get worse.  For a practice to survive and thrive going forward, the owners and partners will need to make a more granular response to their practice's profit and loss statement (P&L) or income statement than they may have done in the past.

Here's what to consider next time you are assessing your practice's P&L:

Net income
The first place everyone looks when handed a P&L is the bottom line:  net income (total income – total expenses). If that number is big enough, and especially if it is growing, there is little imperative to examine income or expenses.  I was not around then, but I have been told that was normal in the good old days.

Income
If net income is shrinking, the next place to look is total income (charges – contractual adjustments – denials + patient collections.  If that number is also shrinking, job No. 1 is to look at the components of total income and determine what corrective actions can be taken.

Here are some possible corrective actions to take:

Increase charges
The most obvious way to increase charges is to see more patients.  A typical response is to completely fill the physicians' schedules, and perhaps, shorten the allotted time for appointments.  With a too-full schedule, however, physicians tend to run way behind schedule. The unintended consequences are serious: There is never enough time to get everything done; the stress levels for physicians, patients, and staff increase; time is wasted dealing with patient complaints; overtime and staff turnover spike, follow-up is spotty, etc.

A more productive response is to become more productive.  Identify and resolve bottlenecks in the flow of patients.  Eliminate common errors, extra steps, and duplicated efforts.  Determine if some of the most common snags can be mitigated or eliminated by replacing unreliable equipment.  (This has become a huge problem for many practices with the advent of EHRs.  Their old PCs and servers are not fast or reliable enough.)  Consider whether physicians are doing any work that someone else could do.  If so, it might be more profitable to transfer that work to a staff member, even if it meant hiring someone. 

A solid rule of thumb is that 30 percent of the work in any office  adds no value.  That implies that your physicians could see 30 percent more patients without working harder or longer and existing staff could adequately support them if everybody quit doing the non value-added activities.

Adjust contractual reimbursements
Contractual adjustments are the adjustments necessary to bring a practice's reimbursements into line with its payer contracts. With the consolidation of payers, individual practices have little pricing power.  A practice can improve its pricing power by merging with other groups or selling itself to a hospital or payer. 

Another option, which maintains independence, is to join an IPA, particularly a large one that can demonstrate high quality care.  MHMD, a clinically integrated physician organization in the Houston area, reports its contracted rates are rising.

Prevent denials
Some denials result because staff did not properly verify insurance before service was rendered, or because staff supplied incorrect or incomplete patient information with the claim.  In most cases these problems can be eliminated with good procedures and discipline, as well as the practice's willingness to refuse to see a patient without prior verification of insurance information.

Unfortunately, the Affordable Care Act in 2014 will introduce the possibility of retroactively denying coverage.  For plans procured from an insurance exchange, a patient's coverage is reported to be in place for 90 days after the last premium payment.  After 90 days, coverage is cancelled and claims for services within the last 60 days can be denied.

Denials can also result from inadequate clinical documentation or coding. The issues here are inadequate training and provider discipline.  It is worth noting that the advent of ICD-10 in October 2014 is likely to cause at least a temporary increase in denials.

Improve point of service collections
Collecting copays and, where appropriate, deductibles before or at the time of service is critical.  Front-office staff must know or be able to figure out what is due, and they must be held accountable for at least trying to collect it.  A physician may always choose to see the patient anyway, understanding that he may not be paid for the service.

Working harder is not the only way to increase total income, and other methods can be much more effective.

Similarly, cutting staff is not the only way to decrease total expenses.  We'll look at that next week.