The Great Practice Makeover: Going It Alone

Practice breakups can be stressful, and the tale of Houston-based Clear Lake Neurology is no exception. Last year, over a span of just five months, neurologist Leanne Burnett watched both her practice partners leave the group she founded in 1999. Today, Burnett is saddled with a small mountain of aging accounts receivable, and she worries about being able to support overhead and staffing costs at her now-solo practice.

Burnett asked Physicians Practice if she’s on the right track. We started by projecting the practice’s potential annual revenue using her business’s average monthly take over this year’s first quarter. It’s too early to tell if those numbers will stick or if Burnett will need to completely rethink her business plan. So far, we’ve spotted several changes that Burnett and Clear Lake’s practice manager Angela Williams can make to improve matters now.

Time to downsize

There’s certainly no shortage of floor space at Clear Lake Neurology. The facility is vastly oversized for the needs of one neurologist and her 4.5 full-time equivalent (FTE) staff. Although it is now a solo operation, Clear Lake remains in its 2,647-square-foot suite, paying $3,751 in rent per month. Fortunately, medical space in Houston is a bargain compared with other cities. And the practice’s lease reverted to a month-to-month arrangement earlier this year.

According to Williams, Clear Lake is set to sign a deal that will move it into a more appropriately sized 1,500-square-foot space in a nearby medical plaza. The practice’s new rent will be $1.50 per square foot. That move alone will chop away $18,000 in annual expenses and match Burnett’s workspace with national benchmarks that indicate 1,537 square feet of space as appropriate for a solo neurology practice.

Use staffing resources wisely

The Medical Group Management Association’s (MGMA) 2005 Cost Survey indicates that Burnett is slightly overstaffed. She employs 4.5 FTE support staff compared with a national benchmark of 3.72 FTE staff per neurologist. However, that benchmark reflects medical groups with an average of seven neurologists on staff. So, 4.5 or even five staff positions may be very appropriate for Clear Lake’s needs, assuming Burnett makes efficient use of her staff.

In fact, that may be one of her problems.

Presently, Burnett employs no dedicated clinical assistant. Instead, back-office duties are shared by a trio of workers who also have front-office responsibilities: They are also the practice’s scheduler, receptionist, and front-office coordinator. A full-time billing manager and practice administrator round out the staff. Although it’s admirable for front-office workers to be so fully cross-trained and willing to take on additional tasks, so much interchangeability within job roles can produce too many gaps in accountability for critical back-office functions.

Burnett’s job descriptions for her front office give the impression that crucial responsibilities such as generating patient lab slips for blood work, checking and returning prescription refill calls, and other functions are fully covered. But her office’s actual operations reflect another reality.

“When she [Burnett] needs a chart or something done, she just gives it to one of the three [staff members],” says Williams. “Whoever gets that chart will put it on their desk, and when they get the opportunity, they’ll get it done.”

That’s a prescription for delaying or losing lab reports or other important documents. And there’s a lot of activity to document at Clear Lake. In addition to treating patients for migraines, multiple sclerosis, and other conditions, Burnett offers botulinum toxin (Botox) injection therapy for dystonia, nerve conduction velocity studies, and electromyography, and she adjusts deep brain stimulation implants. A dedicated clinical assistant could certainly help Burnett more efficiently handle the 45 to 62 patients who visit her practice weekly. Such an assistant could also help out in the front office while Burnett makes her afternoon hospital rounds, or when it’s her turn to take a week-long neurology call every other month, a duty she shares with six other physicians.

Because her office coordinator is a certified medical assistant, Burnett can fulfill this staffing need without adding to her overhead. Many front-office tasks now assigned to the coordinator could be transferred to her full-time receptionist and scheduler. In return, Burnett’s medical assistant can take over several of her other employees’ back-office duties.

Time management

Although Burnett has developed the admirable habit of dictating patient notes after each encounter rather than delaying those tasks until the end of her day, she often runs 15 minutes behind schedule, says Williams.

In addition to a full-time clinical assistant, Burnett should consider experimenting with the “fourth exam room” concept in which appointment slots of 15 minutes are held open several times throughout the day. During these reserved time slots, Burnett could return messages, dictate notes, approve orders, and complete other paperwork. Her schedule already reserves 30 to 45 minutes for new patients and 15 minutes for established patients, which can also greatly help with workflow.

This “fourth exam room” could be scheduled every other hour on Mondays, Tuesdays, and Wednesdays when Burnett holds five-and-a-half-hour clinics, and hourly on Fridays when she spends the full day in the office. Alternately, Burnett could stick to her current scheduling template but still gain efficiency if her medical assistant fed her a steady stream of important administrative tasks to handle between each patient visit. Either way, Burnett would have a better chance of staying on schedule and leaving on time.

Collect on accounts old and new

Administrative snafus and other issues that arose during the departure of Burnett’s two former partners have contributed to the mountain of aging accounts receivable (A/R) she now faces, says Williams. And by “mountains,” we are referring to the Himalayas rather than the Appalachians. Thirty-six percent of Clear Lake’s A/R are more than 120 days old. Compared with the median 14.2 percent of A/R more than 120 days old reported by single-specialty medical groups in a recent MGMA survey, Clear Lake is well outside the norm. In general, Clear Lake accounts average 69.9 days in A/R compared with the median 44.8 days reported by MGMA for single-specialty medical groups.

Since many of these old accounts are past the 180-day mark, they should either be sent to a collections agency or be written off. The older balances that Clear Lake may have a slightly better chance of collecting are those owed by self-paying patients, who represent 4 percent of the practice’s payers. Williams and billing manager Rayenon Ross are taking another swipe at the old accounts and say the effort is producing a small-but-growing stream of payments, some for charges that date back to 2004. Williams, who came to the practice in mid-2005 as Burnett’s two partners were going in other directions, hopes to soon get extra help to tackle the largest and least senior of those balances. However, she knows that many patient balances will prove too small to justify the expense of collections efforts.

“When I got here in 2005, it was like the free clinic; the staff wasn’t collecting copays or balances,” says Williams.

Since then, Williams has taken steps to improve the practice’s collections efforts, reminding patients of unpaid balances when appointments are scheduled, checking and updating patient demographics during each visit, and sending notices of impending collection agency assignments if a bill goes unpaid for 90 days. Williams can continue her efforts by giving staff prepared scripts and even holding role-playing sessions to help them excel at politely but firmly asking for and obtaining payments from their patients at the time those payments are due.

The practice should also consider charging a nominal fee - say $10 - on accounts that remain outstanding after 30 days, but also promise to waive that fee if the patient makes full payment within 30 days of billing. After training staff on the importance of collecting patient payments in a timely manner, Williams should then measure how many patients are remitting payment at time of service for 30 days to monitor how well her staff is doing.

Determine appropriate patient fees

Clear Lake’s simplistic approach to setting its fees is to charge 125 percent of Medicare’s reimbursement rate. That policy plays into the hands of commercial insurance payers - 60 percent of the practice’s payer mix - by setting artificially low rates. Many medical practices using this basic “percent-of-Medicare” approach opt to set their fees at 200 percent or more of the Medicare allowable. When you consider the complex nature of many neurology office visits and services, Clear Lake’s methodology may be causing it to miss out on thousands of dollars in fees per year.

Burnett should consider using the resource-based relative value scale (RBRVS), which is intended to reflect a physician’s use of resources for each service rendered. Clear Lake could switch to an RBRVS system similar to Medicare’s by using the fee schedule calculator available in the “Tools” section at www.PhysiciansPractice.com. The calculator multiplies the total relative value unit (RVU) of each CPT code by any multiplier the practice selects as its RBRVS conversion factor. So to set your fees at 250 percent of Medicare’s rates using the RBRVS model, you need only multiply the product of the RVU for each CPT code by the Medicare conversion factor (CF) by 2.5 (RVU x CF x 2.5).

Regardless of the approach it chooses, Clear Lake should base its methodology on setting fees for each service it provides just a bit higher than the highest allowance of any insurance company with which it participates. For benchmarking purposes, the results of Physicians Practice’s 2005 Fee Schedule Survey (at www.PhysiciansPractice.com) show the average amount medical specialty groups including neurology charge for office visits and other codes.

While raising its fees, Burnett’s practice can reward its self-paying patients by offering them a 30 percent discount if they make full or substantial portions of their payments at the time of service.

Of course, setting professional fees to just a bit more than the highest payer’s allowable is only feasible if you know what those allowable amounts are - something Clear Lake does not. Williams should determine Burnett’s top 25 or 30 most frequently billed CPT codes as well as her 10 highest-paid codes, and then ask her payers to state their allowables for each service. Then Williams can load these specific amounts into the office’s practice management system to more easily spot improper reimbursements.

But that’s easier said than done.

“I’d like to enter a fee schedule - even the one we have - into the practice management system and match it with EOBs [estimates of benefits] to flag ones that are incorrect, but that would be a struggle with this system, and I’m already putting out so many other fires,” says Williams.

Burnett’s staff does a good job of entering all new charges daily, submitting bills to payers electronically, and obtaining electronic remittance whenever possible. But they find their current practice management system, which Williams describes as “clunky,” of little help when it comes to important tasks such as spotting coding errors, missed charges or modifiers, CPT codes not linked to diagnosis codes, missing documentation attachments, or other oversights that can trigger claims denials. With this in mind, Burnett may want to evaluate whether upgrading or completely replacing her practice management software would be the most cost-effective move.

Cut no-shows

Patients who fail to show up for their appointments are more than an inconvenience; they can hurt a practice financially because the overhead that exists to serve patients is a fixed cost. Clear Lake Neurology’s overhead is projected to be a respectable 48 percent of the practice’s revenue in 2006, but why not try to improve on that?

It’s true that when a physician routinely runs behind, a no-show may seem like a small blessing that helps get things back on schedule. But when you see an average of 10 to 12 patients a day as Burnett does, each one counts.

Williams says she carefully tracks the office’s no-shows (which average six per week), and the worst offenders are eventually dismissed from the practice. Part of Clear Lake’s persistent problem with no-shows is that it fails to enforce its written policy of charging each no-show a $100 administrative fee. Burnett frequently waives the fee or reduces the penalty. “Sometimes we charge it, sometimes we don’t, and we aren’t sticking to a consistent policy,” says Williams.

Besides missing the opportunity to recover no-show fees for precious office time, Burnett is potentially creating a larger problem. Many physicians waive no-show fees for a first offense or a credible emergency. But by failing to apply no-show penalties consistently, Burnett could open herself to discrimination charges.

Additionally, patients who do not show for appointments with specialists like neurologists can lead to chronic conditions remaining unmonitored. And Burnett’s long time-to-next-appointment period - five weeks for new patients and slightly longer for established patients - doesn’t help matters. Even though her staff is diligent about sending reminders, especially to new patients or those scheduled for pricey services, the longer patients have to wait for appointments, the more likely they may start to “feel better” and not show up - a decision that can put in motion seriously adverse health complications.

Looking forward

Six percent of Burnett’s patients are classified as charity cases - a much higher percentage than that provided by many other specialists. If she wants to continue this generous service to her community, she should take steps now to improve her patient flow and beef up her information systems to better support her practice’s billing and collections processes. She also needs to develop a realistic fee schedule and more closely monitor her payers’ performances.

With operating costs including staffing budgeted to just top $270,000 this year (compared with the national median of $308,247), Burnett’s overhead of 48 percent is admirable. You can always find a solo practitioner who will brag about achieving a lower rate of overhead than you, but Burnett should dwell less on cutting overhead costs and more on boosting her revenue and improving office efficiency.

Bob Redling is a freelance writer and a former editor of Physicians Practice. He can be reached via editor@physicianspractice.com.

This article originally appeared in the July/August 2006 issue of Physicians Practice.