Managing Staffing Costs at Your Medical Practice

The topic of cost management in medical practices always seems to start with payroll and the question "How many staff should we have per doctor?" Of course, like many good consultants, I answer "it depends" (on specialty and volume, for example). The more profitable practices generally have more staff per full time equivalent (FTE) physician, but, they also have the appropriate utilization of staff.

This table"Performances and Practices of Successful Medical Groups: 2011 Report Based on 2010 Data," published by the Medical Group Management Association (MGMA) demonstrates the variability in profitability and cost management indicators between physicians in better-performing practices and other practices.

So how do better performers net higher medical revenue even with significant support staff costs? Higher performing practices tend to be better users of technology and optimally utilize their staff. Generally, the typical practice thinks that new service providers or technology will "cost too much" for it to adopt. But, I find it is necessary to look at the value of staffing efficiently, first, before making that judgment. Think about these opportunities to use technology or service providers to boost efficiency:

• Your clearinghouse vendor or your billing manager wants you to push all your claims through the clearinghouse, even the claims you can file directly at no cost, for greater efficiencies.

• Your practice management vendor is trying to up-sell you on a service that will handle all your patient statement/invoice production and mailing.

• You attend a meeting and hear from a colleague that they've automated their appointment reminder telephone calls.

• You read an article that recommends verifying insurance eligibility on all your patient visits.

Are these strategies things you would consider for your practice? Or would you say, "Why should I pay for that when I've got in-house staff that can do it?" Before you come to that conclusion you should do the math to compare the new cost against what the task is costing you now. You might just be surprised.

Here are a few examples, with some real numbers, from medical practices I've visited as a consultant.

• Pre-visit eligibility verification. One way to reduce denials is to submit batch eligibility verification for all patient appointments through a clearinghouse. A sampling of denials for the first quarter of 2011, for one of my clients, showed a first pass denial rate of 5.9 percent (the rate for better performers is approximately 3 percent). Approximately two-thirds of those denials were due to eligibility issues. The cost to manage each denial is approximately $25 per claim; that could be eliminated with an investment in batch eligibility for all scheduled appointments at a transaction cost of 25 cents per claim. Many services also offer a flat monthly rate. It only takes five denied claims each month to "cover" a flat rate of $125/month/provider for a full clearinghouse service package (includes unlimited claims submission in addition to eligibility verification).

• Verifying diagnosis codes. Another reason for claim denials is incorrect coding. Some practices insert a prep-step by a certified coder for verification of the correct ICD-9 diagnosis code before they submit claims. Typically your practice management and/or clearinghouse solutions include an edit that automates the process, reduces manual errors, and saves staff time. If you need to purchase a scrubbing tool, typical costs are around $47/month/provider (plus a set-up fee/provider, which is around $500), which can be recovered if only a couple of claims are coded incorrectly.

• Appointment reminder calls. If it seems like you have too many patients not showing up for their office visit, you've probably tried to institute a process where your staff calls each patient to confirm/remind them of their appointment. But, have you followed up on how this task is getting done? All too often, I see a last minute scramble by staff to start racing through those calls at the end of the day. They leave rushed messages on answering machines and in voice mail, without ever speaking directly with the patient. Some practices resort to sending a letter or a reminder post card. Neither method achieves direct confirmation from the patient that they will be at their appointment.

So, what does it actually cost to remind patients of their appointments?

• An outgoing call which results in leaving a message will take approximately two minutes
• Staff cost per minute (including benefits) is approximately 21 cents/minute
• Cost of a call with a message left is 42 cents
• Cost of a longer call, actually connecting with the patient, ranges from 63 cents to 82 cents

So, the simple math says that if the transaction cost for automating appointment reminder calls is less than 42 cents, your practice would be better off using technology for this task. And that is without considering the value of other tasks that staff could be doing, instead of making reminder calls!

Cost management is really about having the right staff and the right tools in place and using them effectively to drive revenue into your practice. Work flow, technology, and shaking up traditional job duties can all affect staffing headcount. Dig into your processes to manage these costs more effectively, without cutting staff.

Rosemarie Nelson is a principal with the MGMA healthcare consulting group. She conducts educational seminars and provides keynote speeches on a variety of healthcare-technology and operational topics. Drawing upon her diverse experience, Nelson provides practical solutions to help medical groups succeed in their practices. She may be reached at www.mgma.com/consulting/nelson.