Rising operating costs, declining revenue, and maintaining compensation levels in the face of declining reimbursement rates are the top challenges for physician practices, according to the Medical Group Management Association (MGMA). Consumer driven health care and reduced reimbursements are just two circumstances that are impacting revenue cycles in medical practices and may be responsible for changes that may change the face of health care delivery.
“In the past, physicians worried about how much money they were making and was it more than last year. Then they worried if what they were making was the same as last year,” says James A. Stroud, CPA, a member of the health care consulting division of Warren, Averett, Kimbrough and Marino, LLC in Birmingham. “We fear the question of the future will be, ‘how much am I making and is it less than last year?’”
Stroud says there are things physicians can do to mitigate losses and to enhance income. When profits are shrinking, the first thing to do is look at the balance sheet. “If you have big debt on a machine or on property or on a loan for partners’ bonuses at the same time profits are declining, you must pay back the loans,” he says.
When you repay loans, Stroud points out, you are using after-tax dollars. Because most physicians are in a top tax bracket, it can cost close to $200,000 to pay back a $100,000 loan. “It’s almost a doubling effect,” he adds. “That’s a vicious position to be in – declining income and paying back debt with non-deductible dollars.”
Stroud encourages physicians to pay off all debt. “I know physicians with high incomes who struggle to pay off their credit cards,” he says. “Get out of personal and business debt and work on improving the profitability of your practice.”
With patients carrying more financial responsibility for their health care as a result of higher deductible plans and increased co-insurance and co-pays, medical practices must increase their focus and resources to collect balances from these patients. “In the past, the physician’s office could collect a $15 co-pay from a patient. Now, that same patient may have a $1,000 deductible,” Stroud says. “Medical practices are not geared to be a collection agency, and it’s a big problem when you have to learn the art of collecting money from patients.”
Stroud says if you wait 60 days to start collecting money from patients, you most likely will not receive payment. He suggests starting the collection process when the patient calls the first time to make an appointment. “Go ahead and collect the patient’s insurance information over the phone then, and tell them how much money to bring with them,” he says. “Prior to the visit, call and remind them of the appointment time and of the amount of money to bring with them. When the patient arrives at the office, collect the money up front. That way, they haven’t even seen the doctor yet and you’ve asked them three times for payment. That’s how you win the battle.”
In addition to collecting more fees, a physician can generate additional revenue in a practice by improving patient volume. “Increase the number of patients you see in a day and manage no-shows. That’s just profit you’re leaving by the wayside,” Stroud says.
One way to increase the volume of patients is for the physician to practice medicine and leave other tasks to the staff. “If you look at the time many physicians actually practice medicine, it is much less than 100 percent. They spend too much time on paperwork or entering information into a computer themselves,” Stroud says. “If doctors could practice medicine and pay others to do the non-medical tasks, they could improve patient volume and increase revenue.”
Stroud suggests that physicians schedule re-check appointments first thing in the morning. “You can get these patients in and out quickly, freeing up more time for the rest of the day,” he says. Stroud says physicians also might consider starting their clinic hours earlier. “Start at 7:00 a.m. and have coffee in the waiting room. You will have to work a little longer, but it will add hours to the week.”
Avoiding debt in the future may be difficult as medical practices are governed by more regulations, including the requirement of electronic medical record systems. “Doctors must be careful about incurring new debt,” Stroud says. “One way to avoid it is to save money now and use it to lessen loan amounts later when you must make a purchase.”
According to Stroud, the future of health care will not be just about economic efficiency but also about effective health care. “My clients love to practice medicine, and they are good at it,” he says. “But they must change the way they’ve done it in the past.”