Practice Management

“Evaluating the Total Package”

Where do I go from here?

Define Professional Goals and Objectives – Get to know yourself - what you love, where you want to be and who you love to be with.  Ask yourself these questions prior to any interview.  Make sure you do not tailor your responses to what you feel the practice needs but what you can or will be willing to give.

1.      What do you enjoy doing most professionally?

2.      What do you enjoy doing most when you’re not working?  Will this location enable you to enjoy your “down time”?

3.      Who do you want to spend your time with?  Family and Friends (as well as family and friends of your significant other) and the proximity to them may or may not be the most important factor in your decision making.

4.      Are the group’s visions and practice patterns in line with yours?  Physicians can adapt to almost any sort of circumstances, as long as it does not disturb how he or she has become accustomed to practicing medicine.  Make sure the groups core philosophy about the practice of medicine is in line with yours.

5.      What types of patients would you prefer to see?

6.      How many patients per day do you want to see?

7.      How many hours would you like to see patients per day?

8.      How often would you like to be on call and take coverage for the group?

9.      Would you like to pursue a subspecialty fellowship?

10. How much time do you require for CEU each year and estimate the $ amount you will need to accommodate the need.

11. Are you interested in academic medicine?  Do you want to be in a teaching setting?

12. Are you willing or have a strong desire to become involved in the management of the practice?

13. Do you get along well with others or are interested in owning your own practice?

Location –Location –Location –A great deal of physicians leave a practice because they don’t enjoy the location, not necessarily because they don’t like their job or group.  Make sure your significant other wants to be where you are going to relocate.  (Keep in mind general travel distance to family if that is a priority for either of you).

v     Are the activities you enjoy available in this location?  If you enjoy working out at the gym everyday, is there a gym close by? 

v     If you like to eat out every night, are there a lot of nice restaurants?

v     If your wife is expecting, and she’s far from her mother, is she going to get home sick?

v     If your husband wants to continue his education while you start your practice, is there a college close by?

Politics- Check out the Group, but as important –check out the Facility where this group chooses to operate.  Many times the group will “encourage” their providers to operate in a primary location.  Do as much research as possible prior to your visit.  Make lists of questions about anything that may seem suspicious.  There are all kinds of ways to get the “scoop” on a community.  Get it before you go!  Make sure when you interview, you visit the facility in addition to the practice. Speak to the CEO, CFO, CNO and OR Director.  Schedule your visit around everyone’s availability.

Other questions to ask with interviewing with the facility and the group that will give you insight into the “Politics”: 

n      Is the facility growing?

n      What is the financial viability of the facility?

n      Is the community thriving and supporting the local facility?

n      Is the community diverse?

n      What is the reputation of the group?  Ask everyone you see while on your visit if they know anything about “ABC Clinic” and “XYZ” Hospital.  See what kind of feedback you get.  Even ask the clerk at the closest gas station.

n      Check out the facility that the group is closest affiliated with on the internet, through the KHA, etc.

n      Check out the community through the local Chamber of Commerce –most have web sites now.

n      Check out the physicians in the group.  Are they professionals you want to be associated with?  Have someone check the National Practitioner Data Bank.

 Necessary Questions:

1.      Reputation –Ask everyone you see while on your visit if they know anything about “ABC Clinic” and “XYZ Hospital”.  See what kind of feedback you get from the community.

2.      Check out the facility that the group is affiliated most closely with. 

3.      Check out the community-use the internet and the local chamber of commerce for information on the community.

4.      Check out the physicians in the group –Are they professionals you want to be associated with?

There are all kinds of ways to get the “scoop” on a community.  Get it before you go! (Search the Internet, Recruiters, Practice Management Consultants –they can call for you as a neutral party, Real Estate Agents Area Banks, Accountants, Competitive Facilities, and Medical Supply Vendors)

Planning -Have the Medical Director define the Practice Goals.  If you don’t know where your going how can you get there?  If the practice hasn’t considered and planned their business model, they may not have done their homework on the need of an additional provider.

1.      What types of patients will the practice see?  Not see?  Age limits?

2.      What will be the ultimate size of the professional (physicians) component of the practice?  How many physicians do they want to add to the practice?  What specialties?  How will this impact your volume?  Will other physicians in the group be retiring?  Who will absorb their patients?

3.      Does and will the practice have satellite offices?  Would you have to travel and what is the distance?  Is there a plan to add satellite offices?  Is this something you would be willing to do to grow the existing practice?  Is there a need in the area that they are considering?

4.      Will the practice use multiple hospitals or expand to do so?  If the practice utilizes only one hospital, how will you accommodate patients that refuse to go to that facility?  Will this arrangement accommodate all patients and their needs?

5.      Will the practice construct a new facility?  How will this impact your compensation?  What is the timeline on this construction or move? Will the practice participate in all HMOs, PPOs, Medicaid, Medicare, Self Pay and Commercial carriers?  Is this subject for review?  How frequently? 

6.      Will the practice expand into subspecialties?  Which specialties?

7.      What quality of care will be maintained?  How will this be monitored?

8.      What procedures will be performed in the office?  Are these procedures profitable?

9.      What type of continuing education will be supported?  How much funding is available?

10. Will the practice demand that all physicians be board certified?

11. What will the practice do in terms of marketing their services?  Your services?  Will they be receptive to marketing ideas that you have?  Is this a priority for you?  Is it as important to your group?

12. Will the practice utilize physician extenders?  Are you receptive to this?

13. Is the organizational structure clearly defined?

14. Will the practice assign functional duties to the physicians to aid in management?  If so, how?  Equally sharing responsibilities is a good idea and means that no one physician has to bear an unreasonable load.  Also each physician would have the opportunity to share his interest and expertise. 

a.      President/Chairman of the Board

b.      Physical Facility & Equipment

c.      Medical Community Relations & Marketing

d.      Personnel

e.      Finances –Budgeting and Accounts Payable

f.        Finances –Accounts Receivable, Coding, Contracting

g.      Systems

15. Does the practice have a mechanism for strategic planning?  How often does the board meet and what is reviewed?

a.      Historical Data –Does the practice track and trend data over time?

b.      Staffing –How does the practice know they have appropriate levels of staff?

c.      Internal Influences

d.      External Influences

e.      Revenue

f.        Budget –Charges, Adjustments, and Fee Schedule.  (Does the practice know the cost of providing the services?)

g.      Expense Budget –What is allocated and how far out do they plan?  Have they budgeted or projected for the position you are applying for?

h.      Capital Budget – What equipment is needed and planned for?  What is the process for decisions to purchase new equipment?  Will you have input?   How will costs associated with equipment that you do not feel is needed or relates specifically to another physician affect you financially?

i.        Cash Budget –Payments-how are they projected?  What formula is used?

Contract Negotiations- Ask the right questions and utilize your attorney.  It will be worth the expense.  Below are just a few examples of common contract options.  Another session will focus on specific questions and answers related to contracting options.

1.      Salaried Physician –Make sure the salary is realistic.  If it is not, make sure you prepare yourself to only take the portion that is realistic, especially if your compensation structure will be changing during your contract.  Unrealistic income may be a way to lure you into a contract, however almost always results in future income dissatisfaction; and could result in legal action.  I.E.  Practice terminating the physician for not having achieved the projected income prior to discharge, the practice could face wrongful discharge due to overstatement of income potential.  If a physician wants to leave the practice and avoid a no compete or liquidated damage clause, they could submit a resignation charging breech of contract for overstated income.

2.      Incentive/Production Based Compensation –Does the practice have a physician compensation plan?  How often is the formula used evaluated?  What are the influencing factors?  How will this affect you?  Is the formula used for all providers in the group or on the same level as you?

a.      One of the most common formulas for calculating this type is to take all income, subtract shared expenses and the net is distributed proportionately to the doctors who generate it.  For example:  A physician responsible for 30% of the gross revenue gets 30% of the group’s net income. This rewards each physician to his/her direct financial contribution to the group.  If you work harder you benefit, however if you want to slow down, you make less.

b.      Another common formula is instead of distributing net profits, they credit the income for each physician then subtract an equal share of fixed costs, a proportion of variable costs equal to each physician’s productivity percentage, and the full amount of the doctor’s direct expenses.

3.      “Eat what you heal” –A physician would be paid 100% of what they make minus expenses.  How will you survive month 1-6?  It is common that credentialing with payros takes 3-6 months.  Typically it will take 3 months before you will see your first payment.  Will you need to obtain a loan?

4.      Will there be any opportunity to become a share holder?  Know your options and the cost of the “buy in” or the formula to determine the cost prior to signing the contract.    Know how the division of income with work among shareholders.  When will this option be available to you? 

5.      Income guarantee –is there an associated facility that is recruiting you into a group or private practice with a set amount that they will guarantee per month?

a.      Can you pay the group for shared expenses?  Regulations prohibit facilities recruiting a physician into a group and allow them to pay expenses other than directly associated or added expenses that are incurred by the addition of the physician.

b.      Typically there will be a contract between the facility and then a separate agreement with the group. 

c.      Does the group have a payback after the facility contract?  If so make sure you take that portion out of your guarantee and put it into a separate account so you are prepared to make payment at the end.

d.      Is there a buy in at the end of the hospital contract?  How will that be calculated?

6.      Non-compete –Are you so attached to the location that it would be an issue?  Are you from the area?  Do you really want one?  Is it realistic?  Think about the worse case scenario.  What would the non-compete impact be to you and your family?

7.      Malpractice coverage after termination of contract –which will be responsible and to what degree?

8.      Sign-on or relocation bonus -Will the practice consider a sign on bonus or relocation reimbursement?

Management - Whether you have a desire to be a part of the management team or not, you should ask and be assured that the group knows the following information about their business.  It is recommended that you interview both the Practice Administrator and Medical Director (President) separately and ask the same questions.  You should get the same answers if these crucial business indicators are being communicated appropriately.

1.      How many employees have left in the last three years?  How many of them were physicians?  Why did they leave? 

2.      What is their staffing ratio?  Is it the full time equivalents (FTEs) per physician?  How many clinical staff is assigned to each full time physician?

3.      What are the days in accounts receivable (AR)?  It should be less than 40.  This is the average time that it takes to collect a payment after it is billed.

4.      What percentage of outstanding AR over 60 days old?  Who monitors this?

5.      What are the average monthly charges?

6.      What are the average monthly adjustments?

7.      What are the average monthly payments?

8.      What is the outstanding AR?   It should be less than two times the average monthly charges.

9.      What is the collection percentage?  Is it being calculated as adjusted or unadjusted?  Unadjusted will be charges/payments.  Adjusted contractual percentages will be calculated by taking charges minus contract adjustments divided by payments.

10. What is the payor mix?  The payor mix is what percentage of each payor (insurance class) type makes up the practice.  This is calculated by taking the total charges and calculating what percentage is of each payor class.  It is recommended that this be tracked by month as well as year to date.

11. What are the total fixed expenses?  Fixed expenses are regular payments that do not change with volume or outside forces (rent, telephone, utilities, loan payments, lease payments, etc)

12. What are the total variable expenses?  Variable expenses are those that change on a monthly basis with volume levels.  (Medical supplies, office supplies, dictation, etc.)

13. What are the total monthly shared expenses?  If your contract allows for a shared expense formula these should be identified separately for you.  If you share the expense of a Physician Extender is the revenue also shared?

14. What is the overhead per day?  Does the practice know what it takes to keep the practice running each day?  If so you should be easily able to calculate what you need to generate in charges per day.

15. What is the average contractual rate?  Percentage of the charge written off on average.  When you know this number you can look at your charges for the month and estimate what your payments will be.

16. How often do they review their fee schedule and how are the fees set?  Do they use a percentage of Medicare (170-200% is most common range used), RBRVS or Conversion Factors?

17. Do they look at their monthly Balance Sheet?

18. Do they look at a monthly Profit & Loss Statement?

19. How does the practice track their referrals?  Do they have a mechanism for tracking how the new patients hear about the practice?  Do they do a zip code analysis?