We were recently called into a group practice where the physician owners of Struggles Medical Group were disillusioned with the practice of medicine. Their concerns were typical, shrinking reimbursement, dismal profits and the threat of new competition, as a large urban academic faculty practice was beginning to penetrate this suburban community. Sound familiar? This is happening around the country as a response (or reaction) to healthcare reform, where larger healthcare organizations see new opportunities to get a bigger piece of the revenue pie. Struggles timing was perfect for bringing this consulting team in and here’s why.
We performed a detailed practice assessment, examining the implications of past decisions and analyzing the current state of Struggles Medical Group in primary areas of performance including practice structure, finances, human resources, billing, clinic operations and work flow and marketing. One physician owned this practice and the other physicians and providers were employed. We soon discovered the physician owner had a history of making bad decisions. They did not analyze return on investment (ROI) before making investment decisions that would impact the practice operations, finances and possibly patient care.
A perfect example of Struggles poor decision-making was buying very costly diagnostic equipment that they were unable to use because payers were contracted with a lab to provide these services. This meant the investment was rendered useless to the practice. Besides this, with new models on the market every six month,s there was no way to attract another buyer for the equipment. There were other equally disastrous investments Struggles made over the past two years.
The most recent strategic error was changing the direction of the entire practice. In their quest for new revenue opportunities the practice decided to focus on expanding its service to workers compensation patients. Attracted solely by somewhat higher gross reimbursement rates, they went ahead with this in this in 2013 without thinking of the implications with would have on staff, workflow and profit. This was a costly error.
Workers compensation is a practice model that is significantly different from other payers and requires specific expertise in report writing and tremendous resources to manage from onset to payment. On top of this, with workers compensation shifting to the RVU system in 2014, reimbursement is expected to decline — while report writing requirements and paper work continue to increase.
During 2013 the movement to workers compensation patients required Struggles to add four additional staff members without commensurately increased revenue. Struggles Medical Group is struggling to keep itself afloat and will have to take critical steps in 2014 to improve its current position.
Our recommendations included:
- Refocusing on the private pay sector and renegotiating contracts that had not been reviewed in years.
- Reducing the workers compensation portion of the practice and let it decline to a minimum, allowing Struggles to cull workers comp support staff through attrition, reassignment and layoffs..
- Establishing collection policies for patients to ensure large deductibles and payment responsibilities are managed on a “pay as you go”basis. This means training staff, establishing collection performance measures and goals, and holding staff accountable to collect from patients.
- Finally, conduct a strategic planning retreat to determine a blue print for the practices future and an implementation plan to make it happen.
It will take some time, but with prudent decision making, implementing strategic actions and keeping their eye on the ball with industry changes, Struggles Medical Group can rise again and be successful.
What can you learn from Struggles’ struggles? Being open to new initiatives and services at your practice is an asset for your practice — just make sure you are modeling the profit and loss implications and considering all reimbursement factors before you forge ahead!
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