Medical Practice Management for Poor Profits
During a recent medical practice management consultation, I listened to an owner of a hybrid family medicine/urgent care practice lamenting – “We’ve been open for 4 years. After about the first 2 years we became profitable. This past year we’re busier than ever, but barely breaking even!”
I asked, “How many patients are you seeing?”
“About 100 a day”
Most of the time I hear this from any practice operator it is usually due to one or more of:
- Overstaffing
- Staff productivity issues
- Bad contracts/reimbursements
Profitability is obviously the difference between income and expenses. In medical practice, or any service business for that matter, the bulk of the expenses is staff.
Overstaffing
In a mostly walk-in type practice, it’s difficult to know exactly when you’ll need a second (third, fourth) provider. You certainly need to have some way of looking at the hourly patient flow over time and understand your trends.
On the one hand, you want to provide good service and little to no waiting time, balanced with providers and staff that don’t have long periods of “downtime” when the flow isn’t there. And it’s not practical to bring someone in for a 2 or 3-hour shift for just the busy times.
Here are a few staffing strategies you can consider:
Situation: One provider is needed per (12 hour) day but gets a surge of patients in the AM, and gets backed up by 10 or 11.
Solution 1 – Overlapping shifts
- Provider 1 shift is 8 to 1 or 2
- Provider 2 shift is 10 to 8
- Gives overlap of the busy time
- Providers alternate short/long days according to hours desired/contracted for
Solution 2 – Queuing application
If the flow tends to slow down too much for 2 providers on duty in the early afternoon or you have trouble getting those shifts filled, an alternative is using a queueing application, available on your website and on mobile, for patients to put themselves online.
This gives them an estimated time to be seen, so they don’t have to actually come in right away.
Walk-in patients can also sign into the queueing system and have the option to go do some other errands if their estimated visit time is an hour or more from now.
The patients’ perception when using these apps is that they are not “waiting,” they are seen at their estimated, designated time, and can be alerted if things are running a bit longer than expected.
Now instead of 8 patients coming in during the 9-10 hour, 4 of them can be effectively “moved” to later AM or early afternoon when it is slower.
Solution 3 – Appointments
Wait, we’re a walk-in practice, aren’t we? Well, maybe. We’re in the convenience business. That used to mean no appointment or walk-in. But then it gets too busy and there is a long wait. Not so convenient anymore. People want to know when are they going to see the doctor.
When to use appointments?
If you are doing primary care, schedule those exams or follow-up visits during the slower times or when you can also schedule a provider during those times. The same for work comp follow-ups and work-related or other exams that can be scheduled.
If one provider is seeing both appointments and walk-ins, keep appointments to 1 or 2 per hour or whatever makes sense for your average flow as charted above.
This is not a marketing piece – but those practices that show time availability on their websites and on mobile and can better meet patient expectations and convenience will win out here – you must embrace evolving technology
Providers
Overall your docs, NPs/APNs, and PAs should be seeing somewhere in the range of 3 – 4 patient visits/hour (for a typical urgent care/occmed practice). Primary care is typically on the lower end.
I’ve known some colleagues who have and still do see 6+ visits per hour. And I’ve worked with practices where some of the providers saw less than 2 patients per hour.
There are many reasons for the variation. Acuity/severity level is very different across practices. EMRs and other systems may be bogging things down. Hybrid practices see primary care and urgent care patients. Some providers are just slow.
So in a given practice we first want to know what is the overall productivity, then look at each provider, observe variances and determine why and what to do about it.
Several KPIs (key performance indicators) should be looked at to determine productivity and understand variations.
- Visits/hour
- Visits/hour by payer-contract
- Revenue/hour (charges – allowances is best to get an estimated net revenue, this is not where we are assessing days in A/R, that’s a different exercise)
- Revenue/visit
- Revenue/visit by payer-contract
- E&M distribution
- Patient mix
- Charges
- Payroll/hour and per hour by contract
- Fixed and variable expenses/hour and per hour by contract
Contract Profitability
These last 2 items are often overlooked and their significance is unrecognized. It’s not always easy to arrive at and sometimes takes some detailed spreadsheet work to get it. But in a medical practice where the bulk of your expense is payroll, you need to know which patient visits are consuming what amount of resources – payroll, the share of fixed and variable expenses – and determine if the average reimbursement per hour exceeds those resource expenses.
So we break down each visit from each payer/contract into the payroll, fixed and variable costs consumed by that type of visit. Compare that to the net revenue per visit and we’ve figured out which contracts are profitable.
A further step is to do this for each provider. Sometimes we find one provider is more “efficient” at caring for one type of patient vs another.
Part of our process may be then that we’ll shift those patients when possible (usually relative more to primary care, but may also be procedures or certain work related visits) to the more “efficient” provider.
You may also find a provider is just slow or inefficient. If possible you might only schedule that provider for slow times or dole out available hours/shifts to more efficient providers preferentially.
If presenting your productivity findings to the non-productive provider doesn’t result in improvements, ultimately you’ll decide on whether you can keep them in the practice.
Other times we will determine that the contract is not profitable overall. If we cannot alter our cost structure to accommodate these findings, we need to go back to the payer and see about a rate increase, laying out our reasons why it is not a profitable relationship. Failing that, drop the contract.
What?! Drop a contract?! Don’t we want to see as many patients as we can?
No. If you are in a situation where you are working your patooties off, there are long wait times, you’re stressing about making the next payroll because cash flow is tight, you need to make the call about how to improve your business.
You can see less patients and make more money. This of course often comes with cutting staff, your biggest expense. You have to plug your new patient flow assumptions into your spreadsheet, take out the payroll and variable costs associated with those visits, keep the fixed costs, then see what effect there is on your net profit.
With around 50% of patients now having high deductible plans, it may be that they’re out of pocket at any rate.
Even giving a cash discount or implementing a transparent tiered pricing system displayed prominently in your lobby for cash pay patients is often better than getting a small copay now and waiting a month or more to get the rest of your unprofitable contract rate.
Your bottom line isn’t about getting busier and busier. Good medical practice management dictates a detailed analysis to reveal the source of your pain and make the fix more obvious.
Want to learn more about how this would look in your practice?
A small investment in this type of analysis can pay off in the tens or hundreds of thousands of dollars per year, for many years to come, in your practice.
We take on a limited number of clients each month to give you more clarity, less anxiety, and more profits.
