Why Small Practices Are Struggling, And What Can Be Done

Written by on January 31, 2013 in Practice tips - No comments

Independent physician practices and small practices all face common issues these days as operating business units. Doctors from all walks of life are wrestling with common and sometimes what seem to be unsolvable challenges. There are six common factors that consistently impact the practice as a business. They are:

  • Revenue is squeezed
  • Overhead costs keep rising
  • Poor management skills
  • Lackluster marketing
  • Ineffective leadership and poor soft skills
  • Uncertainty about the future of health care

Jed Constantz from Central New York Medical Support Services commented, “There are several factors affecting the short and longer-term viability of the independent practice.  The first, and most obvious, is the lack of business savvy among those who make decisions regarding the business operations for the practice. Doctors should learn to appreciate the characteristics of a successful business operation and then make the connection between those and the operational characteristics of their own practice.”

Revenue is “Squeezed”

When asked what are the key factors the companies you work with are facing, Gregg Seidner at Match One Staffing in New York City noted,” the number one factor is that the small practice must negotiate the rates they receive from the insurance companies they accept directly. As insurance companies are pressured to lower their payouts for various services, smaller practices are squeezed more. Larger practices with higher volumes can often negotiate higher rates. So, the revenue per patient for many small practices is going down.”

Cynthia Leckman noted, “When a physician hires the wrong fit, the ending result is lost revenue for the physician and the practice.  This can range anywhere from 10% to 20% of the outstanding receivables”.

Overhead Costs Keep Rising

When asked what the key positions his firm was placing were, Gregg Seidner’s immediate response was, “human resources positions are our largest placement category. This includes the roles of:

  • Handling benefits for employees
  • Employee requests for information, claims, problems with insurance, etc.
  • Talking directly with insurance companies for employees and for patients
  • Handling disability claims and paperwork

When half of your staff deals exclusively with insurance, billing and other administrative duties, which is the case in many practices, this overhead is a huge burden on the practice as a small business.

Poor Management Practice

“Most physicians struggling with their business, it’s part of the challenge of doing business with them as a potential market. It’s part of what causes them to do damage to themselves,” explained Jed Constantz at Employer Health Care Advantage Solutions. “They are so used to being solely responsible in terms of patient care they have trouble behaving differently in terms of business relationships and shared decision making.”

Part of why costs keep rising and doctors are struggling is their management practices. Cynthia Leckman, who has managed practices for 25 years noted, “there are three key areas that contribute to practices struggling.

  • Billing
    “My experience in all practices, whether private sector or hospital employed, is inefficient billing operations can and will lead to the demise of the practice.  Unfortunately, in all of the practices I have consulted for, it is inaccurate with poor attention to detail in the claim billing and follow up with insurance companies as well as with resolving unpaid claims.”
  • Practice Manager’s knowledge
    “It is essential that the practice manager is able to critically analyze and interpret all of the billing complexities.  When a practice manager has a limited knowledge of billing operations, this is when errors in billing as well as inefficient billing processes and systems are likely to be performed.
  • Ineffective Scheduling
    • Feedback and Communication are the keys
      Effective scheduling will decrease doctor idle time and patient wait time.  The doctor and his or her staff need to analyze the daily schedule for the types of appointments, time allotted and facts about the patient that could affect the visit and schedule. Delays in the schedule cause idle time for the doctor.
    • Idle Time Leads to Interruptions, Killing Schedules
      If a doctor has idle time, the tendency is to chat with staff during that time, attend to phone messages, see pharmaceutical reps, or complete charting.  All of these variables factor into increasing patient wait time. Although some think the physician has many interruptions, typically this is not the case of the delayed doctor.
  • Sequence of Appointments
    Finally, the sequence of scheduling is important.  I recommend that the first appointment of the day and after lunch be ones that are predictable in the length of time, i.e. only physicals or regularly performed procedures for established patients.  This starts the morning and afternoon off on a positive note.
  • Try Team Huddles
    Dike Drummond shared a simple tool is to hold a ‘team huddle’ twice a day that improves scheduling. This is just like a football team huddle except it includes the doctor and all the staff involved the patient flow for that half day. Hold these 3 minute meetings once at the beginning of the day and another prior to the afternoon appointments. Make sure your receptionist and the person who rooms your patients are there at a minimum with a copy of the schedule for that half day.”
 Lackluster Marketing

Like any other business, doctors and their practices need to bring in new patients on a regular basis. Dr. Simon Sikorski , M.D. who had assembled case studies that do not break the bank suggests, “going with companies and plans that put the risk taking on the marketing company. Compensating marketers on actual patients delivered is a new paradigm and one that the top firms can and do offer.”

Soft Skills Gaps Induce Stress, Sap Productivity and Impact Business

I asked Dike Drummond, MD, what are some of the key areas that cause doctors to struggle in their practices?

“There are two key areas all physicians can improve in and if done consistently, will improve their personal experience of being a doctor, their practice as a business and their relationships with their staff and with their patients,” commented Dike Drummond, a former doctor turned coach and adviser.

“These are:

  • how they handle stress during the work day;
  •  the leadership skills they use to coordinate the activities of the team involved in delivering their flavor of patient care.”
 Stress Kills Business as Well

“Doctors have to live with high levels of stress. They are seeing sick people, making medical diagnoses, sometimes very quickly.  As the day goes on their stress load builds making them less effective in making decisions and actually being able to be present with their patients. A simple stress relieving technique is a single breath the doctor takes where you release any worry or stress you notice as you exhale.”

Leadership Skills Count

Cynthia Leckman explained, “Leadership and the management by the physician are the leading contributing factors for why they are struggling with the business of their practice.

“During my work as a practice manager for 25 years as well as consulting for individual practices, I have seen wide pendulum swing from one extreme “bad practice” to another.  The top three “bad practices” include:”

  1. Micromanaging
  2. Undermanaging
  3. Inefficient talent management process

Dr. Drummond continued, “doctors also lead a team of nurses, nurse practitioners, receptionists, schedulers and others. We are conditioned by our medical education to be workaholics and we never get any training on leadership skills. The result is all doctors’ work too hard and their teams are usually ready, able and willing to share the load of patient care activities. We have to remember that patient care is a team sport and our job is to coordinate the team … not do all the work.”

Poor Employee Engagement

By not listening to, barking orders and not respecting their staff, doctors as well as practice managers can unknowingly sabotage their practices.  This behavior will cause their employees to shut down and not offer solutions they know would potentially improve productivity or processes. These employees interact more often with the patients, who are the key stakeholders of the physician’s revenue base. The staff of a practice reflects the culture of the practice.  They are the first impression the patient has regarding the practice.

Uncertain Future of the Health Care Industry

Gregg Seidner observed, “with the Affordable Care Act, or Obama Care, the outcomes or results of this are still largely unclear. The stated intention of the Act was to; include more people in the pool and to provide more preventative services. In theory, this would reduce costs for the patient. But, we really don’t know what the outcomes will be.”

And Dike Drummond also noted, “there is a great deal of uncertainty in health care in the US. Many doctors are opting to join larger practices or hospitals, in the hopes of reducing their stress and handing off the management tasks and business issues to someone else so they can “just see patients.

By Robert Sayre
Marketing Adviser/Business Coach
High Performance Network

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