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Archives : finance
A Doctor by Choice, a Businessman by Necessity
A good essay in the NYTimes.com which speaks to the rising commercialism of healthcare.
I didn’t bother to disillusion him, but the reality is that most doctors today, whether in academic or private practice, constantly have to think about money. Last January, Dr. Pamela Hartzband and Dr. Jerome Groopman, physicians at Beth Israel Deaconess Medical Center in Boston, wrote in The New England Journal of Medicine that “price tags are being applied to every aspect of a doctor’s day, creating an acute awareness of costs and reimbursement.” And they added, “Today’s medical students are being inducted into a culture in which their profession is seen increasingly in financial terms.”
via Essay – A Doctor by Choice, a Businessman by Necessity.
Dear Doctor: Here is half your money, take it or leave it
I recall as a student when – somewhere near the last day of school – an instructor would share the funniest things that they’d seen come across their desk throughout the year. It was usually some 5-word blooper from a student or a simple, yet funny misstatement of history that found it’s way into a writing assignment; something that managed to set itself apart from the rest, truly catching the attention of the instructor through a countless sea of papers, essays, tests, and homework assignments. Only the real gems would make it to that last day of school.
We’ll, I wish I could say that I’ve got a “gem” for you, or perhaps even a blooper. If not that, then at least something that is a bit rare and unusual. Unfortunately, the only qualification that my statement has is that is has caught our attention, and it should catch yours as well. It’s not funny, rare, or even a blooper.
One of our functions is as a provider of medical billing services, and we consider this to be a “sign of the times” in health care and in our economy, and the statement is simply this (taken from an actual letter from patient to doctor):
Dear Doctor:
I am your patient and I have a bill for $400. I will send you half within the month if you will agree to write off the balance. Please sign below acknowledging this agreement.
Sincerely,
Your Patient
Approved:_________________________
Medical Practice Authorized Representative
Our recommendation is simply this: If you believe in your services, your prices, and your policies, then don’t fall hostage to anyone, not even a patient. If you feel that arrangements such as this are in the best interest of your practice, and your financial policy supports this behavior, then it certainly might be right for you. But understand the risks of too quickly going after the quick buck in lieu of collecting the sum of what is rightfully yours as a provider of health care services.
There are no easy answers, but it is in your interest to know that these letters are coming and you should at least know how you will respond.
_________________
Tannus Quatre PT, MBA is a private practice consultant and principal with Vantage Clinical Solutions, Inc., a nationwide healthcare consulting and management firm located in Bend, OR and Denver, CO. Tannus specializes in the areas of healthcare marketing, strategy, and finance, and can be reached through the Vantage Clinical Solutions website.
Female patients not immune from economy’s impact on healthcare services
We’re blogging about this quite often here at The Healthcare Entrepreneur, but in case you haven’t noticed, the souring economy is having an impact on the healthcare provided through private medical, physical therapy, and dental practices. People are delaying care, paying more slowly, and losing insurance coverage – all of which have a direct impact on the ability for private practices to run strong.
It seems that women are no exception.
In this article from WebMD Health, a new study released by the National Women’s Health Resource Center (NWHRC) is said to indicate that the rising costs of healthcare combined with the economic downturn is having a major impact on women’s decisions regarding their care.
- 28% of women said they put off going to the doctor during an illness for financial reasons.
- 19% said they had skipped recommended medical procedures, such as Pap smears or mammograms, because of cost.
- 18% said they had taken less than the recommended dosage of a prescription drug in order to make it last longer and 18% failed to fill some prescriptions.
- Only 4% said they had put off taking their children to the doctor because of the cost.
_________________
Click here or call (888) 827-5613 for information on a free program dedicated to helping private practices throughout the U.S. strategically adjust to the slowing economy. Free program runs through March 31st, 2009 and is open to practice owners and administrators of any healthcare discipline.
Tannus Quatre PT, MBA is a practice consultant and principal with Vantage Clinical Solutions, Inc., a national healthcare consulting and management firm located on the west coast. Tannus can be reached through the Vantage Clinical Solutions website by clicking here.
Moody’s revises healthcare outlook from “stable” to “negative”
Maybe we only think we are recession proof. With the seemingly never ending spiral of credit, housing and banking crises ravaging through the global economy, investors are starting to take notice that healthcare doesn’t exist in a silo.
Medical practices, hospitals, and physical therapy clinics get paid by someone, and if that someone is in financial trouble, you can bet the problems don’t stop at the practices’ front doors. The someone just so happens to be “everyone,” or so it seems in our economy today.
This article from the ChicagoTribune.com discusses Moody’s downgrade of the healthcare industry’s 12- to 18- month outlook.
The New York-based financial ratings firm has issued reports in the past two weeks on various sectors, from hospitals and medical devices to insurance companies, revising the health-care industry’s 12- to 18-month outlook to “negative” from “stable.”
Moody’s sees fewer patients seeking medical care, particularly elective surgeries, while more people could lose their health-care coverage altogether. Such trends will lead people to delay getting medical care or avoiding treatment.
_________________
Click here or call (888) 827-5613 for information on a free program dedicated to helping private practices throughout the U.S. strategically adjust to the slowing economy. Free program runs through March 31st, 2009 and is open to practice owners and administrators of any healthcare discipline.
Tannus Quatre PT, MBA is a practice consultant and principal with Vantage Clinical Solutions, Inc., a national healthcare consulting and management firm located on the west coast. Tannus can be reached through the Vantage Clinical Solutions website by clicking here.
Being “in the know” isn’t above (or below) any of us
Being “in the know” isn’t easy. Knowing all of the elements that go on within a private practice, or any small company for that matter, can appear to be a daunting task, if not impossible. As such, delegation takes a prominent role in the management of many important matters responsible for the sink or swim of small healthcare practices, replacing owners’ ”in the know” with “in the dark.”
For any practice owners that think that there are aspects of their businesses that are above (should be taken care of by other partners, practice administrators, consultants, etc.) or below (should be delegated to lower paid or more specialized staff) them, they’ve got another thing coming…and it’s likely not good.
Not knowing how money is spent, decisions are made, or customers are treated can only lead in the wrong direction. It is not above or below us in the role of practice owner, CEO, or VP to know these things, and it is quite important that we do.
Here is a great example from the Atlanta Journal-Constitution, of the new Grady hospital CEO who has taken it upon himself to be “in the know” within the first few weeks on the job. He’s charged with a large task – turning around a $740 million budget to save the failing health system that’s been in the red for years – and he’s addressing it not behind a pencil, podium, and PowerPoint presentation that speaks of great vision and execution (well, he might be doing that too, actually). But he’s doing it by sifting check by check through expenses made during a single week in July. “‘The best way to figure out what’s going on is to look at the checks,’ he said, noting that he now has made this mini-audit a weekly practice.”
Let’s not forget that if we own the business, it’s ours. And knowing what’s going on in our business is our responsibility, no matter how far above or below us the tasks may seem.
Good luck to Michael Young and Grady Memorial Hospital.
This is not the usual work of a hospital CEO, especially one overseeing a medical megalopolis like Grady Memorial Hospital. Grady operates a 600-bed hospital, 60 specialty clinics and its own nursing home. It has 4,800 employees and serves as metro Atlanta’s top level trauma center and last refuge of care for the poor.
The Grady health system also runs deficits of up to $40 million a year, so saving money is a priority of the CEO, who officially started work Sept. 2.
Young hit upon checks that shocked him, such as the $100,000 one-week payment for temporary employees, including nurses and X-ray technicians. Not only did Grady have to pay the temp agency — some of the temp nurses made more than a staff nurse, he said.
The numbers game: Fee schedules
In healthcare finance, numbers are – unfortunately – a game. As much as we’d all like to focus on the practice of quality care and little else, the amount we charge for services and the amount we are paid are distinctly different concepts, and therefore must be understood (better yet, managed) as such.
Fee schedules upon which payments for services are (loosely) based, must be higher than the amounts allowed by each payer if a practice is to maximize their revenue. You can rest assured that an insurance company is never going to whisper into your ear, “achem…you know you can charge a bit more for that,” or better yet, “you’re charging less than we’ll pay, so we’ll give you the higher of the two.” This isn’t the way it works, or will ever work. Practices must look out for themselves, and must keep on top of payer contracts on a regular basis to make sure that they are getting paid to the extent allowed.
Now, the difference between the fee schedule and the allowable amount creates a game of sorts (I prefer backgammon myself) when managing practice financials. Because the fee schedule can generally be what you’d like it to be, as long as it’s above the allowable amounts, this can inflate (or deflate) gross revenue (total charges based on the fee schedule) depending on where it sits in relationship to the allowed amounts. Net income will be the same, but there can be wide swings in the amount of revenue “discounted” which can be confusing to the practice owner if not entirely understood.
In this post, Peter Lucash over at the Medical Practice Business Blog makes the point that fee schedules must remain consistent with what services are worth, AND be higher than the allowable amounts per payer contract. By doing so, an accurate representation of the value of services provided as well as the “value” (or lack thereof) of certain contracts can be properly evaluated.
Some disagree with billing at full (private) fee as an exercise in self-deception. But it’s not – it reflects what your services are worth, and what some patients are undoubtedly paying. Financial statements always have to be in context, which is why any footnotes are very important.
Opportunity cost in private practice healthcare
I love working with numbers to model sound business decisions for healthcare clinics. I haven’t always been that way, and in fact it wasn’t until after business school was well underway that I began to understand how truly important numbers are to making good decisions.
One of the most valuable concepts I learned in business school is the concept of opportunity costs. Opportunity costs are the costs associated with the “opportunity” foregone when decisions are made, or resources are allocated to a certain area – necessitating that those same resources can no longer be applied elsewhere. By nature, opportunity costs are easily obscured, and for those unfamiliar with the concept, poor decisions can be made in the absence of an opportunity cost analysis.
This concept has tremendous applicability in business, and especially in healthcare. As the industry becomes more resource intensive and as reimbursement for healthcare services dwindles, making the right decisions about the allocation of resources is critical to the survival of healthcare practices.
I published an article on this topic in Advance for Directors in Rehabilitation that I’d like to share with you here. The article goes into detail about the concepts that underlie the definition of opportunity cost as well as some practical examples of using opportunity cost analysis to make good business decisions in private practice healthcare. The principles apply whether your business is a medical clinic, physical therapy practice, dental facility…or even a used car lot.
Opportunity cost is the trade-off associated with a decision or purchase-something that must be given up in order to get something else. Stated differently, opportunity cost is the cost related to not putting your resources to their best alternative use. When speaking of purchases or monetary decisions, the monetary cost of something plus the opportunity cost yields the true cost of the decision.
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