Designing the practice of the future

Good managers know that having the right infrastructure is paramount to increased productivity and revenue production. They are also aware that there are numerous impediments to being able to mold their organizations into a better form.

While some of the barriers may be self-imposed by the organization, healthcare leaders know that others will be more substantial, therefore requiring a long-term strategy to restructure their future organization to have the appropriate mix of staff, space, capital equipment and information technology investments.

A good strategy to create the right infrastructure is to follow the advice hockey great Wayne Gretzky credited to his father, Walter Gretzky: Skate to where the puck is going, not to where it is.¹ In other words, design the practice of the future and, as the opportunities occur, rebuild the organization to meet this goal.

What should your goal be? In “An administrator’s dilemma: Minimize cost or maximize revenue” (January/February 2017 MGMA Connection magazine), I described how a strategy of maximizing revenue produced a much better bottom line (total medical revenue after operating cost per FTE physician) than minimizing cost or attempting to optimize cost efficiency.

With the new quartile report available from the Enterprise version of the MGMA DataDive Pro Cost and Revenue 2016 software, it is possible to drill down even further to identify practices that maximized their bottom line compared to their peers. These groups were in the fourth (highest) quartile for total medical revenue after operating cost per FTE physician. Comparing the performance of these practices and their characteristics to other practices provides insight into how you may want to structure your organization in the future.

Studying the accompanying chart: Figure 1 (below) compares the financial performance of the most profitable multispecialty groups with primary and specialty care to the median for all multispecialty groups with primary and specialty care. It is immediately apparent that these practices maximize revenue, with a median total medical revenue per FTE physician that is 67% greater than that of all multispecialty groups. 

The increased revenue has a cost, as these practices spend 47% more on total operating costs per FTE physician. With much greater revenue, practice overhead (median total operating cost as a percentage of total medical revenue) is 10% lower at 54.1%. The combination of much higher medical revenue and moderate overhead yields a bottom line that is 92% larger, and physician compensation and benefit cost per FTE physician is 24% larger than the median of all multispecialty groups in the survey.\

The DataDive quartile report for total medical revenue after operating cost per FTE physician reinforces the premise that financially successful practices focus on revenue over costs, so it is important to examine what the report shows for how these practices are structured.

We see that these practices produce 12% more work RVUs, which implies that their infrastructure better supports productivity, and (as shown in Figure 1) median square feet per FTE physician in these practices is 2,784, which is 17% more than the median for all multispecialty groups.

Not only do the most profitable practices have more space, they also have more staff with 5.12 median FTE support staff per FTE physician — 29% more than the median for all multispecialty groups. Figure 2 breaks out this total into the key staff categories and lets us visualize the differences. We see how the most profitable practices utilize more nonphysician providers (.40 vs. .35 per FTE physician) which improves overall productivity. More importantly, the profitable practices have more nurses. These practices have 2.02 median clinical support staff (registered nurses, licensed practical nurses and nursing assistants) per FTE physician compared to 1.83 FTE for all multispecialty groups. The additional nurses support practice physicians and, with the additional space, contribute to better practice throughput and the increased work RVUs. They also have more business office and ancillary service staff, all of whom contribute to the practice bottom line.

How can you use this information? Hockey fans know Gretzky took his father’s advice and became the greatest scorer in National Hockey League history. Practice leaders should look at their practices and benchmark their staffing, facilities, productivity and financial performance to the best practices.

Knowing how your practice differs provides the opportunity to “skate to where the puck is going” by redesigning your infrastructure to enhance productivity and re-engineering workflow to be more efficient. Also, if you find that your practice is severely understaffed, knowing that the most profitable practices have more staffing can be justification to include staffing changes in your strategic plan.

Obtaining financial success is not easy. It takes hard work on the part of staff and physicians. It also takes foresight and planning by the practice’s leadership. Knowing where you are today is important, but knowing where you want to be in the future is the key.  

Notes:

Gretzky W, Reilly R. Gretzky: An Autobiography. New York: HarperCollins, 1990.