The Increasing Challenges to Managing a Medical Practice

June 28, 2007

In a recent Medical Economics (www.memag.com) poll, 4 of 5 physicians found it challenging to maintain their dual roles of doctor and businessperson, and of those who responded, 76% expect that challenge to get harder over the next few years. The following were the most common practice management challenges listed in the poll and the percent of physicians citing each:

56% Automating patient records

54% Managing slow third party reimbursement

48% Managing malpractice insurance costs/coverage

42% Collecting payments directly from patients

36% Expanding the patient base

36% Managing accounts receivable

31% Adding and updating medical equipment

22% Earning adequate net income to compensate partners

22% Finding the right providers or additional providers

12% Finding financing for expansion

Let’s take a look at each a little more closely.

Automating Patient Records

I think this is going to be one of the biggest challenges facing all medical practices now and in the future – moving to an electronic medical record system. While there are many challenges, I believe the potential benefits far outweigh any of its challenges. As a consultant, I’ve seen the benefits and efficiencies created by a paperless office. Physicians are able to spend more time seeing patients and less on paperwork, the business emphasis moves from a concentration on billing to a concentration on collection, and accessing/responding to such things as lab work and radiological tests becomes simpler and easier.

Make no mistake about it, there are significant challenges to the successful implementation of an EMR system. You would think cost would be the biggest challenge but I think it’s the last one of the bunch. To me the biggest challenge is getting everyone in the practice to actually use the EMR system once it’s been implemented. You would think this is a no-brainer since the practice is making a large capital investment but the reality of it is that some physicians can’t walk away from paper. This is particularly true of the older age physicians.

The next challenge is the creation of the clinical templates that drive an EMR system. If doctors within a group have differing clinical styles, the developing common  templates for all to utilize can be difficult and time consuming. My suggestion would be to designate a physician to be the “champion” to create the templates and pay him or her for it. You will see how time consuming template development can be for the solo practitioner.

Managing Slow Third Party Reimbursement

This one surprised me because I thought physicians would be more interested in DECLINING reimbursement rather than slow reimbursement. How to deal with an environment where managed care companies and Congress continuously look to cut physician payments should be a strategic priority for all medical practices.

Managing Malpractice Insurance Costs/Coverage

Tort reform has helped but malpractice insurance cost will always be a major expense for a medical practice. To contain and even lower these costs, I believe this is one reason why you will see medical practices continue to consolidate (as well as to gain some leverage over managed care payers).

Collecting Payments Directly from Patients

Why is this a challenge? If a medical practice has sound policy and procedure and hires good people, this should never be an issue.

Expanding the Patient Base

As I have said, it isn’t about the overhead anymore – it’s all about growing the revenue base. I am surprised at how many medical practices do not have a formal marketing plan in place. I am also amazed at how many medical practices have not even held a strategic planning meeting to address this and other practice challenges.

Managing Accounts Receivable

Same commentary here as the one made above for collecting payments directly from patients. If a physician has to worry about collections and receivables, maybe it’s time for new office management.

Adding and Updating Medical Equipment

The challenge is how to invest in capital assets when physician incomes are getting squeezed from all different directions. This is another reason why I think physicians need and will consolidate their practices together in the future. It’s easier to invest in capital when such a cost is spread over a number of physicians.

Earning Adequate Net Income to Compensate Partners

I am shocked this wasn’t ranked higher. Practices need to create a healthy bottom line to make monies available for physician compensation. Mix cost inflation with declining reimbursement and what you get is a formula for declining physician compensation. As you can see, I’m a big believer in the strategic planning process for all medical practices, big and small. Use this forum to talk about and provide solutions for all issues impacting physician compensation and practice net income.

Finding the Right Providers or Additional Providers

Just being able to recruit doctors to a particular medical specialty is becoming harder and harder. Also recruiting doctors who may someday become your partner (can you say marriage?) is even harder. I see most medical practices with a reactive recruitment process rather than a proactive one. Adequately planning for physician recruitment will allow you to take the time to do it right.

Finding Financing for Expansion

As long as you have collateral to put up, you can find financing. You just need to find a banker that understands physician practices and the healthcare industry. Creating a bigger medical practice through merger(s) may allow for internal financing of practice expansion needs.

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