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Strategic Planning – Using Data and Benchmarking t ...
Strategic Planning – Using Data and Benchmarking t ...
Strategic Planning – Using Data and Benchmarking to Help Drive Practice Growth
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Welcome everybody. Thank you so much for joining us for today's webinar, strategic planning, using data and benchmarking to help drive practice growth. I have just a few housekeeping notes before we get started. So all attendees are in listen only mode. We will be utilizing the Q&A function today to gather questions and we also will have the chat open. So throughout the presentation, feel free to chat with each other and ask questions in either of those places and we will be monitoring that. The webinar is being recorded and we will be sending out a link to the registrations with the recording in the next couple of days. So you can keep an eye out for that. Today, our speakers are Andrew Colbert from Ziegler, Chris Greenman from Vail Summit Orthopedic and Neurosurgery and Terry Rosenthal from the Orthopedic Clinic. Now I am going to turn it over to Andy to get us started. Thank you so much Jessica. Really, really appreciate it and great to be here today. Thanks everyone for joining. Looking forward to talking about using data and benchmarking to drive practice growth and really excited to be here with Terry and Chris. So thank you both for joining. We are going to talk a little bit about SWOT analysis, budgeting strategies and then data and benchmarking. And really the goal for today is to try to drive as practical and tangible a discussion as possible. First off, let's introduce ourselves. So I am Andy Colbert. I am one of the partners here at Ziegler. I have been with the firm now 17 years. So I have a 20-year career in investment banking, specifically in healthcare. My focus is working with independent medical groups across the country and helping them evaluate all kinds of strategic initiatives and really advising as their advocate on mergers, acquisitions, investments, joint ventures, partnerships, private equity transactions. We have the privilege of getting to help independent groups stay independent and help them really think through the options, certainly in today's changing landscape and have had the privilege of doing quite a bit of work in the orthopedic space and excited to be here today. Chris and Terry, would you guys introduce yourselves? We'll be starting with Chris. Yeah, Chris Greenman, happy to be here. I am the current CEO of Bell-Sommer Orthopedic and Neurosurgery. Been here about a year. Prior to that, spent about 24 years at Tahoe Fracture Clinic, running that. I've been involved with AAOE for many, many years. Past president, I've worked with Terry a number of years on the Benchmarking Committee. Just happy to be here. Great. Thanks, Chris. My name is Terry Rosenthal. I'm the CEO for the Orthopedic Clinic, located in East Central Alabama. I've been with the practice 25 years. The past 13 as the chief executive officer. Like Chris said, I've served on the AAOE Data and Benchmarking Council since 2016, including two years as the council chair. And currently, I serve along with Chris on the AAOE Board of Directors. Excellent. Thank you both and looking forward to a great discussion today. Thank you. So let's start off with just what are some of the basic frameworks of conducting a SWOT analysis? So there's really four key frames of the SWOT analysis. And this is something that we highly recommend groups do at any size or any scale. And, you know, candidly, something that probably should be done every couple years, if not every year, as a formal evaluation of your strategic opportunities. The first place to start is really identifying the strengths of the practice. Things you do well, what separates you from your competitors, what some of the tangible assets are, and the resources that are driving that success. Next would be laying out the weaknesses and real threats that you see. Things that maybe competitors do better than you, where your resource limitations are, and what the perhaps gaps in the value proposition are. Next would be listing out the opportunities. This is a great way to really identify where there might be some under-service areas in the market, maybe service lines that perhaps are underutilized in the market, limited competition in certain service areas, pockets of new demand, investments, perhaps M&A opportunities or merger candidates, and how to kind of leverage your strength and momentum to get bigger and stronger. And then lastly would be what are some of the threats as you see them that might be coming down the pike towards you. This could be everything from economic environment, whether it be things like labor costs or other challenges there, regulatory, this would include, you know, modeling out future reimbursement changes from Medicare and other commercial payers, looking at the competitors that are around you in the market and identifying what some of the changes or threats that they might be bringing, particularly to the extent these competitors have received recent funding or recent partnership that have kind of changed their status, and then, you know, what some of the challenges from an external perception are. As you get deeper into this, these are some questions to kind of think about as you build this analysis and certainly happy to dialogue with any groups on this offline. From a strength perspective, we love to start with really digging into the strength of the leadership and the management team. You know, typically one of the biggest areas we see for improvement in many private practices is, you know, deepening up the bench of the management team. That could be things like even, you know, training or executive education or just investing in more resources to help drive leadership, even both on a clinical and an administrative standpoint. Where you are from a capability and infrastructure standpoint, this is something that I think, you know, is always helpful just to inventory, market reputation. We're often surprised that, you know, many groups don't take advantage of doing formal patient surveys. You know, something that we highly recommend would be doing an annual net promoter survey. You know, net promoter is a score that in the consumer world is relatively well understood, although in healthcare, I think it's underleveraged. And it can be a really helpful metric where you basically survey an audience and really the key fundamental question is how likely are you to recommend this service line? And you take, you know, all of the positive results, which is fives or higher, and then you subtract out the negatives, which is under five. And, you know, typically anything with even a six or seven is actually considered a pretty high net promoter score. Surprisingly, a lot of healthcare gets, you know, net promoters in the ones or twos. Understanding the expertise around just subspecialty, right, and where you have depth relative to the market and where you might need additional resources. Relationships in the local market, be it health system or payers or other third-party players. Diversification is often a place where we like to really dig into and understand diversification, both from a payer mix perspective, both from a revenue mix and service mix, as well as from a geographic perspective. And then understanding the technology capabilities, and do you have over-reliance in one tool or another, and how does that set you up for the future? In terms of some of the weaknesses, certainly one of the biggest areas we're hearing folks in today's market is just the challenge of recruiting, staff turnover, and just labor shortages and cost of labor overall. That's an area that definitely is just systemic with what's going on. Market reputation, I think, is part and parcel to really understanding what your market score is and how the brand is perceived in the market, something that can be hard to really get your finger on without doing more qualitative research. Revenue cycle is definitely an area where often most groups know perhaps what their contracted rates are, but often struggle to really truly validate what they're getting paid relative to the true contractual rates. And that's something where we see a lot of groups that could benefit from a more robust contract management system, where you're really validating that every payment that comes back is actually in line with the allowable. And then, of course, just understanding reliance on kind of a key referral source or key market landscape. From an opportunity standpoint, I think this is always a fun one to think about is, you know, what service lines or capabilities, be it investments in areas like PT or imaging or other ancillary services, infusion, that might be beneficial where you're kind of seeing leakage out of the practice, strengthening some of the local market relationships, be it evaluating joint ventures or other collaborations, knowing that the stronger you are, obviously, the more able you are to keep competitors out of the market, and then developing a service line, right, and a strategy around customer service, really investing in the brand and using data to demonstrate where the opportunities are in making those investments. And then lastly, would be, you know, doing a really deep dive into the threats of the business, right, really understanding the local market players, who you see is potentially moving into your market, encroaching on your market share, how the aging population may impact or not, the reimbursement mix of the practice, if it's a group that historically has had more commercial payer mix, you know, as some of those patients age into Medicare, what does that do to the overall revenue mix of the business? Is there threats from other large groups or hospital systems moving in? What's the employment model dynamics? And then, of course, just the challenges of data security is something that is impacting everyone in healthcare right now, and just the cost of maintaining that. And then lastly, would just be some of the technology requirements. So hopefully, this gives folks a good framework of just some of the key questions to ask and how to at least set up a real critical analysis of the group's strengths and weaknesses from a SWOT perspective. And then next, let's talk about just, you know, building the five-year or three- to five-year financial forecast and what are some of the key attributes that go into this. You know, first off is really building a baseline of how you project out those operating results, ideally up to five years, but at a minimum for the next three years. You know, giving yourself, you know, real sophisticated view on, you know, what some of the potential drivers of growth are, but also some of the competitive threats might be. And then how do some of the new initiatives that you're planning, you know, maybe lead into growth or opportunities across the operating framework. Next would be, you know, taking that broader macro context of some of the industry dynamics. So be it things like labor cost increasing or reimbursement rate pressure, you know, and then using some of the benchmarks in the market to be able to kind of impact or reference some of the assumptions that you're making. Those choices really need to be grounded in some sort of, you know, data, right? I mean, we can't just say, okay, we're going to take a 3% or 5% assumption. You know, we need to really be grounding that in some sort of benchmark that we're looking at or some sort of data point. I think that's an important element. And then making sure that we've got those projected growth rates well-defined where, you know, any sort of growth that you're assuming, you can tie that back to historical growth and being able to demonstrate that. And then last is, you know, being really clear to put action items for the non-finance executives and demonstrating to them how they're going to be held accountable to a budget and what some of the key parameters are to drive success. And then I'd say the last piece is really ideally creating a framework where not only are you doing an annual budgeting process, but you're doing a rolling process where over the course of the year, you're updating the budget with information as you go throughout the year and then layering that on top of what you budgeted and seeing and comparing it back to the budget to determine, you know, how close you were to projecting your results and, you know, historic success as a parameter for future performance. Maybe Terry and Chris, you know, it'd be great to get your thoughts as kind of, you know, both on the SWOT analysis and then moving into the financial forecasting. Maybe talk a little bit about how you think about these elements relative to your groups and what some of the forecasting initiatives that you've put in place. Maybe Terry, we'll start with you. Thank you. So yeah, it was interesting for me sitting here as you were going through the different parts of the SWOT analysis and while me being a much smaller practice, we probably don't do it as formal as that, but I definitely was seeing things that we've done over the last, you know, five to seven years in terms of growing the practice, adding physicians, adding ancillaries, you know, starting out with, you know, to determine your strengths and weaknesses. How do you do that? For us, it's looking at the data and looking at benchmarking and seeing where our volumes are. What do we do well? Are we as busy as our competitors? Are we busier than our competitors? And then drawing from that the strengths and also the weaknesses. What do we do, you know, what are we struggling at? Not only looking at practice key performance data, but patient satisfaction surveys. You know, we had some issues. We determined we had a weakness from some patient satisfaction data results that led us to make some changes in terms of some new technology and things like that. So, you know, as you were going through that, like I said, we're a smaller practice. We don't sit down and do a formal, you know, SWOT analysis, but we do all the things that were in that as we try to build. And we looked at opportunities, you know, looking at some hospitals and some peripheral areas that have approached us about coming there. And we go back and we pull the data and we look at zip codes of patients and things like that and determine if it's an opportunity or if it's not for us. And along the lines with ancillary, we've added some ancillary lines that have done well. We've tried some other ancillary lines that we thought would do well and didn't. Podiatry was one we brought in a podiatrist. We thought from looking at everything it was going to help grow the practice, but it really didn't. So, we got out of the podiatry business. You know, rheumatology is one we've had that went by the wayside. So, but some other ones, MRI and PT, we've done very well with. So, we definitely try to look at what we do well, identify what we need to improve in, look at our opportunities and our threats. You know, luckily I'm not in a big market where I have a lot of external threats. We do have a few. And we just try to make decisions using data, you know, using the data we have available to us to try and make the best decision. It doesn't always work out. Like I said, we've had some missteps, but for us, it's worked really well. That's great. That's great. Chris, what about from your perspective? How do you guys use these themes from a SWOT analysis? Yeah, you know, I've done a number of SWOT analysis, so some things I've learned that have helped me in this process is not doing this for the doctors, not doing this for the group myself, but rather I prep them and it's done at a retreat typically, or, you know, the end of the year meeting, the strategy meeting where they're participating themselves because, you know, a lot of this is perception, right? And perspective. And I've always looked at the strengths and weaknesses as kind of being an internal issue, the opportunities and threats being more external. And Andrew, to your point as well, you know, traditionally when I started, this was like a five-year plan. I think this has morphed a bit to a one to two to three year. I mean, things change so quickly that I think it's good to do this. And so what I do is I get a basis through the doc, you know, working with the doctors, they're coming up with their own opinions and everything else. We kind of break it all down and agree what, you know, what is exactly our strengths, weaknesses, opportunities and threats collectively. And then we build on it, you know, for the next year to work from that because those things change and they can change very, very quickly. And having data also helps. So, you know, I've shared with doctors, you know, some of the information that we'll be going into maybe of how busier, you know, how much they utilize, you know, resources and everything else. And their perception is oftentimes far different than the reality. And so I think being prepared with data to paint a picture, not that there's an agenda, but just like what we talk about with, you know, how the patients view us and everything else helps take some of the emotion out of this process. And I think help kind of anchor it to reality as well. No, it's great. I think you bring up a great point, which is it's so critical to bring data to the conversation. I think one of the challenges with your traditional SWOT analysis is it's often a bit more of a, you know, intangible kind of, you know, qualitative exercise. And sometimes it can be hard to bring, you know, core data, right? So even measuring things like how your market share is changing, right? Or what the opportunity is in the market, right? These are things that are sometimes hard to truly quantify. Maybe, Chris, what are some examples of the types of data that you've been able to bring into these conversations that kind of hit some of these key themes, would you say? Well, you know, one thing that comes to mind is, you know, quality. You know, a lot of people are going to say, oh, we've got, you know, we've got the best doctors. And there are times I have to just kind of question, say, well, based on what, you know, besides personal opinion, is there anything that is there to quantify or to, you know, paint that picture to say, yeah, yeah, our quality is better, not because we just think it is, but it's based off, you know, outcomes, it's based off something, right? I would, you know, utilization, where do people fall within, you know, how busy they are compared to their, you know, national counterparts. Oftentimes so from work RVUs, I think a lot of people don't, you know, we don't use that for basis of payment or comp per se, but just, hey, how busy are you, right? And that, I think that method is one way to kind of say, hey, yeah, this is how busy you are. And then correspondingly, you know, this is the comp you have or whatever it may be. So I've used that as well. That's great. But from a quality standpoint, have you been able to identify metrics there that you report back to the group that really, you know, benchmark quality or is that still an evolving area? That is still very elusive. And so, you know, we have looked at some, you know, programs out there to help that. And you know, there's some, you know, feedback that we are getting, however, instead of just having them throw that out there of, oh yeah, our quality is great. You know, then almost you have to leave it off the table unless, you know, I think we can show for it some way, somehow. And that's, you know, that's just been my experience, but that has been a very elusive quest. Yeah. And maybe that's an opportunity for AOE. Yeah. Terry, what's your perspective there on quality? I mean, any thoughts you have there in how you kind of demonstrate that more quantitatively? You know, it is so difficult. So we do have kind of a multi-factor approach when we talk about quality. You know, we're in a couple of payment bundles with a couple of payers. So they give us some quality numbers on certain procedures. So we use those. We use our MIPS. We've been involved with MIPS since year one. So we get some quality reporting scores from that. And then we do do patient, you know, patient reported outcomes and patient satisfaction surveys. So we kind of use all four of those to kind of give us. But it's not perfect. I mean, because you're, you know, when you're talking about MIPS and some of these other things, you're only talking about certain very limited number of procedures that you're looking at. You're not looking at every surgical procedure that a physician's provided. So that is elusive. I know there's a lot of companies right now trying to get their hands around it and make their way into the market. And in terms of being able to show doctors, this is how your quality is. So that's how we do. We kind of have to look at those things. And you know, like I said, we saw some things on some patient satisfaction that led us to make some changes, not necessarily in quality of care, but in quality of the patient experience, which is so important. You know, patient, patients, if a patient has a bad experience, they may have a great surgical outcome. But if they had a bad experience with your staff, it could take their whole opinion of your practice and can affect things. So I, like Chris said, it's very difficult. That's just the way we try to, to look at quality and try to quantify it. Yeah. And I think one cheap way or not cheap, but getting the feedback from the patient, like reputation management, how they feel it went for them now, whether or not it means good quality, who knows, but whether or not that the patient felt it was either good quality or good care, you know, very subjective. That is still something to, to go off as well that we've probably, it's been, we have more access to that data than any other. Yeah. And I think it'll be interesting as we get down the road, deeper into consumer directed care, you know, how some of this data maybe gets housed and reported by third parties, right. And then perhaps gets more available to consumers as they're making that, you know, that decision on, on, on who they want to go to, right. As opposed to maybe today, it's a bit more anecdotal. So that perhaps does change the way we think, particularly in more competitive, more competitive markets. And, you know, I think that'll be an interesting area and opportunity. What about as we shift gears now into, into budgeting? Maybe Chris, do you want to hit on this first and talk about just how do you guys think about budgeting and, you know, what do you guys do there in terms of annual budgets? Do you do multi-year budgets? And then, you know, what's the process look like in terms of setting the budget? And then how do you think about managing to that budget or driving accountability once it's set? Yeah, no, great question. And this is, you know, I think both Terry and our groups are just right on the cusp of, you know, being big enough. I, I'm a firm believer, you know, I've gone to all the department heads and the organization and say, okay, come up with your budgets for 2024. And a lot of this, it's not so much as, you know, we only have X amount to spend on IT, but rather to compare to the previous year, are there expectations of, you know, a new service line? So we need to be prepared to hire more people, to buy equipment, to, and even the doctors. I, when I first started this year with them, I said, hey, what's your, what's your take on this next year? Are you going to be about the same? Are you going to be up 10%, down 10%? And they all provided some feedback, which was helpful. As we go about the year, knowing, hey, we are, we're pretty much in line. Another thing is, you know, each department head gets their, you know, the employee costs for their departments. So someone might not have a big budget per se of disposable cash, but how many employees and the cost of those employees are still going to be under their, their stewardship and their, their, their domain, along with, you know, the ancillaries and that as well. So I'm a firm believer in it. You know, do we have it absolutely dialed in? No. Is it takes a lot of effort. It takes a lot of time. And then to compare month after month compared to the budgeted thing, you know, it's, it's a lot of work. It's a lot of work, but it's something that I think is very important. So we can find and see those trends before they get, we get too far down the road of things that we need to address more quickly. And do you guys, when you guys do a budget, do you typically do an annual, do you guys do monthly, do you do multi-year? So it'd be, it'd be for the year, but broken down by month. And the reason that for us really is there's a lot of, you know, high end tourism and some months, the shoulder seasons are slower typically for some aspects and, you know, the ski season's the highest. And so we want to, we want to be able to respond to those months, the ebbs and flows, staffing and everything else that goes with that. So yeah, the monthly is important. That makes sense. And then you typically kind of compare the monthly results back to that budget as part of your process and kind of holding folks accountable and then kind of being able to force accountability on any variances. That's right. That's right. And then also comparing previous, previous month, previous year, month, you know, month over month. Yeah. Now, you know, coming up with a system, I, you know, using just a lot of Excel right now, it's still extremely labor intensive. It is. I think that's an opportunity. Terry, how do you guys do, do budgeting? What's your process? Being much smaller than Chris and being the head of every department, like I am, you know, we're a five doctor, four mid-level practice. So we're so much smaller. We have 80 employees. So we really don't, our budget basically is set by the prior year's budget. So we review it quarterly. We do the P&L quarterly comparing, you know, what we spent this year versus what we spent last year. We look at the variances and then we identify what the reason was for those variances and make sure that we haven't done anything or nothing unexpected happened. You know, it's just, it's so hard with the volatility and reimbursement and, and, you know, payments going up and down and are going down, never going up, but it's difficult for my group to sit down and say, okay, we're going to, we're going to do this budget because one little thing, you know, a doctor being out sick can definitely affect your budget. So being smaller, like we are, our budgeting strategy is we just kind of look at, you know, we'll take a quarter. We'll look at it versus a quarter last year and look for variances and try to make sure that we have an explanation for those variances. Sometimes it's a positive, you know, sometimes the variance, you know, the cost went down and it was expected for this reason, or the cost went up and it was expected for that reason. And then if we don't have an explanation, then we drill into it further and try to, try to see, you know, is this a trend? Is this because reimbursements gone down or things like that? In terms of a formal budget, that's just not, you know, as small as we are, we just haven't found a need to do that yet. I know that's probably not a good thing, but that's, you know, it's worked well for us. It's worked well for us in the past. Terry, we're going to let that slide. All right. That's what, that's what we're here to, we're here to help you with some action items here. So that's exciting. Yeah. It's, it's, it's, that's good though. In terms of how you think about measuring the performance, do you do, I assume you do it more on a cash basis then given, given where you are, probably cash is just the easiest to measure as opposed to trying to convert to accrual. Is that right? That's correct. Yeah. The bill comes in, it goes on the P&L and the day it's paid, it comes off the P&L. That makes sense. And I guess as, as, as you think about the budgeting or, or at least just, you know, the expenditures, do you do a process around, these are going to be kind of the incremental capital expenditures that are going to be required for the year? And that's kind of done on a, on a more detailed basis. Yeah. Now, if we're going to make a capital expenditure, like a new, you know, we bought a new MRI machine a few years ago or, or capital improvements to the building or other equipment, new x-ray machines, we budget that out and the effect that that's going to have kind of on the numbers over the period of whatever it's financed for. So we do, when it comes to large capital expense, you know, we just did an upgrade of our, of our practice management system that had a little bit of capital upgrade. So things like that, we kind of, we, we know we budget those out for, and know how that's going to affect the bottom line. So those are discussed before we make any final decisions and what the overall long-term effect of any capital improvements are going to be. And then do you see much seasonality in your business, you know, relative to obviously Chris being more in the, you know, the ski, the ski world, do you guys see much, or is it relatively consistent quarter to quarter? Now, don't laugh at us because I am an Alabama, we do see an uptick in the fall combination of football season. Very, you know, high school football is, is king here, kind of like it is in Texas. So we see a lot of, during that time, and we see a lot of hunting accidents. A lot of people fall out of tree stands, fall in the woods, things like that. So we do see an uptick in the fall. And then in the summer, you know, you're in the south, the weather's nice, people are outside and a lot more active. So those are probably our two busiest times season-wise, the fall and then the summer. So we do see some volatility. So you probably, you got to kind of correlate your non-clinical staff, maybe a little bit heavier in those, in those times of the year to kind of meet the patient demand. Yeah, we, and more so on the clinical side, because, you know, so much of your, your, your business office stuff now is automated and your billers and stuff are working. But, you know, on the clinical side, you know, we'll rely a lot more on part-time college students and things like that in the summer, which is great because they're out of school and they want to make some money. And then in the fall, we'll generally add a few more part-time. We're fortunate being with the major university here, we have a lot of college students looking to go into healthcare down the road who want some, some, some experience. So we do, we, it's more, like I said, it's more so on the clinical side where we have to adjust staff levels based on the seasonality. So that's how we handle that. That's great. So let's, let's dive into now some of the examples of benchmarking and, and, and how, how we can use this relative to guiding the, the, the physicians and, and the partners. You know, I think let's start with provider compensation, since that's often usually the, the first question, you know, most partners are going to ask is what, what am I going to get paid this year? You know, maybe Chris, let's start with you. I mean, how, how do you guys think about comparing partner compensation relative to the benchmarks? How prescriptive do you guys get in kind of guiding to a certain comp number or do you kind of guide in bands? What's been your approach around kind of giving partners some insight into what to expect for the coming year? Yeah. You know, that's a, it's a great question. Of course, it's a hot topic. Here's what I traditionally do. There's a lot of I think friction when it comes to comparing a hand doctor to a total joint to a spine, to a sports, a shoulder and everything else. And there's some, there are going to be some given differences in that. So I feel it's extremely important to compare each subspecialty because I think that takes a lot of the guesswork out. You know, traditionally, certainly from what I'm seeing spine and of course total joint have a much higher Medicare population in my experience. And you know, a part of these things, you know, people say, well, you know, Medicare, you know, just doesn't pay as much. Well, that's part of this specialty someone got into and that probably should be expected. I think it's going to reflect in part, you know, in the nation by and large, you know, for that. So I think it's extremely important, not just to throw out averages of orthopedic surgeons, but drill it down to the specific type of subspecialist, number one. Number two, coupled with that is we try to, you know, our rule of thumb is try to get as close as we possibly can to the work RVUs or some measure of output. You know, what I do is, you know, if you have the number of patients, number of new patients, number of surgeries, and compare that to national averages under their subspecialty. And then if they're in the median for most of those areas, we're hoping they're in the median for the comp at least. If there's any outlier there, you know, we try to take a look and do that, but basically, yeah, comp is probably the most talked about issue and topic when it comes to benchmarking. But I think you have to look at a number of factors instead of just solely a comp. Yeah, that makes sense. That makes a lot of sense. How do you guys think about? You know, similar, similar, Chris, I mean, it's all about compensation for the physicians. You know, and that's so your worst enemy as a practice administrator is your doctor's buddy that he just went to a meeting with and told him how much money he's making. Compensation. And he comes back and you have to dial your doctor in and educate him by showing, you know, well, you know, what part of the country is he in? What's his subspecialty? What size practice? Because those, like Chris said, you know, filtering not only by subspecialty, but by size of practice can make a big difference. Filtering by things such as how much of his income is coming from something like an ASC or from ancillary sources. You know, we're a lot different than Chris in the fact that we don't even look at RBUs. Just, you know, we're on an eat what you kill model. So everything is based on collections that come in the door. My managing partner always likes to say that he can't spend an RVU. So we don't even look at it. And we when we when we start talking about work being done, we look at volume. You know, how many patients are you seeing? And like Chris, you know, if you're seeing, you know, if you're in the 75th percentile for patient volume, 75th percentile for surgeries performed, we would hope you're in the 75th percentile in compensation. So we definitely look at it from that standpoint. And and like I said, being on an eat what you kill model. And sometimes you have to have hard discussions with physicians. They, you know, they want to draw on the 75th percentile, but their volumes in the 25th percentile. And that's not a sustainable model. So, you know, like I said, and it was interesting. I had a conversation with one of my physicians this morning who had just went to a meeting last week. And we were talking about he talked to some friends there who were hospital employed physicians. And they were now, you know, talking about pay cuts based on RVUs and everything. And like I told him, I said, well, in our practice with our autonomy, the only person who can give a pay cut is you by decreasing your production. So that's how we've always taken care of it. I think that we lose Andrew, Chris. I think we must have lost him. And I think he went to you first, Terry. Oh, you know what? Here he is. He's back. I'm back. Sorry, guys. Andy, maybe if you turn off your camera, it will be a little better. Maybe just to just to keep on that thread, Terry, how do you guys think about projecting partner compensation? Is that something that you project for the year or at the end of the year? You kind of review it. Do you give any guidance heading into where you think it's going to shake? You know, because we're like I said, we're on eat what you kill. And we meet quarterly and they're bonused out quarterly. So we don't we don't wait till the end of year. So we don't you know, there are really no projections. It's you know, everybody has a base salary that they draw monthly. And at the end of the quarter, when all your expenses are totaled up and your share of overheads totaled up whatever left, whatever's left is what goes to you is, you know, distribution or bonus compensation. So kind of like I said, the, the biggest if overheads good, the biggest factor in your compensation is your production. And so, again, you're the only one who can really give you a pay cut by decreasing what you're doing. So that's how we like said, we will be a bonus amount every quarter. And then that's, that's it, we don't we don't say, Okay, we expect you to make this this year. Because we don't know, you know, they may take a, I may have a doctor take a hunting trip to Africa and be gone two weeks in the summer. So it's hard, hard to project. Yeah, well, that's good. So they don't they don't put that. They don't put that burden on your shoulders. So that's nice. Let's switch over to revenue efficiency. How do you guys think about revenue efficiency? Maybe Chris, you want to start on this? What what metrics do you guys look at? You look on a per visitor per physician? How do you think about your collection ratios? What are some of the key efficiency metrics you guys look at? Yeah, no, great, great question. I think, you know, with the revenue per physician, you know, we hear the things we look at, we look at number of new patients, we trended month by month, we look at the total patients seen, we trend that month to month, and then trended compared to previous years. Also the number of surgeries, and then with our pain docs, the number of, you know, pain cases, sometimes I know it's just a, it's a rough number, but it's kind of, you know, for every, every surgery, or every pain case is, you know, 0.25 of a surgery, right. And so a way we can kind of equalize that a bit as far as, you know, the doctor's contribution. Another one is the new patient to surgery ratio. That's an important aspect to see, because at the end of the day, you know, we have the surgeons working to the top of their license, we want the PAs to be working at the top of their license. You know, I've got docs who don't necessarily agree, the PAs are kind of there to assist the doc and clinic, but not necessarily see patients. And I'm really working on that, because, you know, I'm a firm believer that the more patients that are seen the wider net that we cast, then the more efficient our surgeons can be, you know, why is the surgeon seeing a non-surgical patient. And so those are some things that we're really trying to focus on, and actually flip, because traditionally, you've got three, for a surgeon, three days of clinic, two days of surgery. If you can work it where they are casting wider net, you know, what about this idea of three days of surgery and two days of clinic? It's a much more efficient, now it's not like we're doing more surgeries on people per capita. It's just we're finding those cases, right, those surgical cases. And my belief is that is a much more efficient model than having surgeons see a bunch of non-surgical patients. So we really focus on those numbers. But still, it's a process, and we're trying to, you know, improve it as we go. But those are some things that we're dialed in on. Terry, what are some of the key metrics you track from a revenue efficiency standpoint? Well, similar to Chris, you know, we look at surgeries per new patient visit. We do have some, we have two of our PAs working clinic, two of them just work in the OR. And we found it a little bit different than Chris, you know, we've run some numbers for some physicians to look at, and they look at the amount of money they can generate in a day of clinic, versus what they're going to get reimbursed for a day of some surgeries they do. Sometimes we find that being in clinic is more profitable for that position. And we kind of utilize the PAs. You know, if we can make a little money on the PAs, that's great, but we utilize them to make the doctor's lives easier. So they see a lot of surgery follow ups, they see a lot they help in surgery. They see some of the non-surgical facts and things like that. So for us, you know, when we're looking at numbers, we look at the revenue per patient visit, obviously, you want to make sure that you're maximizing the revenue every time a physician or a patient is in the office. We look at also, you know, revenue per PT visit, revenue per MRI visit, because those ancillaries definitely feed into the bottom line. And then, you know, I see it on the screen here. Obviously, AR is important, the number of days, how efficient are you in getting that money out the door and getting it back in and the number of days in AR is another one that we definitely look at, you know, I look at that one, you know, at least once a month, sometimes more to make sure that we're doing what we need to do there. So again, different size practice for me than Chris, where we've, we have found in some cases, it's the doctor in clinic a little bit more helps out just because surgery reimbursement right now is going, is dropping a lot faster than clinical reimbursement on a lot of areas. So but those those are the key ones that we look at. What about collection ratio? Do you guys do you guys track net collection kind of looking at, you know, charge less allowable compared to what you actually get paid and kind of how, you know, how close you are getting paid what you're supposed to get paid? Yeah, we look at that. Um, you know, I'm in a unicorn of a state in Alabama, where Blue Cross Blue Shield is 85% of the commercial market. So I'm not in a situation where I have a ton of commercial payers that that you're dealing with, with them being such a big player. And so we do keep an eye on our Blue Cross contracts and make sure that we're getting what we should be getting there. And we look at that monthly, make sure our adjustments and make sure they're not out of line and, and make sure that we're not leaving any money on the table. What about you, Chris? Yeah, a little bit different in that we've got more commercial payers, we don't have, you know, blues is certainly big, but they're not, you know, 85%. And, you know, this, I have been seeking this Holy Grail for years, right, where, as you post a payment, that it's going to automatically pop up the system, you know, the PM to say, oh, this is what they, you know, they should have paid, you know, I've dealt with some systems that get a little bit there, our current system, we're not utilizing that we're making changes to that. But this is constantly a struggle. And it's not only per case, but then it's, you know, a system that efficiently will say, hey, I've noticed, you know, essentially, an alert that we've noticed that every single one of your office visits is off by five bucks. Individually, we wouldn't care as much. But when you put it together with all the office visits, you know, suddenly, it's 1000s upon 1000s of dollars. And, you know, coming up with just easier ways to track that and having the allowables in the system and everything else. It's been a struggle. I couldn't agree more. I mean, you know, as we work with groups all across the country, you know, it's like, think groups have a sense of what they're getting paid, relative to what they charge, based on just what comes in, but they have very little ability to say, how does it actually compare to what they're supposed to get paid? Right. And I think that to me is, is, is the big Holy Grail. And even the billing companies, if you outsource it, they really don't report the data back that way. You know, it's just it's just not not something, you know, that that's very easy to identify. So I agree. I think I think that's a big opportunity as well. And something that, you know, maybe we can have a separate session on in the future. Yeah, yeah, huge issue. What, what about pay? What about payer mix? Let's talk a little bit about payer mix. And how do you guys think about the just the kind of elephant in the room, which is this, you know, aging population and this movement from commercial into Medicare that, you know, I think it's like, what is it 10,000 seniors a day are basically aging into Medicare across the US. And, you know, it's just, it's a, it's going to put downward pressure on reimbursement for most orthopedic groups, given, you know, often you're just getting paid more from commercial than you are Medicare. Yeah, you know, huge issue, the demographics certainly are not on our side with this issue. You know, part of this is, hey, how do we become efficient enough to make Medicare work? Versus, you know, people trying to get out of Medicare. And I think that is extremely difficult. I think some selective, you know, physicians and groups may be able to do that to some extent. But yeah, this is this isn't going away. And how do we make it? How do we make it work? It's increasingly an issue. And what's interesting is I dealt with somebody who wasn't experienced as experienced in orthopedics, but came into the orthopedic world and saw, you know, how much Medicare we're doing. And, you know, his response was, oh, no, that's way off. That's way too much. But national averages showed we are right in line, because it's the type of business we're doing. We're catering to a lot of Medicare age people. And this is something that we have to we have to deal with. Yeah, that's a problem. No, agreed. I mean, you can see from these charts, I mean, you know, the national, you know, the data across AOE is showing, you know, about 40%, just under 40%, right of groups, payer mix coming from Medicare. You know, it was interesting, the bottom right chart, I was actually surprised to see that jump in Medicaid, I wasn't necessarily expecting that that's also interesting. Terry, how do you guys think about that? Medicare increase? Do you guys kind of model that out and, and kind of put that into your future? You know, projections as you think about kind of a greater proportion moving into Medicare? You know, we certainly have. And we've had some discussions around, centering around when the numbers will get to, you know, add a provider because of the Medicare population. But you know, for us, we've kind of been operating in a model the last several years. And, and as we look to the future with Medicare, our efforts are to get as efficient as we can in clinic. Because if we can see if each doctor could see five more patients a day, and do it at the same overhead using the same amount of resources, then that five patients a day is going to help make up for some of the decrease in reimbursement. Our whole philosophy is, if you want to be able to survive as an independent practice going forward with with where reimbursements going, you're going to have to become more efficient and be able to see more patients using the resources you already have. So we kind of function in that model. Now it's it's not uncommon for for one or two of my guys to see 65 or 70 patients a day. You know, a slow day for one of my guys is generally about 45. And I know for some practices, that's a full day. So we've been operating in that model for for a few years. And it's, it's, it's worth been able to help sustain us. And you know, Medicaid with expanded Medicaid programs, you know, we have to take Medicaid in order to have privileges, it's a community hospitals, the only hospital we have here, as part of your call responsibilities, you have to take Medicaid. And then also in the community we live in, it's hard to with when one of your major refers as a pediatric group that 60% Medicaid, it's hard to expect them to only send you their Blue Cross and send their Medicaid somewhere else. So in my situation, where I am, we have to play that game and my doctors to their credit, you know, they have the philosophy, well, if I'm already over operating doing six cases, if I have to operate on a broken arm, a Medicaid broken arm or something like that, we just throw it all in the meat grinder and see what comes out at the end of the quarter. So we are aware of it. Not much we can do about it. If we want to take call or have privileges at the hospital, we have to take the Medicaid. And for the Medicare, like I said, our solution so far has been to just see as many patients as we can and, and be efficient and keep our volume up. And hopefully that'll sustain us. But it's hard to tell with the it's ever changing, like Chris said earlier. So let's shift over to overhead now. Because Tara, I think you know, you made a good point earlier. I mean, the two biggest questions you always get asked, right is, you know, what's the physician comp and what's the overhead cost? So, Chris, let's swap to you here. I mean, how do you guys think about measuring overhead? What what metrics are particularly relevant that you found? Or what are some areas where you think the data maybe doesn't always tell the right story? That's a good question. I mean, overhead, we certainly do look at, I think what's really important with overhead, because overhead is thrown out there quite a bit is defining it having an official definition of what overhead truly is. And once that's established, I think, you know, it's a number that certainly is out there that I think does need to be watched. However, overhead, to me is not the most important number, the most important number is the physician comp. Because you might have a system that requires a lot of overhead, but the doctors can also make more out of it. I've seen guys who have extremely low overhead, but hardly take home any money. So I think you have to just bring it into context as to, you know, as a tool and what's helping. And, you know, within our area, for example, we have an extremely high cost of living, our staff expense is horrifically high. And, you know, I don't even compare to national numbers. Why? Because I know we're gonna be at the very tippy top, but then our reimbursements hopefully are better and you know, compensate for that. So yeah, overhead is good. I think it's more important for me to know, okay, what's the national average, as a reference? And then how are we trending doctor by doctor also as the group as a whole, how we're doing, you know, year over year? Does that mean would you then look more like an FTE count? Or or given, you know, the dollar of overhead maybe isn't as relevant for you? Is it more like number of FTEs? Or how do you think which benchmarks would you say are most representative? Well, I think it is helpful to look at to look at overhead. But again, you have to take, you know, we might have a high overhead, but what if there's high comp? And so I kind of look at all those. I do look at FTEs per physician, that is helpful. What is very difficult with that, though, I have to say, is if we're to break it down, let's say we're high, breaking it down into the specific departments that represent our departments, because Terry might call, you know, someone in the back office, you know, their their back office might do, or medical assistant might do surgery scheduling while we have a separate department for that. Same with authorizations. And so that's where it gets a bit murky for me on the FTE. And it's hard to really drill down. But to me, the percent revenue overhead is is an extremely important number, but I just balance it out also with the comp as well. Makes sense. Terry, how do you guys think about overhead? What are the metrics you look at? Like Chris said, overhead is so hard to judge, because I'm an eat what you kill. So in reality, my overhead for the year is 100%. Because every dollar that comes in is going out in either expenses or physician compensation. So when you look at that, my overhead is 100%, which would be awful. We look at overhead as the percentage of every dollar a dollar takes on a doctor takes home of his collection. So if he takes home $1 million on $2 million in collections, we considers overhead to be 50%. But again, that's just a number. We look closer at the hard dollar number when we have our quarterly meeting, we have a dollar number that shows every doctor what they spent and overhead. So we look at that, you know, the empty full time employees per physician. I know some people like to use that mine always looks awful, because I've got two locations, I've got two PT clinics, I've got MRI. So my, you know, my full time employees per physician is close to eight. But what I like to look at is my staff cost as a percent of revenue is usually in the 25th percentile on the low end in the AOE benchmarking. Because while we have a lot of staff, like Chris said, we're using that staff to generate revenue in two PT clinics in an MRI facility, and having two locations. So I do think, you know, those are two numbers that can tell two stories, you know, well, you got way too many employees per physician, but how are you using those employees? What are you doing with them? And then on the other side, you know, obviously, outside your staff costs, we like to look and see, you know, what percent are people spending on marketing? Are we within that, that range? What percent are people spending on IT or outsourced, you know, services. So we do look at other things just other than the staff, and just make sure we're in line with what other people are spending. But we do look at the overhead percentage, and then just the hard dollars spent and overhead are the two most important things that our guys look at when we meet. Yeah, that makes sense. You know, what one one observation is, maybe, you know, maybe it makes sense to look at overhead costs or staff cost as a ratio of physician compensation, right? Because then that really tells you what's what's the return that you're driving off that cost. And maybe another way we can we can help slice and dice the data. Well, I think we're probably just about out of time here. I do want to thank you, Chris and Terry, you guys have been phenomenal. And I think we've covered a ton of topics. Clearly, we could just keep going here. So I do want to thank you guys. I want to thank the AOE staff for having us here today. And, of course, feel free to reach out to any of us here if you've got questions. And, you know, just looking forward to continuing the dialogue here as we drill deeper into data and benchmarking. So thank you both. You bet. Thank you. They're great questions, by the way, for the topic. So thank you. Thanks, everybody. As a reminder, this is a recorded webinar. So the recording will be made available on the AOE Learning Center afterwards, and you'll receive an email notification when that is up and ready to go. Thank you so much for your time today. Hope you found the information valuable. And thank you so much to our speakers and moderator today for participating. Have a great afternoon, everyone.
Video Summary
In today's webinar on strategic planning using data and benchmarking to drive practice growth, the speakers discussed key topics such as SWOT analysis, budgeting strategies, and revenue efficiency. They highlighted the importance of identifying strengths, weaknesses, opportunities, and threats within a practice to drive strategic initiatives. The speakers emphasized the need to assess data metrics like patient volume, surgeries per new patient, and revenue per patient visit to ensure operational efficiency and profitability.<br /><br />Furthermore, the discussion focused on physician compensation, overhead costs, and payer mix as critical factors impacting practice performance. The speakers shared insights on comparing partner compensation to benchmarks, tracking net collection ratios, and adapting to shifting payer demographics, particularly the increase in Medicare patients. They stressed the importance of monitoring overhead costs as a percentage of revenue and assessing staff efficiency to optimize practice operations.<br /><br />Overall, the webinar provided valuable insights into leveraging data and benchmarking to make informed decisions and drive practice growth in an evolving healthcare landscape.
Keywords
strategic planning
data
benchmarking
SWOT analysis
budgeting strategies
revenue efficiency
patient volume
physician compensation
overhead costs
payer mix
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