a patient-level approach to managing practice costs

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A Patient-Level Approach to Managing Practice Costs

Owen Dahl, MBA, FACHE, CHBC, LSSMBB

Consulting, Owen Dahl Consulting

The Woodlands, Texas

Jennifer Souders, FACMPE

Practice administrator, Hilltop Family Physicians

Parker, Colo.

MGMA has determined that Owen Dahl has a financial relationship with

a pharmaceutical company. The content of this session has been

reviewed and has been determined not to be a conflict of interest.

Jennifer Souders does not have a financial conflict to report at this time

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©2017 MGMA. All rights reserved. - 3 -

Learning Objectives

• Analyze benchmarks to determine each

area within your practice that can be

improved

• Develop a plan to accurately calculate

the cost per patient metric

• Analyze your practice process to see

where your bottom line is affected the

most from a revenue or cost standpoint


Why ”tackle” costs

• HDHP

• Value based contracts

• Managing payer relationships

• Narrow networks

• Competition

• Survival – to care for patients

Why?

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Big picture

• Global

• Pass through from above

• Operational

• Cost per hospitalization, ED visit

Define Costs

Knee Surgery 2012

Charge Payment % total GR %

Anesthesia $5,902.00 $3,498.00 12.0% 59.3%

Orthopedic surgeon $5,115.00 $2,124.13 7.3% 41.5%

PA Assistant

Hospital $56,944.50 $19,452.66 66.7% 34.2%

PT $3,295.00 $2,292.79 7.9% 69.6%

Pharmacy $1,125.51 $1,125.51 3.9% 100.0%

DME $1,737.78 $294.99 1.0% 17.0%

Primary care $190.00 $85.22 0.3% 44.9%

X-ray $46.00 $34.50 0.1% 75.0%

Lab $325.00 $243.43 0.8% 74.9%

Total $74,680.79 $29,151.23 100.0% 39.0%

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Hip Surgery 2013

Charge Payment % total GR %

Anesthesia $6,336.00 $3,546.50 10.2% 56.0%

Orthopedic surgeon $9,224.00 $1,813.81 5.2% 19.7%

PA Assistant $9,224.00 $290.21 0.8% 3.1%

Hospital $44,523.07 $28,632.82 82.0% 64.3%

PT $00.00 $00.00 0.0% 0.0%

Pharmacy $273.92 $230.52 0.7% 84.2%

DME $58.00 $18.51 0.1% 31.9%

Primary care $215.00 $83.92 0.2% 39.0%

X-ray $241.00 $102.50 0.3% 42.5%

Lab $372.00 $218.36 0.6% 58.7%

Total $70,466.99 $34,937.15 100.0% 49.6%


Categories

• Fixed – same regardless of volume

• Variable – change based on volume

• Direct – specific to mission

• Indirect – support activities

• Sunk – costs incurred that cannot be

recovered

• Capital – invest in equipment, facilities

(sec. 179 or depreciation

Define costs

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What will work for you?• Per visit

• RVU

• Resources

• Time

What metric

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Assumptions

• 2,500 patients

• 6,250 visits per year

• 10,188 Total RVU per MGMA data

• 5,780 wRVU per MGMA data

• 50% Medicare - 4 visits per year

• 50% other - 1.5 visits per year

• 240 work days, 8 hour day = 1,920

office hours per year

• Schedule patient visits 6.5 hours

per day

• Twenty six patients seen per day

• Four patients seen per hour

• One new patient per work day

• Twenty five established patients

per day

• Established patients scheduled for

15 min visits

• New patients scheduled for 30

min visits

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Overall Practice Activity FVDI RVU

Annual % Income Per Visit Cost Category Per tRVU

All Sources

Income $579,794 100.00% $92.77 $56.91

Fixed Indirect Direct

Expenses

Bank charge $1,011 0.20% $0.16 V/I $1,011 $0.10

Billing service $16,368 2.80% $2.62 V/I $16,368 $1.61

Contributions $183 0.00% $0.03 V/I $183 $0.02

Depreciation $8,410 1.50% $1.35 F $8,410 $0.83

Dues & Sub $2,893 0.50% $0.46 V/I $2,893 $0.28

Ins - Bus & Mal $12,400 2.10% $1.98 F $12,400 $1.22

Ins - Employee $16,255 2.80% $2.60 V/D $16,255 $1.60

Lab/outside dx $30,548 5.30% $4.89 V/D $30,548 $3.00

Legal & Acct $6,131 1.10% $0.98 V/I $6,131 $0.60

Marketing $9,055 1.60% $1.45 V/I $9,055 $0.89

Med supplies $33,618 5.80% $5.38 V/D $33,618 $3.30

Ofc exp $17,912 3.10% $2.87 V/I $17,912 $1.76

Payroll $136,094 23.50% $21.78 V/D $136,094 $13.36

Payroll tax $10,581 1.80% $1.69 V/D $10,581 $1.04

Rent $55,491 9.60% $8.88 F $55,491 $5.45

Rep & Maint $1,123 0.20% $0.18 V/I $1,123 $0.11

Taxes $1,337 0.20% $0.21 V/I $1,337 $0.13

Telephone $6,299 1.10% $1.01 F $6,299 $0.62

Training $53 0.00% $0.01 V/D $53 $0.01

Total $365,761 63.10% $58.52 $82,600 $56,013 $227,149 $35.90

13.22 8.96 36.34

Net income $214,033 36.90% $34.25 22.60% 15.30% 62.10% $21.01

Current CF: $35.9996

Break Even Analysis

Break evenRevenue per visit $ 92.77 Total expenses $ 365,761.00 Expenses per day $ 1,524.00 Need to see to BE 16.43

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Definitions

Benchmark

- A systematic, logical and common-sense approach to measurement,

comparison and improvement

- A comparison to a standard

Benchmarking

- Copying the best, closing gaps and differences, and achieving

superiority

- Identifying, understanding, and adapting best practices and processes

that will lead to superior performance (www.dti.gov.uk/benchmarking)

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Reasons/benefits

• Increase understanding of operations

• Gain or maintain competitive advantage and industry superiority

• Adopt best practices from any industry into organizational

processes

• Uncover new concepts, ideas, and technologies

• Objectively evaluate performance strengths and weaknesses

• Observe where you have been and predict where you are going

• Convince internal audiences of the need for change

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http://www.dti.gov.uk/benchmarking

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Two key principles

1. If you don’t measure it, you can’t change it- Description

- Comparison

- Context

2. If you don’t value it, you won’t change it- Benefit

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- 16 -©2017 MGMA. All rights reserved.

Benchmark – total RVU

MGMA 2015 data – Family Practice

Mean 10% 25% Median 75% 90%

Total physician cost $26.22 $12.41 $16.43 $21.95 $27.55 $47.62

Total non physician provider cost $52.48 $2.07 $3.78 $7.00 $39.73 $102.93

Total support staff $17.20 $6.69 $10.43 $14.03 $19.08 $27.67

Total business operations support staff $2.25 $0.76 $1.13 $1.83 $2.69 $4.39

Total front office support staff $7.52 $2.07 $3.00 $4.04 $9.89 $16.53

Total clinical support staff $4.80 $1.18 $3.00 $4.20 $5.94 $7.83

Total ancillary support staff $1.94 $0.34 $0.77 $1.50 $2.52 $4.35

Total general operating cost $14.94 $2.03 $2.51 $15.04 $20.74 $28.20

Building and occupancy $4.17 $1.80 $2.56 $3.37 $4.73 $6.75

Cost allocated to practice from parent $5.79 $2.35 $3.45 $3.80 $9.17 $9.71

Total operating cost $33.12 $9.01 $20.81 $29.54 $39.78 $56.12

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Takt Time

Time available

Services performed

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Eight hour day 48025 patients to be seenMinutes per patient 19.2

30 minute break -30Time Available 450Minutes per patient 18.0

Six hour day 360Minutes per patient 14.4

Includes:

Prep

In Room

Documentation

©2017 MGMA. All rights reserved. 18

Time Study

Direct and continuous observation of a task, recording the time it takes to accomplish

• Frederick Winslow Taylor – late 1800’s early 1900’s

• Used to set standards for task

• Planning for work effort

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Motion Study

Reviewing and tracking how

work is done, the “motions”

required to do the work


TDABC

Time Driven Activity Based Cost –• Allocating overhead to where and when

used

• Activity

• Cycle time for each activity

• Cost of each activity – hours, minutes, and resources used in that time frame

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TAKT study with staff

• 3 FTE’s work, 240 days or 1,920 hours per year = 5,760 hours

• 5,760 hours = 345,600 minutes

• Productive at 80% = 276,480 minutes

• 25 patients per day @240 work days = 6,000 visits

• Staff has 46 productive minutes per visit

TAKT Staff continued

• 6,240 paid hours @$15/hour = $93,600

• @374,400 paid minutes - $93,600 cost - $0.25 per minute

• @46 productive minutes per patient = $34.50 per visit

• What’s going on the other minutes that can produce revenue? Are

there other non-cost services that can generate revenue?

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TAKT continued

• 6,000 visits @ 15 minutes = 90,000 minutes allocated

• 90,000 minutes @240 days = 375 minutes per day

• 375 minutes per day = 6.25 hours per day

• If did 14 minute visits save, 6,000 minutes or

• Gain 428 patient visits > 1 per day

• 99213 @ Medicare = +$30,000 under FFS

Value Stream Map

Check out

Post

Provider

Triage

Chec

k In

WAIT

4

minutes

12

minutes

14

minutes

7

minutes

7

minutes

44

minutes

4

minutes

3

Minutes

8

Minutes

32

minutes

47

minutes

91

Minutes

Escort to exam room

Interview

Blood pressure

Temperature

Weight 1 Minute

1.65 minutes

1 minutes

2.4 Minutes

4.2 Minutes

All value Add –

- Timing of

- Right person

- ????

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Normal time for Triage

Task Time

(minutes)

Rating factor Normal time

Weight 1 1.0 1.0

Temperature 1 1.0 1.0

Blood

Pressure/pulse

1.5 1.15 1.65

Interview 3 1.40 4.2

Escort to exam

room

2 1.20 2.4

Normal time 8.5 10.25

Calculate Standard Time

Normal time = 10.25 minutes

PFD* = .20 - percentage

Standard time = 12.3 minutes

1 FTE – 480 Minutes @ $15/hour = $120/day or $0.25/minute

@12.3 minutes for triage = $3.07 for triage

*PFD =

- Personal – rest room, phone call, water

- Fatigue – physical, mental, environmental (light, heat)

- Delay – clean up, supplies, malfunction, random events

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What is your cost for . . .

• Appointment scheduling

• New, Established, Wellness, Chronic

• In office cycle

• Check in

• Triage

• Provider time

• Post activity time

• Check out time

• Billing

• Administrative support

Tests and procedures in the office

• Identify costs associated with this department

- Staff, supplies = variable

- Equipment and space = fixed

• If possible, start with top 5 – 10 procedures done

• Consider using RVU and apply all overhead to these

processes as an option

• Questions:

- Return on investment = meeting expectations?

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Managed Care Negotiation

Cost to See a

Patient $ 58.52 $ -

Medicare

Allowance

Managed

Care

Allowance

99213 $74.16*

99214 $109.29*

* Houston 2016 ratesWhat is your percentage of “profit”

per visit? 99213 = ~26%


What do you do with this?

Manage your costs

• Operations

• Support

• Return on investment

• Market changes

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- 31 -©2018 MGMA. All rights reserved.

Continuing Education ACMPE credit for medical practice executives…………... 1.5

*AAPC Core B, CPPM credit …………………………………… 1.5

ACHE credit for medical practice executives…………..…. 1.5CME AMA PRA Category 1 Credits™……………………….. 1.5CNE credit for continuing nurse education …………….... 1.5

*CPE credit for certified public accountants (CPAs)……….. 1.8

CEU credit for generic continuing education………..……. 1.5

*AAPC CODE: 5 8 7 5 6 G C O*CPE CODE: 2 0 1 C A

Let the speakers know what you thought!Evaluations will be emailed to you daily.

Thank You.

Owen Dahl

[email protected]

832-260-4455

Owen Dahl Consulting

87 Lennox Hill Dr.

The Woodlands, TX 77382

mailto:[email protected]

a patient-level approach to managing practice costs

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