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AS SEEN IN
January 11, 1998Medical Economics
THE BUSINESS MAGAZINE OF THE MEDICAL PROFESSION
Top-performing groups reveal their secrets
Get the most from staff and
ancillaries
Crackerjack employees and cost-effective adjunct services may be second
only to good doctors in making your group a success
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No matter how much money your group earns, what you take home depends on keeping overhead low. That's where effective use of staff and ancillary services comes in.
There's no one recipe for success, if the experience of the 16 "better performing" multispecialty groups identified by the Medical Group Management Association in 1997 is any clue. Ranging in size from nine to 80 doctors, these groups take a variety of approaches to staff and ancillary management.
But the bottom line is that staff and ancillaries must provide patients and doctors with efficient service. That builds practice revenues by keeping patients satisfied and making the most of every group's most valuable resource: its doctors' time.
While some of the better- performing practices achieve the goal with a traditional approach - keeping the staff-to-doctor ratio low - others find that selectively adding staff actually boosts overall practice productivity. Indeed, the median staffing ratio for the better-performing practices was 5.06 full-
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"You don't raise productivity by adding another layer of administration; you raise it by helping doctors see more patients."
Jayne Oliva, MBA The Croes Oliva Group
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higher than the median for all groups, the better-performing practices did nearly 19 percent more procedures per physician, including visits and ancillaries. That translates into 17 percent more revenue per physician than for all multispecialty groups in the study. And much of this additional cash found its way into the doctors' pockets: Total physician compensation, including direct pay and benefits, was $224,597 for doctors in the better-performing groups, or 14 percent higher than the $196,620 overall median.
These practices weren't just throwing money at staff and hoping for the best. For the extra 2.5 percent they spent on staff, they employed 8 percent more workers.
One reason was their better use of lesser-trained, lower-cost personnel, notes David N. Gans, MGMA's director of survey operations. Although better-performing groups hire about the same proportion of RNs and LPNs as the typical multispecialty group, they employ nearly 63 percent more medical assistants and nurse assistants. "It indicates there may be some substitution going on," Gans says. "These practices are trying to push
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time-equivalent employees per doctor, or 0.38 more than the 4.68 median for all multispecialty groups.
A closer look at the MGMA figures shows that the extra staff tend to fill clinical support roles, such as nurse and medical assistant. Better-performing groups focus on helping physicians.
That makes sense to Jayne Oliva, a practice management consultant with The Croes Oliva Group in Burlington, MA: "You don't raise productivity by adding another layer of administration; you raise it by helping doctors see more patients." MGMA data reinforce that hypothesis. With their median support-staff cost just 2.5 percent
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nursing duties down to the lowest appropriate skill level."
At the same time, ancillary services necessitate higher staffing in the better-performing groups. While 71 percent of all practices have labs and 65 percent offer radiology services, 15 of the 16 better- performing practices have both. Additional services - such as ultrasound, pharmacy, optical, physical therapy, ambulatory surgery centers, and even liposculpting - significantly raise staffing levels. Naturally, they're found mostly in larger groups.
And while MGMA data suggest that most ancillaries barely break even, group leaders say they enhance practice performance by increasing efficiency of managed-care services, generating specialty referrals, and staking out territories in competitive markets.
"Patients demand a full range of services today," Oliva says. "They want them conveniently located, they don't want to wait for them, and they don't want to waste time going from place to place to get them. The successful practices are those that meet these demands."
How can more staff bring more efficiency?
The 72-doctor Quincy (IL) Medical Group employs about 490 support staff, a ratio of 6.80, placing it near the high end of the better-performing groups in staffing. Even when the group's 12 nurse practitioners are counted as providers, the ratio is 5.83. That puts Quincy fifth-highest among the better-performing groups.
But what really counts is staff efficiency, says Diane Weber, Quincy's chief financial officer. "We used to worry that the staff-to-doctor ratio was too high. Now we realize you have to look at more than that. If you divide our staff by the number of patient encounters, we're below average."
That helps keep most doctors at the group earning between the 75th
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and 90th percentile for their specialties, says pediatrician Richard Schlepphorst, the group's medical director. "We're a hard-working group, and our non physician staff helps us see more patients."
Weber notes, "We're a little heavy on nurses, but they help keep things moving." Nurses are responsible for prepping patients. They take vitals, get a description of the complaint, and have relevant test results and biopsies ready before the doctor walks into the exam room. Each department customizes its protocols for what nurses do to assist doctors.
Nurses also handle most calls from patients and phone them with test results. To free nurses for office duties, patients are encouraged to get the results of routine tests, such as cholesterol screenings, via voice mail from the group's computer.
Nurse practitioners also help increase patient visits, says Schlepphorst, one of the first pediatricians at Quincy to add an NP to his practice. Quincy's NPs average 2,500 encounters per year, compared with about 4,000 for primary-care doctors.
While doctors at some groups are leery of using "physician extenders," they've been well received by Quincy's patients and doctors. "They have a different focus," Schlepphorst says. "Their training emphasizes patient education. Some patients request the NP, or alternate well-baby visits between us and them."
What about the cost? Generally, nurse practitioners at Quincy work closely with a single doctor. A doctor with a busy practice may hire one after getting the approval of his department and the clinic board. In the past, he would pick up the tab himself; today, the clinic pays. Then it uses productivity benchmarks to assess the NP's performance.
What staffing ratio is optimal? The answer varies from group to group. At the nine-physician Hedges Clinic in Frankfort, IL, the ratio is just 4.36, or 0.32 less than the
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median for all multispecialty groups and 0.70 below the median for the better-performing practices. The group's seven stockholders, each of whom oversees a practice department, prefer to keep staffing lean. "Not much goes on around here that we don't know about," says pediatrician Steven Antonini.
In other groups, doctors welcome the relief from day-to-day management activities that staffers afford - and are happy to pay for it. Allergist David N. Wright, for one, joined Quincy in July 1997, after a six-year stint in solo practice. In the last 18 months, he estimates the proportion of time he spends on clinical duties has risen from 65 to 85 percent. "I'm free to focus on practicing medicine here," he says. "For me, the cost of the administrative staff is well worth the trade-off."
The best approach to staffing: Be flexible
Because there will never be a perfect solution to staffing and equipping a medical practice, leaders at many of the better-performing practices take a flexible approach.
At the 80-doctor Springer Clinic in Tulsa, OK, doctors are encouraged to experiment with their staff, work spaces, and equipment. The group assumes that the optimal practice arrangement is highly individual and dependent on specialty and location. Overall, this has resulted in a staffing ratio much higher than the median. The practice employs a whopping 500 non-physician staff, for a staff-to- doctor ratio of 6.25.
Ophthalmologist Mark Allison has built a staff of nine assistants. "In 15 years I've never had any request for more staff or equipment turned down by the board, but I've always been able to back up my requests with higher productivity," says Allison.
Even with the cost of extra staff factored in, Allison's income is above the 90th percentile for
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ophthalmologists. This is because, in Allison's case, more staff means increased efficiency. Nurses, medical assistants, and an optometrist prep patients for exams and surgery, allowing Allison to move from exam room to exam room virtually without interruption.
While Springer generally honors its doctors' requests for additional staff, the results are closely monitored by the group's administration, finance committee, and board. "If a doctor asks for another nurse, we'll give him one. But if productivity doesn't improve, we'll take her away," says Rick Callis, the group's administrator.
The 33-doctor Physicians Clinic of Spokane (WA) also allows physicians flexibility in staffing their offices - but gives them incentive not to hire more help than necessary.
The practice divides its overhead evenly. When hiring staff, however, physicians are charged the average cost for the category of provider they choose, whether it's a medical assistant, an LPN, or an RN. So doctors with an RN pay more, and a doctor who wants a second nurse or assistant assumes the entire expense.
The system has kept staffing levels low: 3.25, the lowest staff-to-doctor ratio among the better performing groups. About three-quarters of the doctors have chosen a dedicated medical assistant, who costs about 20 to 30 percent less than an RN. Physician income at the practice averages slightly above median for primary-care physicians and around the 75th percentile for specialists.
But Spokane has also found that adding support staff at the high end increases physician productivity. The group's two NPs handle overflow from internal medicine practices, allowing doctors to book more patients in advance without having to worry as much about leaving slots open for people who need immediate attention. "We're able to see more patients the day they call instead of sending them to
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a walk-in clinic," says administrator David Page. "That makes the patients happy, and the doctors are happy because we're keeping patients in the practice."
Spokane manages NPs "like we would an ancillary cost/revenue center," Page says. "If they don't make a profit for the practice, we want to know why."
At first, the NPs were seeing an average of 12 to 13 patients a day -not enough to cover their cost. Some investigation revealed they weren't seeing many patients in the first two hours of their shift, because the physicians weren't backed up that early. Starting the NPs at 10 a.m. instead of 8 or 8:30 boosted their productivity by 25 percent, Page says. The aim is for them to see 18 to 20 patients a day.
Putting staffers to best use is also key. Hedges Clinic, which has traditionally had one RN per physician, filled its last two nursing openings with medical assistants. "Nurses do a lot of completing forms and phoning for authorizations. A medical assistant can do that just as well," says administrator Frank Schibli.
Hedges has bought into the idea of deploying its staff resources primarily on the front lines. Its total administrative cost per physician is in the lowest 20 percent for all groups, while its nursing staff is larger than most.
Make sure your staff is on your
team
Like physicians, non-physician staffers respond to productivity incentives. At the better-performing practices, the connections between profits, work habits and take-home pay are made quite clear.
Hedges Clinic does it with profit-sharing. A yearly bonus - a percentage of salary, based on the practice's overall financial performance - is added to the employee's 401(k) account. For each of the last three years, the bonus has been 12.5 percent. And the extra
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money adds up: Recently, a longtime employee departed with more than $300,000 in her profit sharing account.
Such windfalls keep staffers from taking the bonuses for granted. According to Schibli, "We reinforce the 'team' message by reminding employees that they profit when the practice profits. You see people turning out lights when they leave a room and staying after 5 p.m. on Friday because they want the work to get done."
The 39-doctor Salem Clinic in Oregon has a more formal review process for awarding merit raises. Every year practice supervisors set specific goals for each employee. At the end of the year, the staffers are evaluated. Specific standards must be met in each of 10 performance areas - job knowledge, quality of work, communication effectiveness, initiative and ingenuity, judgement, reliability, attendance, productivity, adaptability, and loyalty - to earn that portion of the raise. "You either reach the standards or you don't. It's very fair," says Barbara Gunder, Salem's administrator.
Special emphasis is placed on relationships with co-workers and supervisors. Gunder believes that even more than monetary compensation, respectful relationships among staff lower turnover and increase productivity. "You can throw a ton of money at people and still have them dissatisfied if you don't give them respect."
A positive work environment also reduces the chances of staff friction with patients, she notes. That helps improve productivity by reducing the amount of time given to straightening out problems. Good staff relations not only bring patients back, says Ob/Gyn John Alsever, they promote healing. "It's not just a physician issue; it's my nurse and my receptionist and my business office, too. We all have to participate to do the best job."
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How these groups look at ancillary services
Very often, there's more to evaluating an ancillary service than looking at its cost and profitability. Quincy Medical's clinical lab, for example, doesn't always show a profit, but it pays off in other ways.
The lab boosts physician productivity by allowing the doctors to see more new patients - a key to success in this under-served rural area of Illinois. Patients benefit, too, making them less likely to seek care in nearby cities. "Patients are used to driving to Peoria or St. Louis," explains administrator William Sullivan. "If we don't offer the convenience of one-stop shopping, we'll lose them."
With Medicare and private payers cracking down on lab tests, Quincy has seen contractual write-offs rise 25 percent in the last two years. So, staff productivity is key to maintaining the lab's viability. When, at one point, lab tests per technician were running about 20 percent below the MGMA median, the problem was found to be unnecessary stat test orders.
"Often when the physicians marked a test 'stat', what they really wanted was to make sure the results were in by nine the next morning," Weber says. "But to the technicians, 'stat' meant drop everything and turn it around in 15 to 20 minutes."
The solution had as much to do with educating physicians as it did with reorganizing the lab. Guidelines were developed for stat lab orders and disseminated to physicians at department meetings. A reduction in stat orders allowed the lab to run more tests in batches. A separate stat lab was eliminated, and some low-volume tests are now sent to a reference lab or to the hospital adjoining Quincy's main campus.
The result: Lab expenses decreased 20 percent, restoring profitability to clinical lab services.
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That solved, the clinic is nevertheless careful about what services it adds. Quincy doesn't have mammography, CT, MRI, or ambulatory surgery, all of which are offered at the lone hospital in town, with which the group has a close relationship. "We're careful not to duplicate services," Schlepphorst says.
Over the past four years, Quincy has grown from 55 to 72 doctors. New specialties include neurology, allergy and immunology, and rheumatology. New services include bone densitometry, and radioactive seed implants for treating prostate cancer. These are in addition to pharmacy, optical shop, cardiac rehab, and sports rehab - services that go beyond the basic lab and radiology found in all of the MGMA's better-performing groups.
Profitability of ancillary services varies. Among the winners are several cosmetic procedures, including radial keratotomy, vein stripping, and liposculpting. Because these services are seldom covered by insurance, the clinic requires a deposit up front and payment at the time of service, Diane Weber says. The self-pay services account for about 5 percent of clinic revenues and are profitable, she adds.
The PAPP clinic in Newnan, GA, is also adding services to consolidate its market position in the face of new competition. In three years, the group has grown from 27 to 48 doctors, and has added MRI, audiology, mammography, cardiac testing, and an optical shop, according to urologist Bob Mann, Jr., the group's president.
As with many of the better-performing practices, PAPP's ancillaries are not big profit centers. But they contribute to group success in other ways. For one thing, they position the group to take advantage of a growing managed-care presence in this town of about 15,000, located 38 miles southwest of Atlanta. "We
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can provide MRI services 43 percent cheaper than the local hospital," Mann says.
On-site services also boost physician productivity by decreasing turnaround time for tests; this often eliminates the need for follow-up visits, an essential capability for making capitation and other risk contracts profitable. About 15 percent of the clinic's revenues are now capitated; another 25 percent are from other HMO and PPO arrangements.
PAPP's full range of services increases the likelihood that patients will stay with PAPP in Newnan rather than travel to Atlanta. "All of the major systems in Atlanta are trying to creep down here and lure our patients away," Mann says.
The approach has helped PAPP dominate its local market. With 50 percent of the town's physicians, it provides about 80 percent of medical services, says administrator Kent Skolrood. The area's population is also increasing, so the investments PAPP is making are likely to pay off. "A lot of what we're trying to do is reach untapped potential. There's a market growing here that we have a chance to own if we grow with it."
By Howard Larkin, a freelance writer in Oak Park, IL, specializing in health-care financing, management, and policy issues.
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