Successful Practices Invest in Business Office, Clinical Support

There is no one-size-fits-all approach to running a successful physician practice, but a new report has found that top-performing organizations have a couple of characteristics in common.

The report released by the Medical Group Management Association (MGMA) found that practices performing the best on metrics related to operations, profitability, productivity, and value invested more in staff, facilities, and operations compared to the median of all multispecialty practices.

Specifically, MGMA’s analysis of over 3,800 practices showed that top-performing organizations, which it calls Better Performers, have 20 percent more staff in the business office and 18 percent more nursing staffing.

Investments in staff contributed to higher operating costs for the practices – Better Performers reported nearly 9 percent greater medical total operating cost per full-time-equivalent (FTE) physician than their peers.

However, the practices also reported substantially greater total medical revenue per FTE physician, which translated to 19 percent higher median total physician compensation. The practices also had 20 percent more encounters, which was reflected in the practices having 24 percent higher work RVUs and 10 percent higher total RVU production, MGMA reported.

The investments also resulted in better, faster collections and lower accounts receivable.

Additionally, the report stated that Better Performer practices were also distinguished by their peers for their evaluation of profitability and productivity via monitoring of staff and provider output, operating costs, and revenue. Top-performing practices also used quality metrics to improve value.

“To me, one of the clearest takeaways from this report is the number of medical practices that are reporting successful metrics. That is a testament to the level of innovation, creativity and hard work that medical practice professionals are delivering in these challenging times,” said Halee Fischer-Wright, MD, MMM, FAAP, FACMPE, president and CEO of MGMA.

The analysis of top-performing practices occurred prior to the COVID-19 pandemic, but a supplement to the report conducted in October 2020 found that practices are still prioritizing the four categories that MGMA uses to measure practice performance. Those categories in descending order of importance according to respondents to the supplement are profitability (31 percent), operations (30 percent), productivity (24 percent), and value (11 percent).

The benchmark for excellent practice profitability, according to MGMA, means practices have less than the median for total operating costs per work RVU, total cost per total RVU, and total operating cost as a percent of total medical revenues. Profitable practices also have greater than the median for total medical revenue after operating cost per physician.

In 2020, median total medical revenue for all practices is nearly $1.4 million and median total operating costs are $814,342. Meanwhile, median work RVUs is 8,441, medical total RVUs is 21,424, and median total encounters 5,587.

Better Performer practices had higher revenue and costs with a median of $1.5 million in total medical revenue and $844,979 in total operating costs. The median among Better Performers was also 10,437 for work RVUs, 23,620 for total RVUs, and 6,701 for total encounters.

The only exception was non-surgical and surgical specialty practices, which reported spending 5 to 9 percent less on total operating costs.

For operations, MGMA considers Better Performer practices to have less than the median for percentage of total A/R over 120 days and for days adjusted fee-for-service charges in A/R. Additionally, the practices should report higher than the median for fee-for-service collection percent.

The report found that, in 2020, Better Performer practices reported collecting 6 to 9 percent more A/R in the first 30 days.

In terms of productivity, Better Performer practices are judged based on if total medical revenue per physician, total medical revenue per staff, work RVUs per staff and provider work RVUs for a least two-thirds of providers is higher than the median. For anesthesia practices, the latter metric is changed to if ASA units for at least two-thirds of providers is greater than the median.

Finally, for value, MGMA considers a practice a top performer if it reports on quality metrics and qualifies for better performer status in at least one other category.

Only one independent medical practice attained Better Performer status in all four categories in 2020.

“MGMA’s Better Performer reporting process has helped us validate our thinking and that we are making good decisions for our organization,” said Steven Sinclair, CPA, CMPE, chief financial officer of Graves-Gilbert Clinic in Bowling Green, Kentucky. “This recognition doesn't mean that we're done with our efforts because our goal line is always changing. What worked for us a few years ago might not work for us today so we need to continually benchmark so we know how to adjust our efforts.”

The report came out as part of MGMA’s Medical Practice Excellence Conference, which began on Monday. For more coverage on the conference, check back later this week.