advanced financial management · negotiation without first doing your homework! • know your...

Advanced Financial Management

Keith Borglum, CHBCJohn T. Ramey, MD, FAAAAI

Robert J. Holzhauer, MD, MBA, FAAAAI

Learning Objectives

• Understand how to accurately calculate your practice’s expenses and determine how they compare to accepted benchmarks

• List several strategies you can use to increase your practice revenue and reduce your practice expenses while delivering high quality patient care

• Identify effective negotiation methods for vendor and insurance contracts

Calculating and Benchmarking Expenses

Disclosures:Keith Borglum is:a Licensed & Certified medical practice Broker and Appraisera private practice consultant to physiciansauthor of the Medical Practice Forms Bookauthor of the Medical Practice Pre-employment Tests Bookauthor of the Medical Practice Valuation Workbookcontributor to the AAAAI Resource Workbookmember Society of Certified Healthcare Business C onsultantsmember Medical Group Management Associationmember Institute of Business Appraisersmember National Association of Certified Valuation Analystsmember California Association of Business Brokersmember of consultant-panel or faculty of other asso ciations

Many of which provided information or data


• Trend:


• If you can track it……you can manage it

• Charges• Collections• Expense detail• WRVUs• Net income and benefits• Your time


• The IRS only requires ~10 categories of expenses for taxes

• Having a more detailed list has great management value– Clinical v admin supplies– Owner benefits v staff benefits– EHR impacts


Impact of managed-care plans


The physician is the biggest expense to be managed!


Cost per hour to open mail


Be scientific about the data•Use “evidence-based” mgmt

– Know your income sources & data– Know your cost factors & data– Know practice benchmarks

and how you compare


Measuring costs– Track data properly

• Profit and loss (“income”) statement• Balance sheet

– Compare to statistical norms– Customize norms to your situation– Create a budget and stick to it


Evaluate your cost ata– By month, hour, visit, RVU, PMPM

– Ex: “Is it cheaper to do the test for free in office now; or test later and then have follow-up calls or a visit?

– Ex: “Should you replace the computer?”

– Ex: “How many additional visits would be required to justify another MA?”


Incompetence is the highest cost of staffing..

..and the most difficult to track


“Cost control” is different than “being cheap”

One great staff person paid 20% over-market will equal or exceed in work output 1.5 average staff at market rate, at 30% less cost!


Revenue enhancement• Maximize productivity so that

the ratio-of-costs falls

• Example:$2000 rent is 10% of $20,000 income, but only 5% of $40,000 income


• The effect of 1 extra visit / day@ $72/visit x 210 days/yr= $15,120 increased income

at minimal extra “marginal” cost


Calculating market capacity– For every two weeks of waiting

time for non-urgent visits, there is room for one more providerEx:One allergist with 2-week wait;adds 1 provider and reduces wait to 1 week – both with full practices


Benchmarking data sources– MGMA.com

(employment, productivity, WRVUs, compensation employed / not)

– NSCHBC.org – detailed expenses and general ledger guidelines

– Salary.com – staff wages by Zip– AAAAI – Practice Management

Resource Guide, Survey


Customize benchmarks to you– Local / urban / rural / region– Do it once, then apply annually– Examples:

Rents in Manhattan v PodunkStyle of clinical practiceFull v part time


SummaryIts not how much you make,Its how much you KEEP

that counts!

And more importantly…….


“Money does buy happiness,but only up to approximately

$36,000 per year.”-The Scientist’s Pursuit of Happiness

The Costs of Payment Options

Think “PATOS”– Payment At Time Of Service

•Cash – track it carefully•Credit – try to make it “debit”

– Credit/debit “card on file” esp kids– Negotiate rate with bank v Costco

•Care credit, 3rd party finance– Recourse v non-recourse

•Owner financing –risk & reward

Controlling Practice Costs

John Ramey, MD, FAAAAINational Allergy and Asthma

Charleston, SC

Wal-Mart Strategy

• Mission statement– Offer the best quality merchandise at the

lowest prices in all their stores, from school supplies, to household items and top quality groceries.

• Bargaining power over suppliers• One of Sam Walton’s 10

business commandments– Control your expenses better than your

competition

Strategies• Start with most expensive overhead

items– Physicians, staff, buildings

• Someone needs to watch expenses– Expenses grow quickly– Needs to be a detail person

• May meet resistance– Other physicians– Staff– “You are only saving $1,000”

Strategies

• Watch using family and patients – Might be difficult to negotiate best

deal

– May be hurt feelings– Decide type of negotiation– Make sure you review your bills– Hidden fees and credit charges

– Make sure you are getting the negotiated rate

– Make sure they don’t change rate without you knowing

Strategies

• Get at least 3 bids• Talk to other practices • Join purchasing groups• Make sure what you are doing is

profitable– i.e. labs

Physicians

• May choose to use physician extenders

• Employee physicians instead of having partners

Staff

• Evaluate your practice needs• RNs vs LPNs vs MAs• Know area rates• Relationships with tech schools• Raises vs bonuses?

– Merit based?– Evaluations

• Get what you pay for

Buildings• Rent

– Flexibility– Full service vs no service– Know local rates

• Own– Build equity– Historical low prices & interest rates– Tax advantages - depreciation– More flexibility if all partners are

owners

Computer Expenses

• EMR– Software maintenance– Hardware

• Servers vs cloud computing• Hardware maintenance• Wireless networking• Laptops vs tablets

Malpractice Insurance

• Find out the different insurers in your state

• Decide how much coverage your practice needs

• Some companies give money back at retirement

• May need certain amount of coverage for research

• Consent to settle?• Financial stability of company

Malpractice Insurance• Claims-made covers lawsuits only if

the policy is in force at the time the lawsuit is filed– Need to add prior acts or buy tail

(expensive)– May not need tail if close to retirement– Usually less expensive

• Occurrence covers lawsuits filed at any time as long as the physician had a policy in force at the time of the alleged malpractice– Includes tail

• Cost savings $28,520/year

Extract Manufacturers

• Get estimates from ALK, Greer, HS

• Difficult to compare because of different vial sizes

• May save money on syringes with medical supply company

• Need to be willing to change extract

Laboratory Supplies

• Cost of staff to process• Price per immunocaps• Check to see what percentage

the contract increase is each year

• Cost of service agreement• Cost of controls, immunocaps,

and solutions• Tru-tests vs Dormer vs

AllergEAZE

Medical Supply Companies

• May need to join purchasing group

• Compare prices of syringes between IT & medical supply companies

• Company can itemize all supplies for one year

Advertising

• What type of advertising?• Yellow pages

– Do you really need it?– Additional directories?– How large of ad?– Yellow page internet?– Free listings sometimes available with

telephone service– Cost savings: $9,133/year

Advertising

• Internet– Website– Facebook, Twitter, Linkedin

• Television– Rates are very negotiable– Save money by buying in bulk– May want to work through

marketing company

Janitorial and Landscaping

• Take bids– We have 4 offices– Consider hiring an employee for

landscaping & cleaning

• $23,520/year

Copier Companies

• Buy versus leasing– Printer cartridges expensive– Many companies can service

• Service contracts– Read carefully– Replace copier during

maintenance contract– 0.01 per copy

Copier Companies

• A copier salesman dream– Bought used copier– Signed a 2-year contract for

$482.67/month for 4,500 copies/month with overage of .0227

– Signed with different company for $50/month for 3,333 copies/month with overage .016

• $6,000/year

Telephone Systems

• Negotiate contracts– Difficult to understand bill– $8,100/year

• Review cell phone bills– 411 charges, roaming, etc– Services no one is using

Retirement Plans

• Evaluate performance of the plan

• Evaluate the service• Evaluate the expenses

Repairmen

• Ask your repairmen what they charge per hour (computer, handyman, etc)

Golden Fish Tank

• We had a beautiful fish tank with 5 fish

• Discovered we were paying $30/fish/month

• Saved $1,800/year

Credit Card Fees

• Set up fee• Gateway fee• Cost per transaction• Monthly statement fee• Check to see if there are

batching fees-Ask for any AMA discount-Check for minimum monthly fees

Other Expenses

• Courier services• Postage machine• Converted to online patient

forms• Alarm systems

Negotiating with Payers

Robert J. Holzhauer, MD, MBAAllergy Partners

Central Coast of CaliforniaSan Luis Obispo, CA

Negotiating with PayersUsing basic negotiation technique as taught by

Keith Borglum, Professional Management & Marketing

• The 3 Ps : Prepare, Prepare, Prepare: Do not enter into negotiation without first doing your homework!

• Know your opponent: Is the payer you are facing as dominant in your market as you are? Which of you holds the powerful cards may impact result.

• Know the issues: relevant facts & data

– Prepare a spreadsheet comparing what each insurer pays for each of your most often billed codes. How do the fees each pays compare with Medicare?

– On that spreadsheet include the percentage of your practice’s patients that are members of each plan

– Have column showing how quickly claims are paid– Does your group have significant market share?


• Know the issues: relevant risks– Can you afford to lose an

insurer’s patients?– Will many (any) of those patients

see you out of network? Make an estimate to assess financial impact of going non-par(ticipating)

– Will you turn off important referral sources by going non-par?


• Negotiate for something worthwhile: identify the important issues/battles– Reasonable coverage for procedures

most important to your practice– Prompt payment of your claims– Formulary coverage for drugs you use– Administrative hassles

• Prior authorizations for skin tests, PFTs, IT

• Inability to get paid for these at times of visits

• Prior authorizations for medications


• Know your BATNA (best alternative to a negotiated agreement)– Are you willing to go non-par? If a payer plays hard

ball are you willing to “walk?”

– What is your lowest acceptable fee schedule?

• Know when to “fold-’em” before you go in– Plan the point at which you will walk away from the

negotiation

• Never undercut your BATNA in the meeting

• Try to learn your opponent’s BATNA– Can the insurer do without your services?

Negotiating with Payers:General Negotiating Principles

• Winners v. Losers– Zero Sum (one winner, one loser) v. Win-Win

solution. Strive for win-win. Never make an

opponent feel like a loser.

• Open v. closed probes: He (She) who asks the questions controls the negotiation– Ask open questions requiring expansive answers

to help learn what opponent really wants (you in its provider panel).

– Use closed probes (require yes or no answer) as

stepping stones to closes


• The 3Cs of getting to agreement– Confirm the opponent’s right to their

position, reduce their guard by confirming that you clearly understand their position

• Use terms like “I understand..., Are you saying..?, I’m not sure I get it yet, could you

re-phrase it?”

• Wait at least 10 seconds after they are done

talking to begin your reply

“Let Silence Do The Heavy Lifting”


• The 3Cs of getting to agreement– Confirm

– Clarify

• When possible, phrase clarifying points as open questions (requiring expansive answers) for opponent to deliberate

• Make sure that you know what he/she is saying and that he/she knows what you are saying

• You want opponent to recognize issues from your perspective

• Point out things he/she may not have considered

• Demonstrate your knowledge of the issues


• The 3Cs of getting to agreement– Confirm

– Clarify

– Close = ask for agreement• Ask early and ask often

• Early, small agreements create momentum

• Preliminary closes help create a path to

definitive closes

advanced financial management · negotiation without first doing your homework! • know your...

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