Medic Management Aug 16, 2018 11:05:32 AM 10 min read

Tertiary Health Care System Organization & Performance

Medic Management Group’s specialized management services create effective partnerships with physicians. Working nationally with hospital-employed and affiliated physicians for more than a decade, we manage more than 1,000 physicians in practices owned by various hospitals and health systems.

Using a comprehensive health care management approach, our experts assist with productivity, financial issues, and program and strategy development while working to ensure patient care is never compromised and physicians are happy.

Clients count on our business turnaround consulting expertise. Our professionals serve as health systems’ outsourced administrators who manage the entire physician organization. Our proven system has saved health systems millions of dollars.

A tertiary health care system client located in Pennsylvania had been formed through various mergers and acquisitions. The physician organization included two specialty networks and one primary care network. In total, it included more than 500 employed physicians in 300 locations. The system’s executive leadership team was new to the organization and wished to gain insight into its physician organization and identify opportunities to improve its financial performance.

The scope of our engagement included the following objectives:

Assess the current management organization structure
Assess the revenue cycle structure and performance metrics
Identify duplication between the networks and estimate potential cost savings through consolidation
Assess the managed care contracts and fee schedules
Identify improvement opportunities in corporate “back-office” support
Assess the practices for potential revenue enhancements and cost savings
Develop pro-forma estimates on revenue improvement and expense reductions
Review the billing systems and recommend a strategy for consolidation
To accomplish the broad scope of this engagement, Medic Management Group estimated it would take 10 weeks and approximately 1,400 hours from various professionals to deliver our findings to the client.

Medic Management Group assembled a team of professionals with different skill sets to tackle each component of the engagement. The depth of experience and broad range of expertise within Medic Management Group allowed the engagement to begin quickly.

Our executives, who have more than 25 years of experience with developing strategies for and managing health system-employed physician groups, interviewed key corporate and hospital executives to learn the system’s overall strategy and goals for the physician organization. Key physician stakeholders also were included in the interviews.

Consultants with extensive backgrounds in managing the revenue cycle for hospital-employed and independent physician groups were employed to evaluate this component of the engagement. Medic Management Group found 12 different billing solutions with six different tax identification numbers for the networks.

Key findings in the revenue cycle assessment included:

“Front-end” processes in physician offices needed attention in the following areas:
Registration staff members were not obtaining accurate insurance information
Insurance eligibility systems were not available with some billing systems – those that had it lacked consistency
No systems were in place to verify co-payments were being collected in the offices
No systems existed to verify all charges were being captured and billed
“Back-end” processes revealed these opportunities for improvement:
Analysis of a sample of accounts aged at 120 days revealed 35 percent of them never received insurance follow-up activity — those that were “worked” were simply transferred to patient liability. The client’s policy reserves accounts at 100 percent at 180 days. Implementing a practice of timely follow-up would have a significant impact on net revenue.
None of the CBOs had copies of managed care contracts or knowledge of the rates they should expect to receive, and, therefore, had no idea if accounts were being correctly paid.
Medic Management Group recommended the client consolidate the networks into a single tax I.D. physician group with a centralized business office with no more than three billing platforms. One of the networks was utilizing a well-known practice management system with some added front-end systems. We recommended they incorporate additional modules that would enhance the effectiveness in the registration and charge capture process in the offices and begin transitioning the rest of the practices to this system.

To identify additional opportunities to improve revenue or reduce costs in the network infrastructure or at the practice level,Medic Management Group benchmarked each physician and practice against their specific specialty. The benchmark data we used for this engagement was MGMA at the median and 75th percentile. The CEO for the health system felt the appropriate target for production should be at the 75th percentile.

The benchmarking analysis took into consideration time spent in administrative duties and teaching — therefore, the full-time equivalent status only reflected time spent in clinical activities:

Each physician and practice was benchmarked on productivity, collections, physician compensation, and overhead costs.
Corporate functions were benchmarked for administration, finance, billing, and human resources Because Medic Management Group is a management service organization for physician practices, the client’s corporate functions were benchmarked to where Medic Management Group runs its company
A value-added service was provided, helping to validate findings in the revenue cycle and in operational benchmarking, which included our experienced practice managers in the engagement. The Medic Management Group philosophy is to treat physician practices as small businesses that must be managed as such. Five of our senior consultants with experience managing physician practices spent time in 100 of the 300 locations to access staffing, patient flow, systems, consistency in practice, and overall practice efficiency. Through this, we identified an opportunity to consolidate some of the practices to create larger groups and eliminate some duplicated infrastructure. In many cases, several practices with one to two physicians were located within blocks of each other.

Medic Management Group’s engagement identified a $16 million to $30 million opportunity to improve the financial performance of its physician organization. The implementation of the recommendations would lower the investment the organization made per physician to $90,000-$120,000.

Initiatives identified to improve financial performance included:

Net revenue and collections $8 million-$15 million
Front-end revenue cycle process
Aggressive accounts receivable follow-up
Managed care rates
Match production to compensation levels
Consolidation network administration $5 million- $9 million
Consolidation of corporate administration
Implement centralized business office
Physician office consolidation
Physician compensation $3 million-$6 million
Adopt productivity-based contracts
Eliminate excess capacity
Based on a prepared pro-forma, Medic Management Group estimated it would take approximately two years to fully implement the initiatives and realize the benefits from all the opportunities. We assessed that the consolidation of network administration initiatives would be the least sensitive to physicians and was necessary for the achievement of the net-revenue opportunities. We presented a timeline for implementation to the client.

Medic Management Group estimated the consolidation of the administration into a single-management services organization could be accomplished within seven months from our report date, generating annual savings of $1 million.

We also estimated it would take approximately 10 months to implement our recommendations to improve the client’s revenue-cycle performance. During that time, we would do the following:

Create a centralized business office
Improve the quality of the information captured in the physician’s office
Begin transitioning to a single-practice management system, resulting in an initial $2 million financial improvement.

Finally, we estimated that within 12 months of our report date, Medic Management Group could confirm other operating-cost opportunities along with the development of implementation plans that would begin in the second year following our initial engagement.

The client was in the process of recruiting a new chief executive officer to oversee the physician organization and decided to wait until the new leadership team was in place before beginning the consolidation plan. Medic Management Group was engaged to fill the role of interim chief operating officer, and thus provided financial analytical support to the chief financial officer of the physician organization.