This article will discuss the use of time and office capabilities in producing revenue and benchmarking physician productivity. The issue of resources being used in providing services, including those provided by physician extenders, relate to the limited availability of professional time; thus, the practice should work to optimize the revenue from the limited resources. By understanding the relationship between physicians and others in the same specialty, physicians can gain a better understanding of where their productivity may be enhanced.

The traditional methodologies used in business environments for evaluation of costs of production can be brought to bear in a medical practice. The first step is to understand the work that is being produced and the efforts that are being utilized to produce it. In order to do this, the various procedures and diagnostic testing that are being performed need to be broken down into their component parts in order to understand the costs that are incurred by the practice.

Obviously, the front desk needs to be allocated among the various patient categories. Front desk time, including telephone time for making appointments, canceling appointments and scheduling tests, should be analyzed. While this may seem initially to be an extremely burdensome task, 80 percent or more of the effort of the office is consumed with approximately 20 percent of the individual tasks as defined by procedure codes and types of visits. Therefore, it is routinely feasible to determine the costs associated with the majority of the work effort being done.

As an example, the various evaluation and management (E&M) codes in many primary care and specialty care offices will consume the vast majority of the revenue being produced. Because of this, it is fairly easy to break down the 15 or 20 codes that are being utilized and understand what a typical patient is absorbing with regard to resources of the practice. Further, it is possible to track a sampling of patients to understand additional diagnostic testing that needs to be scheduled, prescriptions that need to be called in and/or refilled, additional test results that are being read, reviewed, evaluated and passed on to the patient by different members of the staff, as well as other steps that are taken. Even when blood is drawn and sent for analysis, that too can be broken down into its component parts and resources being consumed.

Once this is done, the practice can gain a better understanding of the resources consumed by the various types of patients and this can be broken down by procedure code, type of diagnosis and other aspects of the patient population. One example may be a phenomenon that occurs in some circumstances with elderly patients who come into the office on a regular basis, often more frequently than the physician may request or require. In many of these circumstances, it has been determined that the patients show up well before their appointment time and often show up in groups. When this occurs, the resources of the front desk, as well as the size requirements for a waiting room may be expanded beyond those that would normally be anticipated. In order to understand this phenomenon and determine the costs, it needs to be tracked and evaluated to determine whether it is having a financial impact on the practice.

After the various aspects of the resources being consumed are known, an analysis of revenue being produced for the resources being consumed can be shown. An analysis may show that certain types of visits generate more gross profit for the practice, and focusing on these more complex patients would be beneficial for the practice. The comparison of your practice to other practitioners will yield specific information to gain an understanding of where the practice may be able to become more productive and profitable.

Benchmarking can often be done utilizing survey data, such as that provided by Wiley Associates’ MGMA data compilation. By using this type of data analysis on a per physician, as well as overall basis, the practice can determine whether expenses are outside of various threshold levels. By understanding the relationship between your practice and that of your peers, you will be able to glean areas where your costs may be out of line. When these are translated into graphical representations they can be even more useful and understandable when a physician is particularly efficient or inefficient, as compared to a peer group.

Analysis might show "Total Operating Costs" or other components of the cost of services comparing four practices with a hypothetical "client," as well as MGMA data. Likewise, the net revenue per physician may be well within the range of your peers and/or the MGMA data, or it may be significantly greater than the peer group, yielding a greater profitability for the physician owners.

In order to arrive at this type of data analysis, the first step is to fully understand costs in your own practice. In this way, costs can be normalized, allowing practices to look at themselves in comparison to the peer group. Because the MGMA data shows the number of practices and the number of providers, it is easier to determine whether or not you are dealing with comparable sized practices. Once physicians understand a variety of the issues that are confronting them with regard to comparable information, they can then work to enhance their collection activity and make their practices more profitable by utilizing the data for different cost structures for different procedures, as well as for providing compensation incentives both among the physicians and support staff. All of these will ultimately lead to greater productivity.

Incentivization methodologies will generally be straightforward. One caveat with regard to incentivization: "Be careful what you wish for." It is important to understand what incentives are provided so that physicians and administrators understand clearly the goals of the practice. If the goals are listed too narrowly, the behavior may become too dramatic for the overall goals of the practice. If, for example, the billing staff is incentivized for all collections that are received in excess of 50 percent of gross charges, they may become too zealous in coding and/or in their collection efforts. Therefore, in setting goals, secondary items may need to be considered as well as maintaining a level of professional decorum and an acceptable level of "complaints."

One other area to be considered with regard to physician productivity is whether to perform additional diagnostic testing and procedures in the physician’s office. In some specialties it has become profitable to bring diagnostic procedures in-house that were previously referred to outside facilities. To fully understand the financial implications of attempting this, the practice should ascertain the number of each procedure that has been referred out. For example, if a cardiology practice is referring out seven stress tests per week, and the payor mix of that seven patient average will generate a sufficient reimbursement, the practice can determine the increased cost of this operation and whether the patients can be better served while increasing the profitability of the practice.

There are long-term commitments that need to be made in order to enter into this type of activity, but they often can be done in a way that both enhances patient satisfaction and is professionally appropriate, cost-effective and profitable for the practice. The practice needs to be aware of the implications for a variety of anti-kickback and other federal and/or state statutes affecting the expansion of certain services. One thing is for certain: it is important not to have investments tied to expected levels of referrals.

After doing these various analyses it is likely that a practice can fine-tune its efficiency, increase its productivity and profitability and resist some of the current economic conditions that are forcing practices to be far more conservative.