George Conomikes

36 Guidelines to Evaluate a Practice Manager

The following guidelines relate to performance goals for the practice manager that helps promote a well-run medical practice.

One purpose of this review is to note areas where performance goals are being met. The second purpose is to address areas where performance goals are not being met. In this latter case, corrective actions should be sought, and timetables established, for meeting the stated goals.

The rating scale to be employed is: 1. Performance is better than goals; 2. Meeting goals; 3. Not meeting goals

Slideshows

Knowing how to evaluate a practice manager is vital to your success. Here are 36 specific guidelines that can be used.


Most practices conduct performance reviews with their employees. However, we have found that the great majority of physicians, whether solo or group practices, do not undertake a periodic and thorough review of the manager's job. This can result in the following problems that we encounter in our consulting assignments:

1. The manager does not have a clear definition of her criteria for performance. In these instances, the manager establishes the criteria that seem most suitable to the job at hand. The problem is there may be areas meriting managerial involvement that become neglected. We have been to practices where the manager regards the job as, almost exclusively, personnel management. This can result in a lack of oversight regarding billing and collections activities - the financial lifeblood of the practice.

2. The physician(s) does not have a clear definition of the manager's job. For example, we have witnessed recent cases of physicians looking into EHRs without manager involvement. The rationale: This is a clinical exercise best undertaken by the clinicians. Yet, when investigating EHR, the possible integration of these systems into the A/R system - perhaps even meriting a new A/R system - carries a high priority in EHR investigation. The practice manager definitely should be part of the study, if not heading it.  

And, in some settings the physician attitude is, that as long as the practice is performing well, the manager's job is assumed to be functioning properly. But when this is not the case, it is not unlikely that the physician(s) will put some of the blame on the manager. In a group practice, we often observe that different partners have differing interpretations -not only of the manager's job - but also regarding the manager's performance.

The evaluation form should not be taken as the final definition of your practice manager's performance criteria. In the smaller practice, some of the tasks listed may not be the responsibility of the manager. In these instances, the non-qualified tasks should be eliminated from the evaluation form. However, for the tasks that are part of the manager's job at your practice, the goals indicated are realistic and generally agreed upon by practice management consultants.

Both the manager and practice physician(s) should spend time reviewing the guidelines. Are all of the guidelines relevant to your practice's manager position? For example, in some smaller practices the manager does an annual budget. Yet it is listed here, not for the smaller practice, but for the larger group. Again, some smaller-practice managers are very much involved in negotiating with managed care plans. And a few practices have the accounts payable work being done by a part-time bookkeeper, even a practice owner's spouse. Therefore the guidelines should be modified, as seen fit for your practice

Practice managers will find the evaluation form very useful for their work. First, they can get a better picture of goals related to each of the many tasks in the manager's job. Second, they can use the guidelines for self-evaluation. Third, they can feel comfortable that their physician bosses will use the same criteria in evaluating the manager's performance.

Physician Involvement - Initial Study of Guidelines

Physicians should closely review and study the guidelines. Then, in conjunction with the practice manager, they should modify any of the guidelines for their practice. Once that agreement has been concluded, it would probably be feasible to consider an initial evaluation in three to four months. Subsequently it could be done annually.

Physician Involvement in the Manager's Review

In a group practice, each physician should be provided an evaluation form to review, study and complete. In a group, one physician should be the coordinator of these evaluations. Caution: do not calculate a composite "total score." The purpose of the review is not to provide a report card. Rather it is, first, to recognize those tasks that are "meeting goals" and "better than goals." These merit being acknowledged and commended to the manager. Second, and most important, special attention should be addressed to any tasks "not meeting goals." These need close study. The physician(s) should seek answers to help solve the low-performance tasks. For example:

A. Many managers are also involved in non-managerial tasks (billing, collections, medical assisting, etc.) as well as managing. Are the non-managerial tasks interfering with the manager's performance? If so, can some of the manager's non-managerial work be delegated to someone else? Example: Can payroll be done by a service?

B. Does the manager need to do a better job of planning the work? Perhaps the manager allows too many interruptions from co-workers. Or, is the manager micro-managing employees who are capable of working under less supervision? In a group, one physician should be delegated to conduct the manager's annual performance review.

Articles

The practice manager and physician can benefit from a thorough review of a practice manager's performance. Here are first steps you should take.

Guidelines for Reviewing the Practice Manager's Performance

Physician compensation is a key source of physician satisfaction or dissatisfaction. And it is the number one reason why physicians leave groups.

Medical groups need the stability that comes from close attention to each group's unique requirements.

The most common failing is that emphasis is placed on actual plan design. What is needed is a set of clear-cut strategies to build the foundation for good plan designs. 

The following strategies are tools for your practice.

1. The Primary Goal of Your Compensation Plan is the Preservation of the Group

Physician turnover has destroyed many practices. Studies have shown that it costs more to replace departed physicians than their salaries. Additionally, potential replacements see red flags when being recruited to replace physicians who have exited. And, worse, it is not uncommon for the departed physicians to remain in the community or nearby, thereby taking "their" patients with them. This means that the replacement physicians have to build new patient bases. The consequence: The replacement physicians may require two to three years to make any real contributions to the group's overhead.

Consider this, in a six-physician group, you may have five happy campers and only one doctor who is unhappy.  As consultants, we have found that these less-happy souls are usually the top producers and want the formulas changed. A pleased majority is not to be interpreted that the formula is working. For example: we worked with a six-physician pediatric group where the high producer wanted the long-standing, equal-share formula changed to provide more reward for production. The remaining five partners had resisted for some time, since changing the formula would result in less take-home for them. However, if he left, all of their overheads would quickly rise, resulting in much less take-home than if he stayed. We also pointed out that a replacement pediatrician would not be as productive for some time.  For these five, it was choosing a little less income versus a lot less income. They chose to allow him greater rewards, agreeing to a production-based formula.

It helps to anticipate changes. In too many cases the physician requesting changes has expressed an interest in change, but has not made these requests formally and clearly.  At a later stage, this requesting physician, still unhappy with the current plan may be seeking a quick decision, only to be stalled - and decide to exit. An annual review with each physician member of the group may help pick up "early warning" signs of dissatisfaction.

Surgery groups usually have different formulas than primary-care practices that are, in turn, different than medical specialists. Some multi-location groups have found that formulas that apply to one locality may not apply to others. One same-specialty practice could be hard-charging; another, more laid back. For example, one of our client internal medicine groups, valuing time off, opted for eight weeks of vacation per year and is willing to take home less. Others thrive on production, working more hours per week and per year.  This is where the annual review, the one-on-one discussions with each physician, the review of production data, can all be combined to arrive at improved formulas, when called for.

These guidelines may help you address a critical part of group success. Before defining compensation formulas, focus first on simple strategies: 

- Recognition that not everyone is pleased with current or new formulas;

- An annual review with all group members to let them know that their opinions matter;

- Different groups may require different rewards and different formulas.

Many physicians and administrators know they cannot impartially review their compensation plans.

They often determine that these sensitive issues are best left to outside experts - who are not involved with the physicians on a day-to-day basis. Instead, they have relied on their accountants or practice management consultants.

Here are four strategies to make sure that your physician compensation does not fail and you find yourself having to replace a departed doctor. 

Why Many Physician Compensation Plans Fail

The recent escalation of patient deductibles and copays has made it more difficult for the patient to be ready to pay for services at your practice. It is important for practices to educate and guide patients regarding their copays and deductibles.

The clue to improve your front-desk collections is preparation. If your front desk does not collect from the patient while at the practice then you will have less revenue, weaker cash flow, and more work.

 Review the accounts receivable with the names of scheduled patients. Patients with still-outstanding balances should be given a reminder call or email that includes a reminder on the outstanding balance. Those messages ask these patients to call, by name, a billing staff member to confirm their appointment. When these patients call, they are reminded of the outstanding balance. With larger balances due, and some starting to age, patients are often asked to deal with these accounts in order to keep their appointments. This is why these reminder emails/calls need to be clear about the name and number of the key contact person in your billing staff.

 You may prefer to couple this with Step 1. All accounts of those scheduled should be reviewed. Most of the following three activities can be assisted by your clearinghouse. For each established patient:

- Determine their eligibility. Check if they are still actively in the plan. If not, a billing staff call to the patient should get more current data. And patient data can be updated at that time.

- Determine if any deductible is due. If so, this should be noted in the appointment schedule.

- Determine the amount of the co-payment. This should be noted in the appointment schedule.

Many practices are unaware that their clearinghouse systems can provide data on patient eligibility, deductibles, and copays. The following leading clearinghouse companies provide the usual claims submission functions, but also provide the data being sought in Step 2. Their customary charges, including all these services, are usually in the range of $80 to $125 per physician, per month. Clearinghouse companies: RealMed; Gateway; Navicure; and ZirMed.

These preparatory steps will lessen pressures on your front desk staff and will result in much improved collections results.

There are two simple steps practices can take to improve front-desk collections from their staff in the age of the high deductible. 

Two Steps to Take to Improve Front-Desk Collections 

In our years of practice management consulting with medical practices, we measure the financial performance of the practice. The same data can also useful to determine the effectiveness of a practice manager.

The helpful tool, the Monthly Financial Report, can be provided to all of the physician practice owners. It provides three measures of the health of the billing and collection process:

This figure represents the amount of money the staff is collecting out of the amount they have the ability to collect. The “Net Collection Rate” is computed as follows:

Payments $750,000 (Charges-Adjustments) ($1,000,000-$200,000) = 93.75 percent

The “Adjustment” figure is for “contractual adjustments”, i.e., the amount you have agreed to deduct, for the plan, from your regular fee: Copays, Deductibles, and Non-Covered Service Fees

In this example, the practice has not collected 6.25 percent of the moneys they should have. The goal of a support staff is to maintain a Net Collection Rate of 95+ percent. The national average reported for Ob/Gyn practices is 98.16 percent.

A healthy practice will have not more than 25 percent of its accounts receivable in the above-90 days categories.

This figure indicates how long it takes the practice to get paid by the plans and patients for the care rendered. The goal is 1.5 months maximum.

How to Calculate Your Accounts Receivable Ratio: Your A/R Ratio is your A/R divided by your average monthly billing, using your most recent three months. For example:

ii. Your prior three months’ billings were: August $67,000, July $57,000, June $74,000 = 3-month total $198,000

Divide by 3 for an Average Monthly Billing = $66,000

iii. Divide your September 1 A/R by your Average Monthly Billing

This means your A/R Ratio, on Sept 1 is 3.4. The A/R Ratio of 3.4 tells us that our A/R represents 3.4 months (102 days) of business. This is much higher than the A/R goal of 1.5 (months). The high A/R Ratio points to a need for the practice staff to undertake timelier follow-up on outstanding accounts with plans and with patients.

Your reports should be prepared and distributed to the owner physicians by the fifth of each month. Subsequently, at a monthly meeting of the physicians, the manager should review and explain the results of the report. And, the physicians should expect the manager to report the actions planned to improve the any performance short-comings.

What are some reports you can run to track the health of the billing and collection process of your practice, and how can this data be used to determine the effectiveness of your practice manager? 

Measuring the Financial Performance of Practice Managers

Recently, there has been more activity from hospitals and large groups interested in buying medical practices. My firm has performed a number of practice valuations for physicians who want to know the value of their practice as a benchmark for negotiating. In the process we have seen ways that physicians were able to improve their bargaining power - leading to better rewards.

We recently did a practice valuation for a solo internist in a small southern Texas City. She had been approached by an entrepreneurial local physician who was interested in establishing a large group practice that could increase its profitability by adding a number of ancillary services. As we were providing her with the valuation, she was contacted by the CEO of her admitting hospital. They were interested in providing a ready-made practice for a physician just completing her residency and interested in practicing in this community. Our client now had two potential buyers. The bidding for her practice increased its value to nearly 40 percent more than our valuation had reported.

So, if you are contemplating the sale of your practice consider the following tactic: Contact your most likely prospects to let them know that you are considering the sale of your practice and wanted them to know about it before you sell.

 Let your key hospital administrator(s) know of your plans. They may be forming a group or may want to provide this practice to someone interested in practicing in the community. They may or may not be interested in your staying on as a salaried physician.

 Contact each group or solo practice in your specialty. Let them know of your plans. A likely buyer could be one of these practices that wishes to expand by bringing in a new physician to take over your practice.

2.  Your EHR system has value; paper charts do not. 

We did an evaluation for a solo ear-nose-throat (ENT) physician who had not converted to an EHR system. He had a healthy practice in an upscale New York City suburb. However, some interested ENT physicians walked away when they discovered the paper charts. They recognized the immense task of converting these charts - one by one, as these patients came in - to an EHR system.

3.  If you own the practice facility, prepare for two sales.

Do you own your practice building or have ownership of your office space in an office condo? If so, you now have two sales to make. Here are your options:

• Sell the practice and lease the space. This overcomes resistance to ownership at this time. It also means that you are now the landlord. Following the sale, you could have your property in the hands of a property management company, who would collect rents and maintain the facility.

• Sell the practice and lease the space, with an option to buy at a future date (say five years). If the physician does not exercise the option, you can continue as a landlord or consider finding a buyer interested in investing in rentable space.

• Sell the practice and sell the space. If the practice buyer is not interested in ownership of the facility, consider finding a buyer. This makes sense if you are not planning to remain in the community.

Part of an agreement to purchase your practice may be the preference of the buyer (particularly in sales to hospitals) to have you remain at the practice as an employed physician. There are now two negotiations to consider:

When the hospital becomes the owner of your practice, there is no guarantee that the future performance of the practice will provide you with the same rewards as when you were the owner. We have witnessed hospitals doing a weak job of billing and collections, resulting in reduced collections and weakened net revenues. We suggest negotiating for a compensation plan based on your performance not the performance of the new owners. The model for a fair compensation plan is one based on relative value units (RVUs).

An example of this form of compensation follows:

This family physician produced approximately 10,000 RVUs per year.

The physician’s take-home income was $200,000 (i.e., $20 per RVU).

Therefore this physician deserves being paid $20 per RVU, and not have to depend on the billing effectiveness of his employer.

5.  Provide transitional marketing services.

One option is to sell the practice and turn it over to the new owner, who has to introduce himself to his new patients and to other members of the medical community. As part of the sale, the established physician adds value to the sale if he/she stays on for 90 to 120 days, and introduces the new physician to the patients and with the new physician, visits practices of referring physicians and other important members of the medical community, as well as key hospital administrators.

Interested in selling your practice to a local hospital or large medical group? Here are five tips from an expert. 