Joanne Tetrault


When Pamela Middleton left a comfortable job as a college professor teaching biology and immunology to start medical school, she had some 20 years' more life experience than most of her classmates. Her father had been a doctor, her mother a nurse. She'd been denied admission to medical school before, but when she read a newspaper article about people over 40 starting their medical training, she felt she "had been called." She applied and was accepted. 

She quit teaching, in part, she says, to get away from the paperwork. Now she laughs at that notion, ruefully. Middleton has been in private practice since 2001 and, seeming near the end of her rope, she turned to 

"Each year I have gone further into debt, working more hours and seeing more patients," Middleton wrote. "I don't know what to do now. I keep hoping that I can turn things around." Legitimate concerns, if not somewhat common - most likely shared by many of you. But there's more. 

At the time of this writing, Middleton's practice was in a state of upheaval. She'd been evicted from the office she rented in a nursing home ("I had no idea things could go so sour with a change in administrators," she says), and was starting over in a nearby space being reconfigured for use as a medical office, with just a handshake for a lease. In just a little more than three weeks, she and her staff of four would pack, move, and set up a new shop, all smack in the middle of the Christmas/New Year's rush. 

A new year in a brand new office seems the perfect opportunity to start with a clean slate, putting new processes in place and addressing some of the problems that have bogged the practice down. 

Middleton says she's willing to give medicine another five years, but has some hard work to do in the short term to put her practice on the right course. 

Her biggest hurdles? Middleton says they're organization and efficiency, keeping up with documentation, and paying off debts. There are a few other problem areas as well, namely a lack of leadership resulting in a scattered and unaccountable staff and the need to simply get a better handle on basic business functions like working and negotiating with business associates. 

 encourages our readers to include staff in decisions, delegate responsibilities, and avoid top-down hierarchy, we also consistently emphasize that you, the physician, are running a business and that, ultimately, your staff must look to you for direction and leadership. 

Middleton appears to have little authority when it comes to dealing with her staff; she hasn't clearly established herself as the leader of the business. Here are a few examples: 

Middleton says her receptionist "comes in last and leaves first. She wouldn't fill the schedule [to capacity] for fear she'd have to stay overtime. I asked her to use the office computer to make business cards for me. She did them at home and billed me." Yes, Middleton paid the bill. 

"I spent $500 to $600 on good surgical tools and one of the people I hired thought they were disposable," Middleton says. "They were all thrown away, piece by piece." 

Of her office/billing manager, Middleton says, "She is not very efficient or well organized." Middleton also doubts this staff member's motivation to follow up on denied claims. 

"My staff has not been getting prior authorizations for imaging," Middleton complains. "I have one patient with a $3,000 MRI and I have two others with expensive tests" that Middleton is unable to bill for, according to at least one payer's contract. 

Finally, "I had [a medical assistant] who was not adequately qualified for the job. For instance, we had [Pap] samples rejected for being improperly packaged. She didn't tell me she didn't know these things." Middleton fired her after two months. 


Middleton needs to establish clear expectations for her staff in terms of performance and accountability. She needs to give explicit instructions for what she wants done and how. And she needs to do a better job at screening candidates before hiring them. 

It may seem obvious, but checking a candidate's background is essential. Call references. Check educational institutions if you need to. We know of one practice whose "nurse" used her roommate's diploma to prove her qualifications. 

Ask candidates to perform basic duties, like rooming a patient, prepping a Pap test, or following up on a denied claim as part of the interview process. Watch them in action. 

Have the staff members who will interact with the person filling the position participate in the interview process and ask the candidate questions. It's helpful to have another perspective, and staff in the trenches may pick up red flags that you might miss. 

Put job responsibilities in writing, and tell new hires they will have to successfully complete a 90-day probationary period during which you'll assess whether it's a good fit. 

These apply to all positions, from MA to nurse to receptionist. 

Speaking of receptionists, Middleton appears to have fallen into the rut so many practices do: skimping on this key position. 

The receptionist is on the front lines of your business. This is the first contact patients have when coming in for an appointment or phoning in. The person you hire for this position needs to have the temperament to be able to courteously deal with frustrated, upset patients, and be given the authority to solve problems. More often than not, a 20-year-old working her first job isn't professionally mature enough to handle these responsibilities, yet that's who many practices hire. 

In Middleton's case, it seems as if her receptionist is lacking a basic understanding that the practice is a business and that Middleton is her boss. Turning patients away for fear of being too busy? Invoicing your employer for a task assigned to you as part of your job? Both would be grounds for a serious discussion with this employee about whether she is in the right place. 

Likewise, Middleton may want to give further consideration to the position she calls her office/ billing manager. "The office is a disorganized mess," says Middleton. "We spend an inordinate amount of time looking for charts. I have a tendency to pick things up, start them, then lay them down when I'm interrupted."

She realizes she needs someone with "stunning organizational skills" to focus on the day-to-day management of the office, and wants the person currently in the position "to reduce her hours and responsibilities, doing nothing but billing, and do it at home." 

Separating the office manager and billing manager roles sounds like a good plan. And Middleton's right - the office manager should be impeccably organized. However, we would caution against retaining someone as a part-time biller who, herself is not organized and apparently not very well versed in the basics of billing, collections, and coding, according to Middleton. 

At the very least, whomever Middleton decides will be in charge of billing needs to follow consistent procedures for tracking and resubmitting denied claims, stay updated on payer requirements like prior authorizations, and receive ongoing coding education. The receptionist must be trained to act as a customer service ambassador, and be equipped to assist in the collections process, including insurance verification and collecting copays at time of service. And Middleton - or, ideally, her office manager - will track their performance. 

When asked to name her most pressing financial problem, Middleton doesn't hesitate: "I have over $150,000 in bank loans and credit card debt." 


While she has been paying down her debt by working once a week caring for inmates at two local prisons, she really needs to take a look at the circumstances that got her into this situation in the first place. In short, Middleton appears to treat business transactions with the same sort of hands-off approach as she does dealing with her staff. 

The bulk of her debt load is tied to upgrades she made to the office at the nursing home she just left. "I made the biggest mistake of my life when I agreed to pay for the leasehold improvements in my office and then did not insist on a five-year lease, or [do] anything to protect my investment," she says. 

Still, at the time of our discussion, Middleton again had agreed to her new space, which contractors were redesigning to accommodate her practice, without having anything in writing. She says she and the landlord "shook hands on a five-year lease and an estimated maximum rent" of $1,400 per month, which Middleton's adviser believes is too high. The landlord is negotiating for a better rate from his bank so he can offer Middleton a lower rent, and has discussed the option of a "balloon lease." 

Our calculations put the rental cost of the new space at about $5.60 per square foot - a bargain anywhere, particularly with the addition of a bathroom as part of the plan. But we would strongly urge her to have the terms of the lease in writing so she can move to a regular payment schedule as her financial situation stabilizes. Otherwise, the variability of the rent payment could turn into a crutch. 

Middleton wants to see more patients, go paperless, improve staff efficiency, and add Saturday hours (as well as continue paying down her debt) to get to profitability. 

 
At her current pace, Middleton sees about 3,000 patients per year - about 20 percent below the median for ambulatory encounters for a family practice that sees OB patients - according to the Medical Group Management Association's (MGMA) 

Physicians Compensation and Production Survey, 2005 Report Based on 2004 Data

Middleton schedules patients from 9 a.m. to 12:30 p.m., then resumes from 2 p.m. to 5 p.m., using the 90 minutes between to catch up on prescription refills and phone calls. "I am in my office until 7 p.m. most nights, and work on weekends trying to catch up on paperwork, but I'm still behind," she says. Her goal is at least 15 patients a day. 

The "fourth exam room" is one way that Middleton could see more patients in a day and remain caught up on paperwork. This is how it works: 

Schedule three 15-minute slots per hour, reserving the fourth 15-minute increment to do dictation on those patients you've just seen, and answer phone calls. This should cut down dramatically on the amount of time needed to catch up at the end of the day. Your memory will be fresher, too, if you dictate closer to the time of the visit. 

Reserve an hour break at midday if you need to, but keep the telephones open. This may be the only time some patients have to call the office during their workday. 

During a 9-to-5 workday, you can see 21 patients using this model instead of the current 15. Based on a four-day workweek (Fridays are reserved for patients at the prisons), annual patient visits could be as high as 4,200. Some visits, like new patients, may require a longer, 30-minute slot, and the schedule can be adjusted to handle these. 

This system should also help cut down on staff interruptions and the resulting distracted physician. Middleton needs to make clear to her staff that she isn't to be interrupted while she's seeing patients unless there is an emergency. They can use the midday break to catch up on any issues or questions. 

Middleton can also implement same-day scheduling as she wishes, but needs to give clear guidelines to her scheduler. For example, she needs to decide how many slots to leave open each day, whether slots can be double-booked, and how to fill them. Some practices have trouble when staff start policing these slots rather than filling them as needed. 

 
Middleton wants to "improve staff efficiency so they don't feel overwhelmed seeing only 15 patients, and reduce the number of FTEs. They complain about how hard they work, but it must be they are not working smart," she says. 


Reducing the number of employees may not be the answer. According to the MGMA's 

Cost Survey for Single Specialty Practices, 2005 Report Based on 2004 Data

, the median number of full-time equivalent (FTE) employees is 4.59 for a family practitioner; Middleton has four. 

Improving efficiencies sounds like the route to take. With only a general idea about Middleton's staff, we would recommend, again, reassessing the office/billing manager and receptionist to be sure the right people are in those spots. Middleton should be able to rely heavily on an office manager to train staff, set performance goals, and monitor how they are doing. This manager should sit down with each employee and review their usual tasks and how they are done to find specifically where processes need to change. 

 
Middleton's thought is to offer a Saturday clinic, "but cash-only, and with no employees. I'm thinking about doing it in [nearby] Lexington, just so I can play country doctor." 

A noble thought, but would it mean leasing yet another office space, or subletting from someone? Either way, it would require an additional set of expenses and would likely add more administrative time to Middleton's already out-of-kilter schedule. 

She should also look closely at whether her Fridays working at the prisons pay better or worse than working in the clinic another day instead. 

Finally, if she is contracted with payers, Middleton needs to bill to them. If she wants to go cash-only, it seems she should do it at all locations, not just one. 

 
Part of getting to financial viability means stabilizing overhead costs. Middleton's monthly gross income averages $13,000; recent monthly overhead costs have varied from $11,000 to nearly $16,000. The percentage of Middleton's revenue that goes toward salaries is 44 percent, above the MGMA median of 31.5 percent for family practices, according to this year's data. Middleton's debts are dogging her; she needs to continue paying them down, getting lower interest rates if possible. 

She should also review staff salary norms (available for purchase at 

); it could be that she is overpaying a somewhat underqualified group. 

A monthly budget seems in order, too. That will help Middleton to keep tabs on funds coming in and going out; she'll see immediately if something unusual happens and also know what she can expect her income to be. She can also review her costs line item by line item. Can she save on supplies and services through competitive shopping, for example? 

Middleton and her billing manager - or financial adviser - should be sure no money is being left on the table by way of lost charge capture, undercoding, forgotten denials, and the like. Finally, Middleton should review her fee schedule to be sure she's charging what the market will bear. 

 
Middleton admits she has a weakness for technology. The office has five PCs, plus a notebook that Middleton uses; she has bought three PDAs. 

Middleton vows that in the new office, they'll start scanning and using a fax to send and receive prescriptions and refills. 

She has also been doing some research into an integrated management and electronic records package. Middleton estimates that switching to a new EMR will put her another $40,000 in debt. However, there are systems designed for small practices in more affordable price ranges. At this point, however, we would suggest first getting further out from under her debt before she incurs any more. (For EMR fee comparisons, click on the Buyers Guide section, then go to The Guide: Product Comparisons.)

Joanne Tetrault is Special Projects Editor for

This article originally appeared in the March 2006 issue of Physicians Practice

Articles

She started medical school at middle age. But life experience gave her little advantage when it came time to manage a practice.

The Great Practice Makeover: RX for Solo FP


Despite a rocky start, this practice has potential to take off - once it gains a tighter handle on operating costs and a clear vision for its future 

Five years ago, Elizabeth Gibbons took the kind of professional and financial hit that may have left other new physicians wondering if they had the stomach to stick with this business called medicine. After med school, she started in private practice under the capricious eye of MedPartners, one of many so-called physician practice management (PPM) companies that bought up practices and promised to handle all of the administrative and financial considerations, including providing needed leverage with HMOs. 

Sounded like a great deal, but in the late 1990s, MedPartners announced it was getting out of the PPM business to focus on the more profitable pharmaceutical sector. 

"It was kind of like the Enron of medicine," says Greg Gibbons, Elizabeth's husband and current practice partner. "Basically, they sucked up all the money and bolted. After five years of working with them, she was told she had about $100,000 in stock that went to zero. She went several months without getting paid. At the end of that she left, and I was just finishing residency. We thought, 'We need to try to avoid this kind of thing.' So, we decided to open our own practice. 

"It was very scary, but with [my wife's] five years in private practice she had a pretty good idea of what was required to run the medical part. We hired a consulting firm to help us jump through all of the legal hoops, get us set up with supplies, [and do] all the paperwork to open the business," says Gibbons. 

Today, Gibbons Family Medicine is five years old, has more than 6,000 patients and a staff of 12. Greg Gibbons sees patients four days a week; his wife, two days a week; and their two nurse practitioners more or less mirror those hours. The recent shuttering of a handful of practices in the surrounding Raleigh-Durham, N.C., area means a likely increase in the practice's usual 100 new patients per month. 

Luckily, the practice doesn't appear to be mired in sticky personnel problems like so many others who've asked Physicians Practice for a makeover. 

"[The physicians] are just wonderful and we have great employees," says practice manager Cindy Howard, who's been with the practice from day one. 

Greg Gibbons agrees, but despite collecting more than $800,000 a year, says it sometimes feels like he and his wife are "barely scraping by on a month-to-month basis. We have a wonderful practice with excellent staff and very high patient satisfaction. My wife and I love what we do, but it's clear we need to do something to ease the money crunch." 

According to the Medical Group Management Association (MGMA) Cost Survey: 2004 Report Based on 2003 Data, the median total medical revenue per physician for family practices is $369,313 - so Gibbons and his wife are ahead, at least on paper, assuming they are measuring the same way as MGMA. 

Still, Gibbons says he's feeling the pinch, and specifically asks for help in:

The Gibbonses and Howard - like thousands of you in their shoes - find dealing with commercial payers an exercise in exasperation. It got bad enough with one, United Healthcare, that the practice decided to stop accepting new patients in its network. Among other things, the payer dropped its rates for a physical exam to well below Medicare, according to Gibbons. 

The fact that a few practices in the region had closed convinced Gibbons that he could afford to cut ties with United. 

"We're fairly busy already so we didn't think losing United was going to hurt our patient volume. We're getting 100 new patients a month. When we looked at the contract they were offering, it was just really awful. With all these other practices closing we were going to get this big influx of people with United, and it would hurt us." 

That's one way to look at it, but it's possible a few of those folks with United coverage will be hard-pressed to find a family physician they like unless it's Gibbons Family Medicine. That puts the practice in a better position to negotiate. Unfortunately, Gibbons doesn't feel that the practice has a lot to bring to the table. 


"Most of the time [payers] just say, 'Hey, too bad, take it or leave it.' They don't care. It's not like we're going to hurt them with our 6,000 patients. We don't really have a whole lot of leverage other than patient satisfaction," says Gibbons. 

Actually, there are a few additional approaches to consider to get the most out of payers: 

 - It's easy to feel resigned to the idea that payers will just pay what they will. What's the use in revisiting your fee schedule? Well, for one thing, if you don't raise your fees, the payers will keep paying you at that rate, even if it becomes lower than their allowable. An orthopedic surgeon we know was routinely charging $31 less than the allowable on a certain service, adding up to a loss of more than $5,000 a year. 

Gibbons has been fairly good at doing this: Howard reports they've just raised their fees for the third time - amounting to a 17 percent increase - over five years. It's just enough to keep a hair's breadth ahead of the cost of living, which, according to the Bureau of Labor Statistics, increased 13 percent from 1998 to 2003. The practice should make a point to reexamine its fees annually. 

 - This goes hand in hand with having an up-to-date fee schedule, and it's the best way to know if you're being paid correctly. Know the exact dollar amounts payers will pay, and don't just rely on the payment formula (say, fees based on X-percent of RBRVS) that's in your contract. Put together a listing of the 20 to 25 codes that make up the bulk of your revenue, and ask the payer to fill in its most current allowable for each. When you have a good picture of who's paying what, that will help you determine whether your payer mix is well balanced, and whether cutting back with a particular payer - as Gibbons did with United - will have an adverse or positive effect. For instance, if you know that Blue Cross pays, on average, $75 per encounter (based on the services that you provide) and Cigna pays $95 per encounter, shifting 5 percent of your payer mix from Blue Cross to Cigna will mean an increase in revenue of about 25 percent. Consider the hassle factor, too. If a payer brings 10 percent of your revenue, but takes up one-third of your biller's time, reconsider. 

 - If you can prove to payers that you're doing a bang-up job following clinical guidelines, go for it. One cardiovascular practice we know was able to prove to a payer that it was compliant with beta-blocker and ACE inhibitor prescribing guidelines in 94 percent of cases and with 3,000 patients - not the 74 percent the payer surmised from diagnosis and CPT codes on a tiny fraction of the practice's patients. Of course, gathering this quality of data is much easier with an EMR, which Gibbons does not yet use. Still, it's possible to track outcomes on a given set of patients - say, colorectal or breast cancer screenings on patients over 50 - and show your track record to payers. It'll force you to be more vigilant about doing those screenings, too. 

 - Gibbons says he wouldn't mind adding a service or two, but worries it would be a money pit rather than a cash cow. "A culture counter so I can do CBCs in the office would be a fantastic thing for us and the patients, but we never know if the insurance company's going to pay for it. If they don't, we could lose $20, $30, $40 every time we do it. And the machine costs $25,000. So things like that are very tricky," he says. 

But unique or additional services are just the thing payers will look for to assess a practice's value to its covered patients. 

Before adding any ancillary, it's imperative to have a written plan and analysis that includes cost, expected use, and anticipated return. Look at the community's needs: How many potential customers do you have, and what's the competition for the service you're considering? How will you get paid? For instance, if Gibbons is considering an in-house lab, it's important to consider that some payers bundle basic in-office lab work into the E&M or preventive visit. Will the new service make money? A detailed financial analysis is in order, including costs for training, equipment maintenance, or additional personnel costs, if necessary. Think outside the box. Family practices are doing DEXA scans, adding in-house pharmacies for generics, performing digital X-rays and pulmonary function tests. 

 - Howard complains that she doesn't "know the jargon to fuss with [payers] about fee increases and things like that. I just don't know how to counter them." Gibbons says his single dedicated biller, Felicia Marsh, is "the only one who has a first-name relationship" with payer contacts. That's a good start, but if Howard is going to assist in the billing process, as she does by checking claims and resubmitting denials, she needs to be as well-versed as Marsh. They both should work to establish cordial relationships with the payer contacts - after all, you can catch more bees with honey, as the saying goes. It's key to know who to go to to get questions answered - and crucial to understand the interests of the payer when it comes to contract negotiations. And keep detailed notes on what transpires during your calls to them.

Of course, another way practices can ease a cash-flow crunch is to take a good, hard look at their coding processes to determine if they're leaving money on the table. Like so many others, Gibbons finds the coding system "completely inexplicable - modifiers and bundled charges are the first two mysteries that come to mind," he says. 

As far as coding education goes, Gibbons says the practice "gets a couple of newsletters" and, of course, a new CPT codebook every year. Still, he feels frustrated; inaccurate information has been part of the problem. 

"One of the things the consultant was supposed to do for us was give us good codes for standard things. After we were up and going for a year or so, and I started looking at them and many of them were just downright wrong, and a bunch of them were getting us far less than we should have ... ," says Gibbons. 

For example, the consultant gave the practice "a global code for supplies, which has nothing to do with what supply it is and how much it costs us." A common service like injections is a money-loser too, according to Gibbons. "For Pneumovax we were losing about $50 every time because it's not reimbursed. That was something that the consultant told us that was just wrong information." 


There are RVUs for injections, but they are only paid if there are no other services payable under the physician fee schedule billed on the same date by the same provider. Otherwise these services are bundled into the service for which payment is made. And keep in mind, this applies to Medicare, a fraction of the practice's business. In this case, Gibbons needs to do some digging to understand why private payers aren't covering it. It's important to realize that there is a world of difference between correct coding and actually getting paid. Private payers may not strictly follow CPT rules, or they'll establish their own rules about payment. The only way to know for sure what will be covered is to call payers and ask questions. 

That said, here are some tips for navigating the chaotic world of coding: 

 - Is there any recourse when a payer bundles two charges into one (usually smaller) fee? Some. If you're treating Medicare patients, you must have the "Correct Coding Initiative (CCI) Edits Manual," available at 

 and embedded in most coding software. Four issues will run you $300. It will help you make some sense of commonly bundled pairs. Medicare also publishes status codes every year in its fee schedule (go to 

). Commercial payers may not necessarily follow Medicare's lead, and will have their own bundling rules, which they may not readily share with you. To dispute bundled claims, try sending appeals letters that include backup from Medicare, your specialty society, or the AMA. 

 - Thankfully, Gibbons uncovered the bad coding information he had before too much time had passed. It's important to stay as current as possible. Buy the new CPT and ICD-9 code books every year and change your encounter forms to reflect the new codes. And make sure physicians and billers/coders are familiar with the official code descriptions, rather than becoming too dependent on the summaries on your encounter forms. 

 - One practice consultant we know estimates that practices typically lose 12 percent of revenue to undercoding, many because they get stuck in a middle-of-the-road approach. That can mean about $70,000 per FTE physician based on median total medical revenue. In both family practice and internal medicine, 99213 is the most-used code, according to the Medical Group Management Association (MGMA). Can you do better? Probably. Get to know how the increasing levels of complexity for office visits are defined. Once you're familiar with them, use a cheat sheet, and check yourself regularly. 

Specifically, Elizabeth Gibbons probably would benefit from understanding the rules regarding selecting an E&M based on time. She tends to focus on patients who are anxious, depressed, or have other psychosocial issues, and spends a lot of time counseling. If she spends more than 50 percent of a given visit counseling, and documents carefully, she can probably select a higher E&M based on time than she could based on the complexity of the visit. 

 - Why? They can help you get paid more by adding a layer of detail to the service you provide. Here are some common modifiers and what they mean: 

-24 applies to an unrelated E&M service provided during the postoperative (or global) period by a single physician. 

-25 applies when a significant, separately identifiable E&M service is performed by a single physician on the same day as another procedure or other service. 

-51 applies when multiple procedures are performed during a single visit. 

-76 applies when a single physician repeats a procedure. 

-77 applies when a procedure is repeated, but by a different physician. 

 - Take advantage of coding courses like those offered by the American Academy of Professional Coders (

), including workshops and certification. 

Gibbons worries that there will come a day when staff costs will outpace the practice's revenue. Staff get annual raises and enjoy a nice benefits package that includes dental and health insurance (the practice pays more than 80 percent), a 401(k) plan, and a flexible spending account. 

"If we can't get the insurance companies to pay us any more per year, and we have to keep giving everyone a raise, what are we going to do? [Elizabeth and I] are going to have to take less and less for our own salaries. We'll make less and work harder to make ends meet. I don't know what the answer is," Gibbons says. Sound familiar?

Here are a couple of suggestions: Consider making pay increases merit-based, rather than simply giving cost-of-living increases. That way, staff members will have greater incentive to do their best, and raises won't come to be expected. The same goes for practices that give year-end or holiday bonuses "just because." It creates a situation in which everyone is rewarded regardless of whether they've pulled their weight - a sure way to make morale plummet, especially among your hardest- working people. Set specific performance goals for each person and review frequently how they are doing. 

Tie staff rewards to financial goals. Billing and front-desk staff, in particular, are positioned to improve the flow of cash into the practice. Set goals for submitting clean claims the first time, number of claims worked per day, collecting copays or reducing days in accounts receivable. Then be specific about the reward - a percent of collections, say, or a predetermined amount per claim. 

Are staffing levels right? Counterintuitive as it sounds, the most efficient practices have above-average support staff per physician. On the flip side, could the practice gain efficiencies through technology? Larger practices we know have saved tens of thousands of dollars by reducing medical records staff and eliminating costly chart pulls with an EMR.

Finally, Gibbons wants to be sure the practice's overhead is in the right place, and that the group can develop and maintain a consistent budget. 

"We've never had a strong monthly budget," says Howard. "I really try to compare [office supply] prices and stay on top of ordering medical supplies. The regular bills like the light bills and the phone bills stay pretty constant so that's not a big issue. Trying to keep supplies under control is one of the main things." 

The fact is, the bills - more accurately, the payroll bill - appears to be an issue. The percentage of the practice's revenue that is going toward overhead is too high. According to The MGMA Cost Survey: 2004 Report Based on 2003 Data the median percent of revenue as overhead for family practices is less than 58 percent. But according to figures Gibbons supplied, 60 percent of its revenue is eaten up by salaries alone. Add equipment, supplies, insurance, utilities, etc., and a whopping 93 percent of the practice's revenue goes toward total operating costs. It's true that, in general, costs for family practice are on the high side. Still, the practice should examine its staffing and salary levels and other expenses to get more closely aligned to national averages. 

The practice is paying down a mortgage on a two-unit condo and has refinanced at least once for a better rate. "We often look at that and say, 'OK, we're not making as much as the other guys but we do [own] the building,'" says Gibbons. 

Owning the building is fine - it means the practice is building equity, although industry consultants warn that properties used as medical offices don't appreciate the way residential properties do. 

Maintaining and periodically analyzing a budget is a great way - too often neglected, especially by smaller practices - to keep an eye on revenues and expenses. 

The number of office visits and procedures needed to meet your practice's earnings goals. 


New services that will bring in more profits or that will attract more desirable patients. 


Services that will be reduced or eliminated because of changes in staffing or payer contracts, or competition. 


Ways to improve coding accuracy, charge capture, and collections. 

Changes in routine expenses - rising supply costs, expected changes in patient volume, or changes in practice contributions to employee benefits or compensation. 


The addition of new equipment or vendor services such as medical equipment, computer software or hardware, copier service, or other contracts. The practice plans to add an EMR within a year or so. This expense is a major concern for most practices, but it should also be considered an investment in the practice's future efficiency and profitability. 


Decreases in expenses resulting from expired maintenance or service contracts or loan/lease payoffs. 

Finally, the Gibbonses should at least reflect on the negative effect of physician time off on cash flow if they continue to feel strapped. Between the two of them, Greg and Elizabeth Gibbons work six days a week. That said, Elizabeth is very clear that the couple has made certain choices about their lifestyle: "We made a conscious decision - our goal is not to have a new car and a big house, but have an enjoyable life and promote values we reinforce with our patients." Still, is it possible one or both of them could manage another day, or even half-day, say on Saturday mornings, when working patients might prefer an appointment slot? 

These are terrific goals to have, ones they have met well. But at some point in the future - for other practices in the same boat - expanded clinic hours may be a consideration.

Joanne Tetrault is special projects editor for Physicians Practice. She can be reached at 

This article originally appeared in the January 2006 issue of 

A rocky start, a promising future. Practice needs to balance low-key, family approach with tighter financial control.

Gibbons Family Medicine

Just what is it about OB/GYN Associates of Northwest Alabama that sets it apart? 

I labored over that question (pardon the pun) as I sat down to report on this year's Practice of the Year competition - an annual event we introduced in these pages in 2002 to give our readers a chance to share their success stories. 

It wasn't just that this practice has achieved significant, measurable gains since introducing an EMR in 1999 - or even that they were one of the first offices in a "technologically infantile" region to automate, according to executive director, Charlie Lathram. This year, 52 percent of Practice of the Year applicants had similar success stories with their EMRs and told us about them in detail. It's great to hear that the promises of technology are generally real and the results tangible. But it's not really news like it was a few years ago. 

It wasn't that the group operates under a physician productivity and compensation formula that one of the contest judges called "the hardest management accounting tool to use but the best at ferreting out true costs and allocating them to doctors." Lathram likes the formula because it "gives physicians a choice in the way they practice." And Philip Wakefield, a physician who's been with the group for 19 years, insists it has instilled in the doctors "a better sense of cooperation and a better sense of each other's needs." Not only that, says Wakefield, "It encourages everyone to see their share of indigent patients without fear of monetary loss." 

And it wasn't even that the practice sends a single rose to each patient in the hospital who's just had a baby. A nice touch, to be sure - coincidentally, runner-up practice River Rose OB does this as well. 

What ties all the pieces together is a sense that OB/GYN Associates of Northwest Alabama simply does a terrific job at anticipating and responding to what its patients need - perhaps even before the patients know or ask. 

. It's got online appointment scheduling, online prescription refills, and all the pre-visit forms a patient would need, including consent for use and disclosure of health information and a detailed patient privacy statement to meet HIPAA requirements. There's the option to ask questions online about insurance coverage, or to translate information on the site into Spanish. 

For now, Lathram says, traffic to the site is light and many features go practically unused. "We have patients in college in Tennessee, Mississippi - as far away as Virginia. For them to be able to request a prescription refill without making a long-distance phone call is very helpful," he says. The point is, just because the majority of its patients aren't Web savvy doesn't mean the site has to reflect that. The practice created a site with lots of patient-friendly features, rather than slapping together a bare-bones site that's not of much use to anyone. 

In response to patient requests, the practice is following a slow, deliberate plan to add cosmetic procedures like laser hair removal and vein therapy to its list of services. "We have been hesitant, just from a time standpoint, because we're so busy in the practice of OB/GYN medicine," says Lathram. "And we wanted to do it in a way that didn't 'commercialize' medicine." Since purchasing the laser last January, the practice has been training its nurses, and Lathram feels they're sufficiently up to speed to start taking clients. 

"We're starting to market [it] by giving discounts on the procedures for hospital nurses - to build clientele we may not have currently, but also to build good working relationships with the staffs of both hospitals we work with. And we have a segment of our [patients] who go to surrounding cities to have these procedures done. I think it will justify itself financially," he says. 

For incoming patient calls and any other situation in which a patient needs an answer, "We have things that patients typically need available so we can answer that patient call the first time. We realize that our patients have busy lives and we like to provide alternatives to save time and administrative burdens along the way," says Lathram. "Patients can work us into their schedules, and not the other way around." 

When it comes to the needs of its mothers-to-be, the practice really delivers the goods. It's called a Special Delivery Bag, and it's given to each patient at her first obstetric visit - a four-pound canvas tote bag filled with educational materials and discount coupons for everything on a Mom's list: maternity clothes, baby clothes and shoes, diapers, furniture, formula, vitamin samples, a safety kit with light socket covers - even a voucher for baby's first birthday cake. 

Chief financial officer Lynda Rohling brought the idea to the practice from her days working in a hospital. More than 100 local and national businesses participate, and all staff members are asked to try to bring one or two new businesses on board. And when things slow down a bit in the office, say, on Friday afternoons, small groups of staff members gather to assemble the bags. "With six people working for about two hours, we can put 100 to 120 bags together," says Rohling. 

"Lamaze provides a world of information [for the bag] in both English and Spanish," she adds. "Enfamil, the formula company, provides a book called Baby Grows, which shows the growth from conception to birth. The mothers ask for this book." 


Not only is the Special Delivery Bag a selling tool for the practice, according to Rohling, "our mothers tell us it is a great way to be introduced to businesses and resources in the community." It tends to have an extended life, too: "I've seen them in Panama City [Fla.] being used as beach bags," she says. 

Expectant mothers aren't the only ones who get special attention from the staff. Patient care coordinator Rosanna Ledbetter spends about five hours a week helping needy patients get the prescription drugs they couldn't otherwise afford through pharmaceutical company-sponsored patient assistance programs. 

"I have about 150 patients that I work with. A lot of them are on fixed incomes. I help them complete the applications and gather financial information and documentation so they can get their medicine," says Ledbetter. One patient, who comes in to do paperwork with Ledbetter about every three months, is particularly grateful. "Whenever she comes in, she brings me a vase of flowers from her garden," Ledbetter says. 

Ledbetter, an RN by training, has been at the practice for 13 years, and her position was one of many that changed following the practice's EMR implementation. 

For example, says Lathram, "The EMR allowed us to take personnel who used to file charts and put them in different spots. We had a dramatic personnel reduction as a result, but we did not terminate anybody. We had some very good medical records staff that we began to use in the clinical area as runners or nurse's aides. They already knew the practice. ... Just teaching them the clinical side really cut back on the training of a new hire. And I love to hire from within. 

"The biggest gain was to be able to use Rosanna in a different scenario," he adds. "Our clinic schedule is typically packed, and our physicians have little free available time to work [unscheduled] patients in. As patient care coordinator, Rosanna is like another provider. She sees walk-ins, follows up on lab results, gives hormone injections, counsels patients on everything." 

Notably, Ledbetter has completed prerequisite work in becoming a board-certified lactation consultant. "In this area of the state, very few people have that designation," says Lathram. 

The extra care and attention Ledbetter provides isn't lost on patients. "They know my number and name; they keep my pager number in their phone book. They know they can speak to me and get an answer," she says. "It's very rewarding when a mother calls to tell me that the breastfeeding is going well and the baby is thriving. I know that I had something to do with that and it makes me feel great." 

When patient demand for care grew in a nearby community, OB/GYN Associates responded by opening a satellite office. "There is certain community loyalty to both hospitals, so we wanted to participate with both [Eliza Coffey Memorial Hospital in Florence, Ala., and Helen Keller Hospital in nearby Sheffield]. In order to do that we had to have an office in both communities," says Lathram. 

He says the satellite operates on a slightly smaller scale, with some diagnostic procedures and ultrasound, but not "the full gamut" like at the main office. Some staff are stationed there permanently; others rotate. The office procedures and systems are identical. 

"We have one GYN-only physician stationed there, and one full-time nurse, plus one receptionist and one supervisor [at the satellite]," says Lathram. Doctors who are on second call work from the satellite, and to ensure proper staffing levels and a continuum of care, the physicians take their "nursing teams" with them. 

"Each doctor has two nurses assigned to him," Lathram explains. "They have a primary nurse whose responsibilities include making sure H&Ps are done, records are where they need to be, the physician is where he needs to be, and keeping up with his schedule. The 'runner' keeps the rooms turned over. They interview the patient, perform documentation, and have that patient ready for the doctor to see." 

This kind of teamwork functions on the administrative side, too. Front- versus back-office sniping is all too common among medical practices, but not here. "[Front-office supervisor Kathy Compton] and I sit down and talk a lot," says Rohling. We don't want to make individual decisions that will have repercussions for the other. We have great respect for one another." 


Ledbetter adds, "We all work well together. We're more like friends, I guess." 

And it shows in the long tenures of most of the staff. "I'd say the average employee has been here five to seven years," Lathram guesses. "We've got some employees here 25 years. Among my management team, I'm the newest - I've been here eight years." 

It helps, too, that the practice offers a competitive benefits package that includes no-cost long-term disability insurance, life insurance, and a matching 401K plan. And there's a little bit of time set aside for fun. 

"Every year we try to have a picnic at one of the physician's farms for employees and their families, with a barbecue and a hay ride. It's hard with this many people on staff, but we try to keep it as close to a family atmosphere as we can," says Lathram. 

Of course, none of the detailed attention to patients or the harmony among the staff would matter much without the work of the physicians. And their satisfaction counts for a lot. One way the practice has addressed it is by altering its physician compensation formula to be friendlier to individual styles of working. 

"Before, the profits and expenses were shared evenly among all the physicians," Lathram explains. "It caused a lot of dissatisfaction. The current formula provides a balance - it provides incentives for individual work, and does not consider specialization, length of time in practice, or payer mix. It does, however, allocate costs to the physicians based on utilization." 

The new system, as Lathram says, allows physicians to decide whether to come in and work, or take some time off. 

"We had physicians working at all different paces - some enjoyed time off more than others - and equal compensation was not appropriate in those situations. Now, if you take time off, you're not generating revenue, so no revenue is allocated to your inbox. At the same time, you aren't incurring variable expenses, so it doesn't necessarily hurt you to take time off. 

"We came up with a point system, basically, in which we allocate points to the CPT codes the physicians perform. At the end of the month, we take all the revenue the doctors have generated and put it into two pools: one is split evenly so as to encourage teamwork - 'I'll see your patient, you'll see my patient.' The other pool is allocated based on each physican's pro-rata share of points generated toward the total number of points," says Lathram. 

It works, according to Dr. Wakefield, to build cooperation among the physicians. For instance, when he wants time to see his child's baseball game, "I have a trade-off. I know I'll be covered, and I'll cover for the other guys when their kids are playing." 

The practice, too, has remained relatively unscathed by sky-high malpractice premiums, which hit OB groups particularly hard. 

"It's affected us negatively, of course," says Wakefield. "Our rates, while they have risen, have have not risen as agressively as in other areas. I sit on the board that reviews claims against our malpractice carrier; we meet quarterly and we fight very aggressively. 

"And in the practice, we simply work smarter and we're very alert to risk management. People at the practice are very motivated to bond with patients." 

This article originally appeared in the November/December 2005 issue of

2005 Practice of the Year: This OB practice really delivers the goods! Learn how its total patient focus put it over the top.

Oh, Baby!

You might say Dr. Peter Barnett is a persuasive man. After all, he was able to convince a patient with hemophilia, who is also a Jehovah's Witness, to undergo a life-saving blood transfusion, which is generally forbidden by the religion's teachings.

Barnett, an internist and assistant professor at the University of New Mexico, says the 18-year-old patient, who was used to being hospitalized about four times a year for severe bleeding, just didn't believe what the hematologists were telling him about the severity of his condition.

"He'd never been transfused and was always told he was about to die. His experience was the doctors were always wrong and he was always right," Barnett recalls. "I asked him if he could imagine a situation where he could take blood. I was trying to understand how black and white his beliefs were. And he said, 'It would depend on whether I thought I was going to die.' " 

In fact, the patient's condition was grave, so Barnett sat down and explained the whole transfusion process. "I didn't push him," Barnett says. "Three days later he changed his mind." 

This wasn't a matter of the clinician forcing his own agenda on the patient. Barnett, a faculty member of the American Academy on Physician and Patient (AAPP) - an organization that promotes "relationship-based healthcare" and provides communication skills training to physicians - was simply exercising "accurate empathy," what he considers one of the cornerstones of good physician communication. It means eliciting a clear picture of the patient's values, beliefs, feelings, and preferences to set the foundation for the medical visit. 

Barnett and others are embodying this modern twist on the old concept of "bedside manner," and using strategies to enhance their dialogue with patients to ultimately provide them with better care.

Before you decide you just don't have time to talk to your patients about their feelings, consider that "the time you spend up-front frequently saves time later [in the form of] phone calls, questions, and complaints," according to Barnett. Other physicians agree.

Jenni Levy is an internist who's also a course director for the AAPP, and trains residents at St. Luke's Hospital in Bethlehem, Pa. When she suggests to her charges that they just let patients talk about what's on their minds, their response is: "I'll be there forever." 

Wrong, Levy insists. "The literature is really clear about this. For the vast majority of patients, if you ask them, 'What brings you in today?' and let them go until [they] run out of steam, the most it's going to cost you is 90 seconds." 

Granted, "What brings you in?" is a little different from Blood Transfusion 101. But the underlying premise is the same: Get agreement with the patient from the outset about what you're going to accomplish and how, and you'll save time, reduce frustration, and likely have a happier and more compliant patient.

You may assume you know what the patient's problem is and what he wants you to do about it, but until you ask, don't be so sure. 

"Take a minute on the front end and elicit all of the patient's agenda, without [focusing] on that first or second complaint. Then negotiate that agenda based on what's realistic," says Barry Egener, MD, medical director for the Northwest Center for Physician-Patient Communication in Portland, Ore. "It takes two or three minutes at most, then you have a common ground to get the work done. The alternative is not to develop a specific agenda. Then you may be surprised by an agenda item at the end of the visit." Most physicians recognize this as the dreaded "Oh, by the way ..." moment that often occurs just as your hand is on the doorknob.

The approach works, especially with difficult or needy patients. Levy cites the example of one upset patient with multiple medical problems and plenty of hard-to-address symptoms, who had been recently hospitalized for a blood clot. 

"At the beginning of the visit, I said, 'I want you to tell me everything. Let's get a list and figure out what we're going to deal with.' A couple of things we put aside because we weren't going to have time and they really weren't as important to her.

"At the end, she said, 'You've given me a lot of information and I feel much better about what's going on.' I did nothing from a medical standpoint to alleviate any of her symptoms, many of which I can't. But because she feels like I really listened and I addressed her concerns, that made it OK."


This kind of interaction helps Levy manage her time during individual appointments and throughout the day.

"My patients will tell you I spend a lot of time with them," she says. "I generally don't spend more than the typical 15 minutes, but it feels like more because they get to say what they need to say and I respond in a way that tells them I'm listening. The time we use is much more valuable to them."

Suppose the patient brings in a laundry list of problems to address. "Prioritize the list," says Barnett. Schedule another appointment if necessary.

"You're actually asking [the patient] to share with you the burden of managing the time," Barnett adds. "Most patients will respect this."

The weepy patient. The patient who just doesn't get it. The agitated patient who, you think, is about to throw your schedule hopelessly off-track. Every physician's experienced this type of situation.

"Ignoring it is not going to make it go away," says Levy. "It's going to subvert everything else you'll try to do in the interview. And it's going to drive repeat visits." 

Instead, face that patient head-on. "I'm very direct about this. I'll say to the patient, 'It really feels like you and I are not seeing this the same way. What's your understanding of what's going on here?' and the patient will have some completely different impression of what I've said or what I understand," says Levy. 

To respond to a patient's emotions in an effective way, she recommends trying what she calls the NURS technique: 

NAME the emotion: "It looks to me as if you are sad/angry."

You don't have to have the personality of a talk-show host to communicate effectively with your patients. A few simple skills, practiced consistently, make for better outcomes.

Author | Joanne Tetrault

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