Paul Angotti

Does it ever feel like your practice is stuck in crisis mode? You spend valuable time putting out procedural and administrative fires when you should be concentrating on your patients. And that's just the beginning. There's never time for creative thinking or long-term planning - critical to the practice's growth and financial health. For many physicians, it's become just a matter of surviving the chaos, one day at a time.

I know what it's like, having witnessed it with practices I work with. How would your office respond to the following?

The office manager has been in a serious car accident and is in intensive care. Payroll is due tomorrow and she is the only person who knows the password to the accounting system. 

A physician's medical license or credentialing just expired. Both renewal forms were in the pile of mail that nobody's been able to get to. 

There's a major computer glitch, the office has lost electrical power, or there's a medical equipment malfunction, and no one knows what to do. 

The physician's plane was grounded Sunday night and she has a full schedule Monday morning. Does anyone know what kinds of appointments should be rescheduled and which ones should be handled Monday by another provider? 

Your staff is there to support you as the physician. Each one of them should have a pretty good idea of what to do in a situation that needs immediate attention - if not to resolve it themselves, to know who to see or where to go to get it done. And forget about the "it's not my job" syndrome. Better-informed employees make ... well, better employees. Fewer emergencies will mean a much more pleasant working environment - as well as fewer patients who pick up on the tension and wonder about the competency of your practice.

In short, mobilize your staff; train them to respond quickly and professionally to the crisis of the day. Eventually, the urgency of these crises will fade.

One of the best ways to empower staff to get things done on their own is to have written procedures that everyone understands and follows to a T, every time. You need written procedures for all routine operations - appointment scheduling/rescheduling, computer system backups and power failures, and recurring financial activities such as payroll. Have staff make a list of all the activities they do on a regular basis and how they go about completing them. It's a good opportunity to step back and see if there are better ways to do things and, in the end, to get all procedures in writing. 

 - Start by making sure your office has a list of contact information for all vendors, contractors, and consultants - any outside people you do business with. It should include names, phone numbers, e-mail addresses, account/contract numbers, and a description of what that person or company does for your practice (e.g., Internet troubleshooting, cleaning service, building manager). Post it in a few accessible locations throughout the office, and make sure everyone gets an updated version whenever changes or additions are made. 

 - Power failures are not uncommon, particularly during spring and summer electrical storms. If your practice has battery backup for critical equipment, a power failure generally requires an orderly logoff of people from computers and a shutdown of some equipment. 

A few strategically connected backup units can avert a lot of potential crises. Have battery backup units for the computer server, critical workstations, the phone system (if you use PBX), and medical equipment that must stay on during a procedure.

Show the entire staff how logoff and shutdown must occur and, with written procedures as reinforcement, cross-train enough personnel so the process can be completed even when you're short-staffed - say, during lunch breaks or late clinic hours.

If your practice relies on a big, heavy-duty copier that always seems to need a repairman, consider buying a small desktop copier and establish an account with Kinko's or another local copy store as a backup.

 - What's more frustrating than being in the middle of a procedure only to find the necessary sutures aren't in the drawer where you expected them to be? Avoid expensive overnight shipments and rush trips to the office supply store by establishing an inventory system that includes an order point for each item. An order point is the minimum quantity of an item to have on hand; once it is reached, it should trigger an order so new items arrive, with reasonable shipping costs, before the supply is depleted.

 - The long-term benefits of cross-training are well worth the time and effort. People can cover for each other during vacations, illnesses, or unexpected departures. But there are other benefits, too. People tend to enjoy work more when they have the opportunity to do a variety of tasks, and it gives them a perspective and appreciation of how each individual fits into the larger team.

 - There's no excuse for missing credentialing deadlines or payroll, or having scheduling mishaps when a physician is out on vacation. There are plenty of easy-to-use electronic calendars such as Outlook, ACT, and Goldmine that are just made for putting all key dates in a central, accessible location. Some practices use their office scheduling system to post daily administrative reminders - just create a provider named "Administration" and input key items. Use an old-fashioned paper calendar if you have to, but be sure key activities and deadlines are written down and visible well in advance. 

Several months out, note when medical and DEA licenses expire, recredentialing is due, and contracts and leases are up for renewal. Include regular tasks like transferring money to the payroll account on designated days of the month. See at a glance who's on vacation and when to avoid scheduling jams.  

Once you've got the chaos under control, you'll have time to think creatively, and make plans for the future of your practice. What kind of practice do you want to have? Where would you like it to be in one, three, or five years? Every practice, regardless of size or ambitions, should have a business plan to help them map it all out.

According to Hal Teitelbaum, MD, who grew his practice from a small practice with a couple of partners to a 100-plus physician group, the business plan process begins with "what a particular practice sees as its mission and vision. Even before the business plan comes [the question], 'What do I, as the practice leader, feel that our role is, and what's our goal?' What will I be happy with at the end of the day?"

"A healthy business is a growing business," says Peter Lucash, author of 

. And a medical practice can't grow without a plan.

Once you're ready to put pen to paper (or fingers to keyboard), be sure to include:

Research about your market - Understanding the market demographics of the community you serve is crucial to making informed judgments about new or expanded services, new technology, or additional service locations. One of the biggest mistakes many physicians make when launching a new service or opening a new office is failing to account for the competition, which often has the advantage of being already established. 

Financial analysis - Though not a budget, per se, your business plan should include detailed analysis of the likely costs and revenue associated with whatever project or service you're launching. Use your examinations of your market demographics and competitive landscape to help you. Build in realistic benchmarks, then measure yourself against them on a regular basis. 

Stakeholder buy-in - Although only the physician leadership (and perhaps the practice manager) should be making business decisions, your staff, accountant, and probably your lawyer should play roles in the preparation and review of your business plan. "You don't want to get six months into something, build up $100,000 in debt, and then find out there's something you didn't know," says business consultant Lynn Hill Spragens. "Smart people ask for help." 

And smart practices take the difficult - but necessary - steps away from the chaos and toward a place where they can grow and prosper.

This article originally appeared in the July/August 2005 issue of 

Articles

It's time to get your office out of crisis-of-the-day mode so you have time for the kind of long-term planning and creative thinking you need to thrive. Here's how you and your staff can make it happen.

Get Past the Chaos

"My husband has had a solo family practice for almost eight years. Last year the bottom seemed to fall out of the business. We are in a terrible pattern of going broke."
 - Brookhaven, Miss.

"We have over 5,000 active patients and collect over $800,000 a year, but we are still scraping by on a month-to-month basis."
 -  Cary, N.C. 

"Our physicians were not aware of the serious danger of bankruptcy that our practice was in, and as nonbusiness people, we had not taken the responsibility to be involved."
 - Scottsdale, Ariz.

These are just a few examples of real stories from practices who've written to Physicians Practice looking for help. Most medical practices have some financial problems - and clearly many are in severe distress. But what business owner doesn't wonder: Why aren't we making as much money as we used to? Are we overstaffed? Spending too much on supplies? And here's a hard one: are we working hard enough?

Many practices I've worked with can't begin to answer these questions because they don't have a well-planned budget in place that is monitored regularly. Some physicians think their practice is too small to need a budget. Some think they are budgeting by simply comparing last year's numbers to this year's. Others feel that so much of their business is controlled by outside influences, preparing a budget is a waste of time. Wrong on all counts.

Think of your practice's budget as a mini business plan covering this year and next. This helps you establish a plan and adds a level of discipline to operations and spending. Planning allows you to put additional services in place, eliminate money-losing activities, and discover and fix inefficiencies.

At its essence, a budget is a tool to measure and track revenue and expenses. While expenses are vital to the process, revenue's where it all begins. After all, the only reason to incur expenses is to support revenue-generating activities. 

When planning the revenue side of the budget, consider:

The number of office visits and procedures that are required to meet your practice's earnings goals. This will, in turn, affect the expense side - things like staffing levels, the facility (overhead as well as the amount of space you need to accommodate your volume), and supply expenses. If you are planning long-term changes in the level of patient visits or procedures, plan likewise for changes in staffing and other expenses. 

Services you might add that are more profitable or that will attract more desirable patients. Along with this, consider how marketing efforts or changes in technology, staffing, equipment, or payer contracts will be affected. Be certain that a new service will pay in the long term, not cost you before you add it. 

Services that will be reduced or eliminated because of changes in staffing, payer contracts, or competition. For example, suppose the practice is considering dropping some unfavorable contracts because the administrative work is too great to collect your money. 

To compare changes related to additional or reduced services, put together your usual budget - Option 1 - along with another version - Option 2 - that would include increases or decreases in revenue and corresponding changes in staff and supplies. 

Managing expenses is a core part of your budget - and most practices do pay attention to expenses. Keep in mind that expenses should only be incurred because they generate revenue or are required by law.

Consider the following when preparing the expense side of your budget:

Changes in routine expenses that will occur because of price changes, expected changes in patient volume, or changes in practice contributions to profit sharing. 

Increases or decreases in support staff salaries and benefits because of changes in staff levels or changes in the compensation plan. 

The addition of new equipment or vendor services such as medical equipment, computer software or hardware, copier service or other contracts. For new services, develop an "Option 2" budget that includes not only the anticipated additional revenue but the lease expense for the new equipment, the addition of a technician, and related expenses like the conversion of an exam room to a procedure room. 

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

Establish processes so that staff cannot purchase supplies and equipment without oversight. 

Understand the negative effect of physician time off on cash flow. I know of one four-physician practice in which three physicians took two weeks off during the same month. They had to borrow money to make payroll about 45 days later. 

In short, be sure to coordinate revenues and expenses - changes in one area affect other areas. If the practice plans to increase revenue through marketing, make sure the marketing expense budget is increased. If you expect to see more patients, make sure the medical and business supplies and operating expense items like overtime are increased. Don't overlook revenue and expenses that are not spread evenly over 12 months, such as occasional educational conferences.

Finding the right level of detail for your budget is a balancing act: Too little detail and trouble spots won't be apparent. Too much detail and it's hard to analyze and make decisions.

Line items in a budget should be at a level of detail required for appropriate data collection, analysis, and decision-making. For example, budgeting and reporting "medical supplies" as one line item is not likely to reveal that the cost of one item has gone up if staff has been getting good prices on 20 other items.

Give separate lines in the budget to items that are significant because of volume, unit cost, discretionary use, or that are controlled by more than one person. Use separate revenue lines for each physician, and consider separate revenue lines for office visits, office procedures, and hospital procedures for each physician.Distribute sections or even single budget line items to those who are responsible for controlling the items. If the supervising nurse or receptionist is responsible for ordering medical supplies, that person needs to have all the budget lines for medical supply items. 


Your bookkeeper must also have a copy of the entire budget so she can set up the records to match the structure of the budget and be able to report it consistently on a monthly basis. For example, office supplies for the clinical department cannot be reported as "general office supplies" one month, then "clinical supplies" the next. 

A budget that is well-planned and then filed away until the next budget cycle or the annual meeting is useless. It must be an active management tool that involves many people in the practice. The physicians should not dictate a budget to the office manager, and management should not be expected to develop a budget without a great deal of interaction with the physicians. The staff should also contribute ideas since they are involved in the day-to-day tasks physicians may not be tuned in to. Your accountant will need a copy to format the information into financial statements, physician reports, and for preparing tax returns. 

Establish a routine for reviewing actual budget data against the projected budget and acting on variations. The best forum is a monthly meeting of the physicians and practice management. If there are significant variations in the data, the person responsible for that section or line item in the budget should be brought in to discuss the issue. 

If you discover you've got a bad budget, don't just stick to it. If an item was badly estimated or an item was unrealistic or circumstances have changed, modify the budget. And keep in mind that "good" variations can be a sign of trouble. For example, if expenses for medical supplies are lower than budget, it could be that you have a bargain-hunter on your staff - or that the person responsible is not ordering enough supplies for your practice's needs. 

Paul Angotti is president of Management Design, LLC, a company that helps physicians to establish and maintain financial and operational control of their practices. He can be reached at 

This article originally appeared in the May 2005 issue of 

Most medical practices have some financial problems - and clearly many are in severe distress. Think of your practice's budget as a mini business plan covering this year and next.

Budgeting 101

As healthcare financing changes, physician practices must adapt, modifying their operations so they can thrive, rather than be thwarted by new payment models. For some practices, the newest crop of payment and benefit designs may lead to a resurgence of marketing activities and beefed-up office procedures as patients will have a broader choice of providers and will be increasingly aware of their healthcare costs.

First, some background. Private insurance carriers, self-insured employers, and some government entities have begun to offer new plans and embrace new concepts, which include defined contribution, health savings accounts (HSAs), high-deductible health plans, doughnut health plans, and noncovered services.

The concept of defined contribution has been implemented in a variety of forms. Generally, however, it works like this: an employer arranges with many carriers to provide benefits to employees, and defines a specific amount of money to contribute to the premium for each employee. The contribution is somewhat like a voucher that the employee can apply to his or her healthcare premium. If the employee chooses a plan that costs more than the employer's contribution, the employee pays the difference.

In the past, the insurance company's customer has been the employer; under a defined contribution, the insurance company's customer is the individual employee -- known to us as the patient.
HSAs provide a system for employers or individuals to contribute pre-tax money to a personal account; patients use funds from the account to pay for healthcare. Unused funds remain in the account and accumulate, surviving job changes and retirement. For example, funds in a HSA that are not used during a person's working years can be used in later life for healthcare and long-term care.

High-deductible health plans have deductible amounts, commonly between $500 and $2,000, to be paid by the patient. Some patients will reach the high deductible, but those that don't are essentially paying all their healthcare costs.

Doughnut health plans provide traditional benefits up to a certain amount ($1,000, for example) and nothing between that amount and a higher amount (for example, $5,000). Many healthy people may not reach the uninsured range or "doughnut hole" ($1,001 to $5,000 in our example) each year. To them, this coverage will appear as traditional coverage. A person with considerable medical expenses, however, may reach the uninsured range and need to contribute a substantial amount until the additional coverage begins paying.

Noncovered services have been a part of managed care for many years. Indications are that the number of services that are not covered by plans will increase. These are a blessing and a curse to physicians. On the one hand, practices need to separate noncovered services and charge patients the full fee, then bill payers for the covered services. But on the other hand, collecting payment for noncovered services is a good source of revenue. (Be aware: most plans allow physicians to charge full fees for noncovered services but some require physicians to apply discounts to them. Check your contracts!)

The new patient payment models will likely bring about changes in how patients approach their healthcare, as well as provide them with increased choices. 

In the past, many patients had little concern for the cost of healthcare. The patient paid a $10 copayment and received $60 or even $260 worth of services. Now patients will be more likely to reach in their pockets or their HSAs to pay for services. It will also make a difference whether the services are covered or noncovered and whether patients have met their deductible.

Patients will increasingly make decisions about the care they choose to receive based on the perceived impact on their health and their finances. For example, since unused funds in HSAs remain in the account and accumulate, it is in the best interest of patients to conserve these funds. To do so, patients may ask more questions and choose cost-effective treatment even if it is outside the traditional delivery system.

Similarly, high-deductible and doughnut health plans and an increase in noncovered services are intended to encourage patients to take action to improve their health (if the condition is under their control) and get more involved in spending decisions.

Patient health may be negatively affected when patients are paying for a substantial portion of their healthcare out of their own pockets, or from their HSAs; they may avoid visits or opt out of lab work or treatment to minimize their personal expense or preserve the HSA. Physicians will need to educate and coach patients through these decisions, and pay attention to situations in which the patient is declining care for cost reasons. They should have strategies in place to address this kind of noncompliance. 

As a result of having to pay for treatment from their own resources, patients may:

Avoid making an appointment when mildly ill, which may increase the risk of a more complex illness

Make the decision not to make appointments for prescribed tests

Make the decision not to fill prescriptions

Make the decision not to see a specialist as recommended by their primary care physician

Make the decision not to return for a follow-up visit, or for routine visits (such as for patients with high blood pressure whom the physician wants to see semi annually)

When patients are paying for services out of their own resources, some may even shop around and consider two or three physicians before deciding which one to use, asking a lot of questions about cost and quality.

Patients will have greater choice in the type of providers they may opt to see, including physicians and nonphysician practitioners, such as alternative medicine providers. Some new patient payment models also include coverage for things like spa treatments, gym memberships, and nutrition classes.


In this scenario, physicians need to understand where they fit in the continuum of wellness and healthcare. You and your practice staff should attempt to occupy a lead role as the authority and coordinator for care, regardless of whether you deliver the care or others do. Ask patients to let you know about the care they receive from others, and maintain professional relationships with these other providers.

As these new plans give more power to patients, practices will need to do more marketing and community outreach to retain and attract desirable patients. Let patients know why yours is the preferred practice. Consider expanding services or your office hours, for example, to gain the edge over other practices in your area. If you need to attract new patients, mail postcards to addresses within a target ZIP code, or sponsor talks at senior centers and schools. Again, strong relationships with referring physicians are key: send them thank-you notes and prompt follow-ups when you see their patients.

To be ready to answer patient queries, physicians' offices can collect data on less expensive alternatives, volume of procedures performed, and outcomes, including rates of complications.

Practices that have data demonstrating competence in a certain area should use it to promote themselves. Offices that can claim, for example, that "96 percent of patients are seen within five minutes of their appointment time" or that "98 percent of stent-implant patients do not later need bypass surgery" will have a competitive advantage.

Use data analysis to improve existing strategies or develop new strategies. If this is a new approach for your office, you may consider getting guidance from a financial adviser or other independent professional.

When patients have more choice, issues such as appointment availability and timeliness, staff courtesy, and proper billing become much more important.

New payment models will force practices to tighten and more closely monitor their collection policies as more money will come directly from patients. If practices are sloppy about collecting from patients, they will not be just forfeiting a $10 copayment, they might be forfeiting $132 for the full visit. As a result, accounts receivable may dramatically increase as will the expense of patient collections. 

Most practices have a policy that payment is due at the time of service, but need to do a better job of enforcing it. At check-out, charges must be tallied, and the patient portion of charges calculated and collected. Do not let patients leave the office with "Bill me later." If collecting becomes a problem, you might consider charging patients $20 if payment is not made at the time of service; have the patient sign an agreement to pay the billing charge so that he or she can be seen without being rescheduled.

Similarly, as benefits and plan options increase, office staff and patients will need to understand the terms and conditions of each, including eligibility, covered and noncovered services, deductible thresholds, how to determine if the patient's deductible has been met, and how to calculate the patient portion of charges. 

State your practice's financial policies, collection procedures, rescheduling policies, and billing charge policies in patient brochures, on the wall of the waiting room and in exam rooms, on Web sites, and through mailings.

That's good customer service, and just the type of strategy the new payment models and benefit concepts demand in an increasingly competitive healthcare marketplace. 

Paul Angotti, BS, is president of Management Design, LLC, a company that helps physicians to establish and maintain financial and operational control of their practices. He can be reached at 

This article originally appeared in the Janaury 2005 issue of 

How to manage in the age of defined contributions and health savings accounts

The New Payment Models

Collecting what patients and payers owe you should be a fairly straightforward endeavor. You provide a service and then you get paid for it. But we all know it's far more complicated than that - especially when the seemingly incongruous idea of receiving overpayment, or the distasteful idea of paying refunds, come into play. How do these situations crop up? These are some examples that may be familiar:

A practice receives payment from a carrier for 100 percent of the contracted amount; the procedure was exempt from a copayment. But the practice had already collected a $10 copayment from the patient up-front. Now the practice owes the patient $10. 
Or: Medicare pays a practice twice for the same claim. The practice needs to refund Medicare for one of them to avoid trouble with the Office of Inspector General (OIG).

Or: The billing department receives an explanation of benefits (EOB) from a private carrier that contains a number of payments and a "takeback," or demand of a refund for a service you performed long ago. In this case, the carrier contends it overpaid you way back when. Your practice now must adjust the patient's account, investigate the takeback, and either accept or appeal it.
Maintaining accurate, up-to-date patient accounts is critical to the business side of your practice. On the surface, it's a seemingly simple process of addition and subtraction. Yet billing staffs commonly spend a large portion of their time resolving accounts after patients have complained about a problem. And while you probably won't get praise from patients for billing them accurately (that's what they expect you to do), mistakes may cause patients to question your professionalism. If the accounting is sloppy, what else is wrong with this practice?

There are other compelling reasons to maintain accurate, up-to-date patient accounts. For one, inaccurate accounts mean lost productivity. One incorrect entry can easily result in 20 to 30 minutes of extra work for the staff. If mistakes go uncorrected for too long, or become too serious, they may cost the practice a patient, or result in a complaint to the OIG to initiate a federal audit of the practice.

Proper management of patient accounts requires the billing department to implement and follow strict bookkeeping procedures, including step-by-step protocols for: 

dealing with each payment posting, adjustment, refund, and takeback situation, 

To comply with laws and payer contracts, I offer the following suggestions to help your practice. 

Overpayments may come in the form of receiving payment twice for the same service or receiving payment from both the patient and a carrier. Or a payment may simply come to you by mistake, for example, if the patient or physician in question is not part of your practice.

If your practice receives an overpayment by individual check, and you're aware the service has already been paid, it's best to simply send the check back with a letter of explanation. It is a waste of time and effort to deposit the check and credit the account, only to be forced to adjust the account and write a refund check later.
When an overpayment is included in a voucher with other payments, it must be handled differently. In this case, you have no choice but to deposit it, credit and adjust the account, and write a refund check. Now that patient account has a credit balance. 

Most practices establish a policy of not sending refunds when credit balances are below $5 or $10, which saves a great deal of work. Instead, they hold small amounts and acknowledge the credit balance on the patient's next visit, applying the credit to the patient's portion of charges. If the practice handles mostly episodic care and the patient is not expected to return to the practice in the foreseeable future, it may be appropriate to issue a refund on a small credit balance. 

When overpayments are owed to Medicare, there are no ifs, ands, or buts. Refunds must be made regardless of the amount - in a timely manner - to avoid charges of fraud by the government or being dropped from Medicare. The process should be audited periodically to ensure compliance and to help you spot glitches in the operation of your practice.

For example, some practices routinely submit additional claims when the original claim has not been paid promptly. Most of the time this is useless because it rarely helps get the claim paid, and will raise legal red flags with Medicare. Moreover, occasionally multiple claims will result in multiple payments. And the vicious refund cycle begins again. 

Although collecting copayments and deductibles at the time of service is a very important part of good billing and collections procedures, collecting too much is one common cause of overpayments. You can use your billing system to help avoid this problem.


All good systems allow you to input payers' contractual parameters, but most practices I've seen are not using this valuable feature. When your billing system is set up with the parameters of each contract, the computer will help your staff to quickly calculate the correct patient portion of charges at checkout. (That being said, if the situation is not clear, it is better to collect what you think the patient's portion is and issue a refund check later, if necessary, than not to collect at all from the patient.) 

And if you decide to apply a credit to patient accounts with small balances, make sure to reset your billing system so it does not send statements to these patients. Many systems are automatically programmed to do so whenever the balance is above zero, but this can be adjusted. 

Since there are usually no set deadlines for processing refunds, your staff may be putting them off until tomorrow - and beyond. But when refund processing is delayed, it means incorrect bills, irritated patients, trouble for physicians, and unnecessary work for billers.

Refunds should be processed on a fixed schedule, generally once or twice a month. Process refunds and adjust patient accounts before billing cycles to improve the accuracy of billing. 

The process should look something like the following: 

List the refunds that should be processed, along with a reason for the refund. Your computerized billing system should be able to generate this information in a report. 

Review the list to make appropriate adjustments and uncover underlying problems. For example, if a name appears repeatedly, or if you're seeing the same reason given for refunds repeatedly, you need to find out why. 

Secure authorization/approval from an appropriate authority in the practice, usually the office manager or a physician. 

Print the checks. The person signing refund checks should perform another review. 

Adjust patient accounts to reflect the refund. 

The process of listing, review, and check-signing should involve at least two people to avoid embezzlement and to track recurring problems.

For security purposes, set up a separate bank account for refunds. Otherwise, it's too easy to use the refund process to embezzle from the practice. For example, a staff member could put his sister's name on the refund list and write checks to her routinely.  
Using a separate account also allows for more detailed review and auditing of the checks being processed, and limits access to practice funds in the general account.

Transactions in this account should be adjusted within a very short time frame, such as 20 or 30 days, and should happen as part of the process of writing refund checks, to avoid the account becoming too large and difficult to reconcile.


The old business adage "What gets watched gets managed" applies to this process. Many practices do not track refunds, overpayments, and takebacks, and therefore have no idea of the volume and extra work the staff must devote to this process.
Start by tracking the number of these problem transactions you're processing, and the reasons for each. You may discover improper set-up of the computer billing system, a misunderstanding of payer rules or miscommunication among your staff, or poor claims processing procedures on the payer's end.

In any case, take action. If the source is internal, improve policies, procedures, forms, training - whatever's needed. When the source is external, contact the payer. Set up meetings with the patient liaison, and offer them specific examples of problems. Work toward an improvement plan with the payer, including changing some of your own procedures with that payer, if necessary. On the flip-side of the equation, you may need to re-evaluate certain payer relationships. When the administrative work of collecting your money and keeping patient accounts correct gets to be too much, it may be time to drop the contract.

In the end, account maintenance is still a matter of addition and subtraction, but one that requires continuous oversight and review. 

This article originally appeared in the November/December 2004 issue of 

There are compelling reasons to maintain accurate, up-to-date patient accounts.

Money In, Money Out

Is there a "sacred cow" on your staff? Not the four-legged kind. I'm talking about the person who is disruptive, unproductive, and demoralizes others, yet is immune from criticism and discipline.

It's easy to spot this creature. He is never held fully accountable for his work or behavior. In extreme cases, staff may fear they will be pushed aside or terminated for even suggesting that this person doesn't carry her share of the workload.

Maybe "untouchable" is another word to describe the person who goes on month after month, year after year, causing dissention and underperforming without suffering the consequences.

How do you know you have one of these people in your practice? Look for the person who:

fails to complete work, so other staff must do it instead;

resists improvements that might diminish status or expose shortcomings;

"Some sacred cows are control freaks," says Frank Mihoda, a CPA in Denver who specializes in advising medical practices. According to Mihoda, an individual can build a power structure by becoming the only one who knows how to do a critical task. He may try to get rid of anyone who questions what he does or how he does it. Even outsiders, like the practice's professional advisers, can be targeted if they pose a threat.

Who elevates an individual to sacred cow status? In medical practices it is usually a physician. So the next question is: why has one person been given such favored status and allowed to disrupt the practice? You probably never intended for it to happen; you may not have known the deification process was underway until it was too late.

The structure and small size of the typical medical practice make it fertile ground for the creation and nurturing of:

The nurse whose seniority and trustworthiness get her appointed office manager with the unquestioned support of one or more key physicians -- even if she is not qualified for the position.

The office manager who is the spouse of one of the physicians.

The staff member who is a relative or close friend of the office manager.

The staff member or manager whose advancement was supported by a physician who won't admit later that the promotion was a mistake.

The staff member who makes sure that he is the only one who knows how to operate the computer system or handle some other critical task.

A little less common but not rare is the staff member who gains special status by helping to cover up a physician's extramarital affair. Then, there's the staff member who is romantically involved with a physician.

I am sometimes amazed to see how far some practices allow their personnel situations to devolve.

As a consultant who has worked with many medical practices over the years, often my first clue is just sensing an atmosphere of tension. In these practices, I find people giving brief, guarded answers to such simple questions as, "Why are charges not posted in a timely manner?" Or "Why do patients wait on hold for so long when they call?"

I find the most difficult engagements are the ones in which people are reluctant to admit that a staff member is incompetent yet untouchable, or creates morale problems that the physicians won't do anything about.

Dislodging a sacred cow is difficult. You must fully understand the situation, the problems that the person's behavior causes, and your options to correct the situation. 

There is no simple step-by-step process because situations vary widely and the problems created by the privileged person are different in each case.

Because resolution is elusive, not to mention potentially hazardous or embarrassing, many physicians procrastinate and go into management paralysis. However, allowing the situation to continue only will increase the damage and make the problem more difficult to correct later on.

I recommend following a four-step process:

estimate the worst repercussions of each option, and


Start your investigation by interviewing those closest to the situation. Since information you gain in one interview will often lead to more questions, be sure to document interviews and label every document you obtain.

Because investigators must gain the trust of the people they interview, it often helps to use a practice consultant, accountant, attorney, or other outsider. Your practice's legal adviser may be able to recommend a business expert skilled at internal investigations.

The investigator should make clear to interviewees that she will do everything possible to maintain confidentiality and contain repercussions. She must also make clear that it may be necessary to disclose some information sources in order to appropriately make changes.

Interviewees will be more candid if one-on-one interviews are held off-site such as at the hospital cafeteria, another office, or by telephone.

The interviews may produce much useful information but could bring to the surface a tangled web of operational issues and personality differences. A good investigator will separate fact from rumor, and know which comments reveal genuine issues as opposed to interoffice jealousies or personal agendas.

The first action many people think of when dealing with a sacred cow is to terminate the person. But other steps could better serve the practice, especially if the problem employee did not create the situation and is willing to change.

Helping a staff member correct inappropriate behavior preserves the value of her talents and experience. Consider restructuring the person's duties or changing lines of authority. Write down expectations and consequences for failing to change the disruptive behavior and establish a timetable. 

Maybe you can work out a reasonable plan for dramatic and lasting behavior change, but will this solution be acceptable to other physicians and staff? If retaining the problem person is likely to cause additional and significant damage to morale and performance, then consider termination.

If your practice used a proper and legal process to address the unacceptable behavior, including documentation of all discussions with the employee about her performance, then follow your practice's policies and procedures through to termination of the problem employee. If, as is generally the case with sacred cows, your practice indirectly condoned the inappropriate behavior by inaction, then termination might bring significant problems. You might as well face the fact that resolving the issue will not be pretty or easy, but will be far better in the long run than allowing the situation to continue.

If your practice either created or condoned the situation  -- or both -- and the situation has been tolerated for a significant period of time, then consider an unconventional approach: negotiate with the individual to voluntarily leave the practice. When it works, this approach helps avoid complaints to government agencies or legal action. Review this or other options first with an attorney who specializes in employment law.

Brace yourself. These negotiations will not be well received by the sacred cow. Don't forget, this person probably likes the power, the control, the recognition, the money, or whatever else it is that her behavior and your toleration of it have produced.

Assemble evidence that shows why your practice cannot allow the situation to continue. Try to quantify personnel turnover, revenue loss, excessive expenses, work inadequacies, and low morale. Present these issues to the problem person. For example, say, "Our practice has a 50 percent turnover rate of staff and most of these people cite you as the reason they leave." Or, "You are frequently out of the office when staff need you." Offer to negotiate a reasonably fair solution.

What are your negotiating points? The problem person may be concerned about lost income, embarrassment, or low prestige if she loses her job. Try offering: 

voluntary resignation before a termination action begins, or

employment agency services to find a more appropriate position. 

This final option is often the best choice when the problem person is the spouse of one of the physicians.

Some of these solutions sound like payoffs -- but their cost will be far less than the expense and stress of defending your practice against a wrongful discharge lawsuit.

The problem employee may argue that your practice allowed the work situation to exist for a long period of time, then suddenly reversed course and disciplined or terminated her for that same behavior. She may allege that she had every reason to believe her behavior was acceptable to you because it was tolerated without penalty for an extended period and she continued to received pay raises, bonuses, promotions, etc. And she may win that case.

Remember that you or other leaders in the practice probably had a hand in either creating or, at least, condoning this situation. 
Don't let it happen again. Good communication with staff, access to managing physicians and consultants, and holding people accountable help foster a healthy working atmosphere in which problems are exposed and resolved before they turn into major issues.

Act now to avoid the development of sacred cows. Some of my clients have physicians' spouses managing their offices, but they are extremely competent managers. Since there's always the potential that staff in these practices might be reluctant to complain about the manager to the physicians, they are told to contact me confidentially with any complaints about the management. Consider using a third-party observer if you employ relatives of physicians in management roles, or if you sense any other forms of the sacred cow in your practice.

Just remember that whatever action you take must be justified and carefully executed. There is no one-size-fits-all solution. If you see a pattern of favoritism developing, deal with it quickly and properly before it becomes an established practice, a likely morale problem, and a potential lawsuit. 

This article originally appeared in the May 2004 issue of 

Don't let unproductive, disruptive staff destroy staff morale -- or practice success

No More Sacred Cows!

When their pay drops and costs rise, physicians usually try to save the day by cramming more patients into it. 

Instead, focus your attention on collecting what you've earned. The single biggest management issue in most medical practices isn't high overhead or managed-care contracts. It's collections. Physicians are not bringing in what they are owed. 

Ironically, trying to improve the financial picture by seeing more patients only makes this problem worse. Seeing more patients overtaxes the physicians and the staff, they tend to make more mistakes, and the collection rate drops further.  

There is an old adage in business: "That which gets watched, gets managed." Frankly, most physicians do not do a good job of watching the store. And physician involvement is essential for improvement in collections.

Here is what you need to do to get paid correctly and fully.

Too many practices hire lots of low-level people to do the bulk of the work and a few skilled people to fix their errors. But you're better off with quality people throughout the office who are continually trained to minimize errors.

And I'm not just talking about those folks in the back office crunching claims. Receptionists are the most commonly neglected members of the billing team. Many physicians still think receptionists just hand out clipboards with forms for patients to fill out. 

Consequently, they pay the lowest wage required to get a warm body in the chair. In fact, a bad receptionist can easily cost a practice $50,000 per year in uncollected revenue. How?

Verifying the patient's insurance information to ensure that the practice can see the patient and be paid,

Checking the patient's financial status at the practice to avoid making routine appointments for patients in collections or dropped from the practice,

Communicating to patients who are making an appointment the practice's requirements for pre-authorizations, referrals, payment at the time of service, etc.,

Collecting and verifying the patient's personal and insurance information at check-in to insure that the practice produces a "clean" claim,

Collecting the patient's portion of charges, whether a copayment, percentage, or the whole amount.

If you have someone at your front desk who can't handle these tasks, you are cutting into your income. Back-office staff can't fill in the gaps. Imagine, for example, how much better it is to collect from patients on the day of service rather than sending them five collection letters. 

If you need high quality front-desk staff to boost collections, you'd better believe you also need great clerical staff, billing staff, and other support staff. Don't try to slide by with the cheapest people you can find. An investment in your staff is one that will pay off.

To completely and accurately accomplish their tasks, staff need resources -- some of which are surprisingly simple. Here's a good starting list:

Written collection policies --  I was visiting a practice with three receptionists who had three different ideas about collecting. When patients showed up without a copayment, one said, "It's OK, we'll bill you." The second said, "Just mail it when you get home." The third was stricter and rescheduled a patient who told her he didn't have his copay.


Ask yourself, in your practice, are receptionists supposed to make appointments for patients who owe three past copayments? Does the practice have a billing fee added to charges when the patient portion of charges is not made at the time of service?

You can set whatever policies you like, but set them. Put them in writing and train staff to use them consistently. Your collections shouldn't depend on the whim of your receptionist.

Include procedures for implementing the policies. For example, if the practice's policy is to see patients who do not have today's copayment, but to add a $10 billing fee, the procedure might be: Have staff explain the policy to patients, give them a self-addressed envelope and emphasize that they must mail the payment within 24 hours to avoid the $10 billing fee.

While you're at it, create a financial policy handout for patients. (See the sample outline in the Tools area of 

Written carrier guidelines -- When I'm consulting with practices, I often stand in the reception area and overhear receptionists ask patients about their insurance carrier. Unfortunately, it's usually a very short exchange. The receptionist asks; the patient answers "Cigna" --  or some other large carrier. Without clarifying which plan, the receptionist sets up the patient for Cigna PPO when the patient's benefits may actually be through Cigna POS. The claim to Cigna PPO will be denied.

Give staff the tools they need to understand where to bill and whether a referral or authorization is needed if the practice is going to get paid. 

Don't work harder. Just collect what you're owed.