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Do You Have a Business Plan for Your Practice?


Today's practice managers must plan proactively for the new year - finding new ways to cut costs and improve efficiencies.

As the curtain closes on 2010, you're no doubt focused on year-end bonuses, vacation requests, and holiday parties. But the month of December is also an opportune time to get your professional house in order and set new goals for 2011. Effective year-end planning, in fact, is more critical than ever in an environment where reimbursement cuts from all major payers loom large, says practice-management consultant Elizabeth Woodcock, with Woodcock & Associates in Atlanta. "This year the government stepped in and reversed Medicare cuts on several different occasions, but there is still the threat of more cuts later this year and again in January," she says. "For planning purposes, that's important from a cash flow perspective."

Indeed, managers today must remain vigilant, finding cost cutting opportunities at every level of the organization and identifying ways to improve efficiency while staying focused on quality care. "Most practices do have their fiscal year ending at the same time as the calendar year so it's a great time to look at the coming year," says Woodcock.

Here's a list of what you should be focused on during the final weeks of the year to prep your practice for 2011:

Read your dashboard. Many practices already do this on a monthly or weekly basis, but a more comprehensive year-end analysis of your financial operations is paramount. Compare with last year all of your basic performance metrics, including accounts receivable, cash flow, total charges to total collections, number of days in collections, and payer mix to flag any changes. You may discover that it's time to hire a billing service, or drop a third party payer who continually rejects claims. It's most useful to compare your results against a national benchmark from the professional trade groups like the Medical Group Management Association.

For her part, Sibby Wilson, director of operations for Tidewater Physicians Multispecialty Group, a large 80-physician group in Newport News, Va., also reviews scheduling and the ratio of support staff to full time equivalent (FTE) physicians in December to be sure she's keeping payroll spending in check without compromising patient access.

If you find you're overstaffed, it's imperative to scale back, but consultants say you should also resist the urge to let go of employees you need for purely cost cutting purposes. Such strategy, they say, amounts to a long-term loss, causing staff burnout, problems with patient flow, and costly turnover.

Coding. CPT procedure and ICD-9 diagnostic codes typically change between October and December. Now's the time to determine which will affect your practice. "We always make sure our computers are set up for the coming year's diagnostic and procedure codes because if we're not using the current ones we're not getting reimbursed," says Bill Hughes, administrator for the Women's Health Specialists, a 7-physician obstetrician-gynecology practice in Jensen Beach, Fl. "We also make sure we train our staff on upcoming code changes."

Negotiate contracts. You should also review your third-party payer contracts. For his part, Hughes says he analyzes all third party payer contracts every year (though not always until January) to determine the average reimbursement rate for services rendered. Payers that fall below the line get a phone call and a request to renegotiate their rate.

And don't forget your own provider contracts - dental and health insurance plans for your staff. Such companies will never voluntarily lower their premium. You have to play hardball. Hughes uses a licensed broker who starts "shopping our group to other providers in early October to see what's out there for us and get us a new quote from our current provider."

Patient access. You can't make money if you aren't getting patients through the door. At year-end, Woodcock says all practices should review their new patient appointments, established patient appointments and "no show" rate with the prior year to spot any trends that may be costing you money. If your "no show" rate is rising or simply too high, instruct a staff member to start putting out reminder calls two days before each appointment - even if you already use an automated system. If you can't reach out to everyone, hone in on patients who missed their last appointment, new patients, and those scheduled for a procedure. "It sounds funny, but you want to encourage cancellations because that allows you to fill that slot with another patient," says Woodcock. "The physician's time is finite so we want to make sure those slots get filled." She also recommends creating a priority list of patients who might be interested in being seen earlier if an appointment time opens up.

Ancillary services. If you've added any ancillary services over the past year, like lab testing, pharmaceutical sales, physical therapy or diagnostic imaging, or plan to do so in the coming year, now's the time to conduct a cost-benefit analysis. Hughes says last year's annual review of the lab services his practice implemented revealed an unwelcome surprise. "It looked good on paper, but it was a money losing venture," he says. "We thought that if our doctors could do a quick diagnosis of flu and strap that it would serve our patients better, but we discovered that we didn't use our supply as quickly as we thought and the tests expired before we used them. We decided to end that."

Budget projections. You must also, of course, plan ahead. Hughes says he makes initial budget forecasts for the coming year during the fourth quarter - waiting for first-quarter performance data to come out before setting anything in stone.

"Between October and year-end one of the things I try to do is look at how the year's gone and try to do a little bit of a perspective look at next year," he says. "I predict income levels based on whether any of our large insurance contracts changed their reimbursement rates and, of course, what Medicare is doing since most of our payers reimburse based on a percentage of Medicare."

Last year, he notes, "we were facing up to a 22 percent cut in Medicare, which did not ultimately happen, but we were busy looking at workflow arrangement and staffing and asking ourselves, "Do we really need this position?'"

Also consider any major purchases or staffing changes in next year's budget. Tidewater Physicians Multispecialty Group, for example, is constantly looking to expand its 23 locations -with construction already underway for at least one new facility. The practice is also implementing a new electronic health record by late next year, which will require considerable resources. "At the end of the year we always meet with our long range planning committee," says Wilson. "Because we've had a significant amount of growth over the last few years we want to be positioned to take advantage of opportunities as they come our way, improve patient access and make sure we're spending wisely to control costs."

Social networks. Not taking advantage of social networking yet? Why the wait? Facebook and Twitter are excellent ways to market your practice - and best of all, they're free, says Woodcock. Create an account today and start posting available time slots on your page, along with notices of new providers and services at your practice. Just be sure your pages are managed professionally. "It's a great idea but it has to be managed," she says. "You can slap something up as an individual, but you can't do that as a business."

Effective year-end planning that considers both where you are and where you're going does take time, but it's well worth the effort. "There's been so much chaos in our industry that it sometimes feels as if you don't have time to step back and plan and yet it is absolutely important that you do that," says Woodcock.

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for more than 12 years. Her work has appeared on,, and Health Family magazine. She can be reached via


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