Scottsdale Pediatric Center, P.C.

September 1, 2005
Pamela Moore, PhD

Thinning patient panel, shrinking reimbursements lead 40-year-old pediatric group to seek our help.

Pediatrician Traci Hurley spends her days treating little patients, but she had some big worries when she applied for a Physicians Practice makeover.

"Our partners have never been 'business people' and that was acceptable in the past. Today, it is huge problem," she writes. "Slowly our patient base has dwindled ... [and] our reimbursements have fallen. One of our younger physicians has decided to leave the group, partly because it will decrease overhead expenses, but mostly she is worried the practice cannot be turned around. This is a 40-year-old practice ... it would be a shame if we had to close our doors."

Hurley's partner, Wendy Kaye, is concerned that revenue is too low, that the practice isn't advanced technologically, and that staff are losing hope.

Never fear: Physicians Practice is here to offer Scottsdale Pediatrics a makeover of its ugliest practice management problems.

To turn itself around, the practice needs to beef up its patient panel, collect more aggressively, and track its performance. A little history will help explain.

More patients, please

The physicians in the group resisted managed care for a long time, and in the process lost patients who wanted to see physicians in their plans. The group has quickly made up for lost ground, signing up with nearly all comers.

Despite this, the practice's panel isn't up to par. Kaye says she would "love to be full-time, but I'm just not busy enough." A fuller schedule -- not necessarily more patients an hour, but more hours per week -- would go a long way to helping pay down the practice's debt (the physicians took out a $100,000 loan to cover malpractice insurance and other expenses) and help overhead costs seem less burdensome.

Keeping new patients coming in the door is a key concern for every pediatric practice; the nature of the specialty is that patients outgrow it. Here are some ideas for attracting more patients:

Review scheduling protocols. Kaye has been encouraging schedulers to lighten up on the over-the-phone triage. "Instead of saying, 'You don't have to come in for that,' we've been saying, 'Well, it's probably a cold, but if you'd like to come in and have the doctor check it, I'd be happy to schedule an appointment."

Make sure complex schedule templates don't impede schedulers. Discourage them from "holding" sick visits for seriously sick kids or avoiding making appointments late in the day or close to lunchtime. Fill time slotted for well-baby visits with sick visits if no well baby is scheduled. If the physicians are willing to work more hours, they need to let schedulers fill them, even if those hours aren't completely packed at first. In healthcare, availability drives demand. Simply having available appointments may generate more visits.

Market yourselves. Scottsdale Pediatric's physicians have already been recognized in the "Top Docs" articles in the city magazine, have conducted some educational seminars at the hospital, and did some outreach to local OB/GYNs when they contracted with additional payers. These are all well and good, but the smartest target is the key market -- moms.

Show off the practice's expertise by setting up talks at toy stores, public libraries, bookstores, local grocery stores, childrens' church groups, and so on. Offer the local news media stories on heat stroke, obesity, and other timely topics (morning news shows are especially likely to pick these up). Talk to schools about coming on-site to conduct sports physicals. Send out reminders for well-child appointments, especially for "older" patients. Pre-teens generally stay healthy and get busier so you may not see them unless you remind them to come in.

And keep up contacts with area OB/GYNs. Lunches, coffees, and other informal relationship-building may secure more referrals than more formalized efforts.

Plump up revenue


Denials are a problem for the practice -- and that's no big surprise. It's typical to see pediatric practices lose at least 6 percent of revenue to denials. You can't stop them all, but you can focus efforts on eliminating as many as possible.

Start by downloading the Denial Tracking Worksheet from the "Tools" area of www.PhysiciansPractice.com. For at least two weeks, examine every EOB, and document why denials are occurring. Then you can target denial-control efforts exactly where the problem is: poor ICD-9 coding, late filing, or not verifying patients' benefits.

Systematically appeal denied claims on which you think you are actually owed money. Since electronic billing is new for this practice, they should be sure someone is reviewing claims reports to confirm that claims got through in the first place.

Scottsdale Pediatric Center also needs to spend some time focusing on copay collection. Kaye seemed generally pleased with it, guessing copays are collected "about 90 percent of the time." But in these days of $50 copays, drive for 100 percent collection.

How? Ask the front desk to track, for each patient, whether a copay was collected and, if not, why not. Then you'll know where to target improvement efforts, whether it's better identifying what patients owe, following a more consistent collection policy, and so on.

Some other revenue generating ideas:

  • Have a standard, written protocol for sending patients to collections. We recommend sending no more than three collection letters, before sending patients to collections.
  • According to Kaye, 85 percent of sick visits are billed as level 3s, putting the group roughly within the norm for coding services. But it may be worthwhile to audit some charts to make sure new patients and consults are recognized, as these pay more than established visits. And make sure that all charges are being captured and billed.
  • Periodically review EOBs to make sure payers are living up to their contracts.
  • With the practice down one physician, consider subleasing some of the office space.

Maximize staff

Scottsdale Pediatrics is currently understaffed, with several employees on sick leave. At just 2.46 staff per FTE physician, the group is below the Medical Group Management Association's median for pediatric practices of four staff per FTE physician. Practices with higher levels of staff actually perform better financially than understaffed practices since physicians can then focus on high-level service.

While the group is short-handed, it's crucial that staff focus on tasks that drive revenue and patient flow (the key issues for Scottsdale). For example, Kaye reports that the office manager does payroll by hand. A better option may be to outsource payroll and refocus the manager on monitoring and working denials or marketing for new patients. Sure, outsourcing payroll will cost the practice, but that should be offset by increased revenue from more patients and higher collections -- not to mention that automated services will likely provide better accuracy.

Similarly, consider automating scheduling and other basic practice management functions. It likely outweighs the cost of having schedulers flip through a book to cancel an appointment; and consider the revenue upside of sending automated appointment reminders.

The practice will need the staff on its side as it makes changes. One approach: Call a staffwide meeting and lay it all on the line. Show revenue versus expenses for the past three years. Explain why raises have not been possible. Outline the five things the practice is going to do to turn things around. Solicit ideas from the staff. Then work together to make it happen -- with the promise of raises for all if specific benchmarks are met. Full disclosure and a team spirit help in difficult times.

Measure progress and success

These physician-owners are at a serious disadvantage working without practice management software. It is very time consuming otherwise to assess the practice's performance and measure how operational changes are influencing it. There should never be end-of-the-year surprises. And while none of the physicians consider themselves business people, it's not too much to ask a business owner to be aware at all times whether costs are outpacing expenses -- and why. These key indicators should be examined monthly:

  • new patient encounters as a percent of total patient encounters
  • total patient encounters
  • percent of denied claims
  • percent of copays collected
  • net collections
  • overhead ratio (as a percent of net medical revenue)
  • days in accounts receivable
  • net revenue/loss

Finally, these physicians may want to consider a radical change to the structure of their practice that could well bring in the additional patients and revenue they need. With its physicians devoted to the idea of longer-than-normal patient visits, and doting on parents in affluent Scottsdale, this practice is a prime candidate for switching to a concierge medicine model. The practice would cancel all commercial contracts and ask families to pay a monthly fee (think in the $200-$300 range) for top-of-line access to the physicians, plus payment for services rendered. Patients could still submit out-of-network claims to payers to have actual care reimbursed.

Obviously, this is a very risky move and only careful planning and market analysis could make it less so. Still, if the numbers just aren't adding up and none of the partners has an issue with the inherent inequities of the concierge care model, it might be worth discussing. See www.higher-care.com for an example of a practice that's made this approach a success or read our article on page 85.

In our opinion, Scottsdale Pediatric is not as bad off as Hurley seemed to think. And since she first wrote to us, things are looking up. New electronic billing sped up accounts receivable collections: a full 56 percent of accounts are collected in less than 30 days and 24 percent come in within 31 to 60 days. Only about 7 percent are over 120 days. That's pretty good.

And thanks largely to saving on the malpractice costs of the physician who left, the practice is ahead of schedule paying down its loan, according to Kaye, and is on track to pay it off entirely by the end of the year -- a sure step toward better financial times.

Pamela Moore is senior editor, practice management, for Physicians Practice.

She provided on-site consultation to the grand prize winner of our Great Practice Makeover, featured in the July/August issue of Physicians Practice. Look for more makeovers in coming issues.

Moore can be reached at pmoore@physicianspractice.com.

This article originally appeared in the September 2005 issue of Physicians Practice.