Provider Productivity is Key to Financial Success
Keep close tabs on productivity measurements, identify revenue opportunities, and share them with your provider.
By Dixon Davis, MBA, MHSA, CPPM
The most important factor in achieving financial success in a clinic is productive providers. Higher productivity results in higher revenue, while lower productivity results in less revenue. This is a simple concept, but we often don’t give it the proper attention. Effectively monitoring provider productivity helps manage his or her expectation of compensation and the business’ bottom line.
Look for Ways to Enhance Revenue
Go beyond simply understanding the correlation between productivity and financial outcomes. A manager should look for ways to create more efficient processes and additional services that add to the revenue stream. Too often, people look at where to cut costs rather than where to increase revenue. This is a misconception: Maximizing revenue is number one for financial strength.
For example, a provider says she should be making more money. She explains that the practice (schedule) is full, yet she is not making as much as a colleague down the street. Upon review, you discover that this provider sees 25 patients per day, whereas the provider down the street sees 35 patients per day. The national benchmark for the same specialty is over 28 patients per day.
The next calculation is very important to understand. For this practice, the average revenue per patient visit is about $100. For a provider who takes off three weeks per year, seeing one additional patient per day equates to about $25,000 more per year. Ten more patients per day equates to $250,000 more per year. As we apply financial calculations to this revenue, there will be associated overhead costs (all of the revenue will not hit the bottom line); however, also remember that once the fixed costs and certain level of variable costs are incurred, the incremental overhead allocation to additional revenue will usually be a lower percentage. This means a greater percentage of revenue brought in from increased productivity will find its way to the bottom line.
Show Providers the Numbers
When it comes to productivity in a medical practice, the majority of billable production is performed by the provider (physician, mid-level provider, etc.). For this reason, it’s very important that providers are given the information, know how to interpret it, and understand how it will affect them personally and as a practice.
To effectively use productivity numbers, first identify what productivity measurements will be tracked. Possibilities include total number of patient visits, total evaluation and management (E/M) visits versus procedure visits, the number of units for each CPT® code billed, total work relative value units (wRVUs) earned, amount of collections received, and hours worked. Measurements may vary depending on the specialty or culture of the practice. It’s important to identify a consistent metric and one that is understood by the provider(s).
Once a productivity metric is identified, the report (or dashboard) needs to provide a clear picture of how productivity numbers influence financials. To help identify target goals, use historical productivity and financial data as a starting place. Benchmark data can be an effective tool to identify target numbers. Charts A and B illustrate a simple example of how both net revenue (collections) and wRVUs are tracked on a monthly basis and are compared to an internal goal and to a national benchmark.
To get providers invested in productivity, some provider compensation models are built on a straight productivity formula. Examples include paying providers a dollar value for every wRVU earned or paying based on an identified percentage of collections. If the provider knows he or she will make $51 per wRVU, there is a clear understanding of how the level of work (productivity) will directly tie to total compensation. Likewise, if a provider is paid 48 percent of total collections, it’s clear that providing more billable services will directly affect compensation. This compensation model confirms that when a provider sees more patients, or provides more billable services, compensation increases.
Take Advantage of Benchmark Data
Using and comparing benchmarks, either internal or external, can provide additional information for setting goals or expectations. For example, a provider may know they will be compensated $51 for every wRVU they generate, but providing her with a benchmark that the average provider in the specialty is earning 4,200 wRVUs per year (350 per month) and is making $214,000 a year helps to create an expectation of where productivity should be.
You start to accomplish objectives when the provider understands:
- How much he or she is paid for each wRVU;
- Where the total number of wRVUs should be;
- How much compensation is expected at that level of production; and
- That the level of compensation for the associated level of productivity is equitable.
You can set up similar models using the varied metrics. If revenue numbers are identified as the metric, will it be gross revenue (charges) or net revenue (collections) that is measured? If a practice uses a fixed fee schedule, charges may represent pure production better, but will not represent actual money received.
Effective productivity reports that tie to provider compensation will:
- Identify the metric(s) that will be measured.
- Associate a conversion factor that relates to compensation or practice profits.
- Compare productivity numbers to either internal or external benchmarks.
- Create clear goals and expectations of productivity and financials.
Take Full Advantage of Production Reports
You can report production measures to create competition among a group or to motivate providers on an individual level. That should not, however, be the end of the productivity monitoring.
Productivity reports also can be a valuable tool for practice managers to increase revenue streams. By reviewing productivity reports and benchmarking them against better performers, you become aware of opportunities for greater productivity and increased revenue.
For example, the manager of a neurology practice becomes aware that providers in the practice are not making as much as other community physicians or as much as national salary benchmarks. It’s up to the manager to help discover why this may be the case. The providers are working from 8 a.m. to 6 p.m., the same as other providers in the area. The office workflow appears to be efficient within the office with full schedules and patients moving through their visits in a timely fashion. Further review of a good productivity report, however, identifies that the providers in this office see a higher percentage of E/M visits compared with industry benchmarks where providers do more office-based procedures, such as electroencephalograms (EEGs), nerve conduction tests, and spinal taps.
The manager can track these trends, educate the providers on the missed opportunities to provide more office-based procedures, illustrate how revenue would be affected by making the change, and then let the physicians determine if this is something they are comfortable doing. Using productivity reports provides the manager with good data on how changes in productivity patterns can affect revenue streams.
The effective use of productivity reports by managers can help them to:
- Identify opportunities for workflow efficiency to increase number of patients seen per day
- Identify information technology tools that improve productivity
- Modify scheduling models to increase patient volumes
- Identify opportunities for offering new services in the office
- Benchmark to better performing offices and new opportunities
- Identify ways to use staff differently to increase billable services
By keeping close tabs on productivity measurements in the practice, you can identify opportunities for better revenue to share with physicians. These numbers will help them to understand how the work done in the office relates to financial outcomes and to make good business decisions on how work is performed to maximize revenue opportunities.
Dixon Davis, MBA, MHSA, CPPM, is vice president of practice management at AAPC.