Signs that your practice is headed for trouble

By Rebecca Anwar, Ph.D.

In the best of all worlds, physicians, whether in solo or group practice, would solve practice problems before they get big enough to have an impact on over-all performance. However, experience tells us otherwise.

Physicians, have little time to dedicate to business matters. For this reason, they tend to look at the practice globally and aren’t quick to identify signs of trouble. Most physicians are not even sure what danger signs to look for, let alone know what actions will bring a defined resolution. As a result, you are sometimes blind-sided with a sudden deterioration in the practice’s performance. Here are seven telltale signs that a practice is headed for trouble.

A change in accounts receivable trends. Each month prepare and update graphs that show you the numbers and trends of (1) charges, (2) adjustments, (3) receipts and (4) accounts receivable. When you see a sudden jump or decline that is not predictable, there may be trouble on the horizon. For example, a sudden increase in adjustments may be an indication that accounts are not being followed-up or perhaps someone is being indiscreet in what they write off. If accounts are shifting into the 90+ day aging, there may be a problem with lag time in submitting billings or perhaps one of the high volume third party (insurance) payers has become delinquent.

Increased overtime. If overtime costs are suddenly rising, your manager needs to justify the reasons why. It may be understandable if you just added a new physician or are going through a computer conversion. However, if everything in the practice is running its normal course, overtime hours should be stable and very limited. Sudden increases in overtime can mean something is wrong with your systems, procedures or staffing. It could be due to high absenteeism, which in itself can be an indicator of a bigger problem.

Rising overhead. If overhead is rising, it’s a sure sign of a loss of control issue. It is likely to be a combination of poor systems, lower productivity and poor financial management. It won’t go away by itself, so dig deeper and get to the root of it. You can start by calling your accountant, but a more detailed overview of the entire practice will require the assistance of a practice management consultant.

Dissatisfied patients or staff. When patients start to complain about how they are treated or the inability to access services, it is time to take stock. If you have employees with an “attitude” perhaps it is coming from the top. Staff will generally mock the attitude and behavior they are experiencing. If you are not there to solve their problems, they will not attempt to solve the patient’s problems or meet their needs.

One obvious indicator of employee dissatisfaction is an increase in turnover. If you are experiencing out of norm staff attrition, it is likely that something is wrong in your workplace. It could be unrealistic expectations, poor management or an inability to develop an atmosphere where people feel important and are proud of their accomplishments.

Poorly managed appointment schedule. Too often, physicians take it for granted that there will be an occasional no show and they will sometimes run behind. But if this is a pattern, not an exception, something is wrong. It may be a lack of well-designed scheduling templates, overbooking, or not predicting or allotting enough time for surgery cases. It may also be an indication that patient demands are greater than you are able to meet without compromising patient service. If you have “no shows” your productivity will suffer and the cost will mount rapidly. These issues can be resolved with a little effort, planning and a true commitment to take corrective action.

Late charges. When you are signing off on accounts payables, review the invoices to see if bills are being paid on time. If you see late charges, it may be an indication that revenue is dropping. This could be for a variety of reasons, such as a poor performing third party payer, lack of management’s attention or a physician that has taken more time off than usual. At any rate, you need to explore this and make sure it does not affect the timeliness of paying your bills.

Inconsistent reporting. It is important to review each prior month’s performance and examine any indicators that affect your current or future position in the market. If suddenly your manager isn’t giving you good solid information about the practice’s performance each month, don’t let it slide by. She or he may not see this as a priority or may be attempting to avoid delivering unpleasant news about the practice. Whatever the reason, you need to get a handle on it and demand practice performance reports each month. These reports should be reviewed with the manager monthly.

What type of reports should physicians be looking at? Physicians should require their managers to distribute month-end reports to all physicians in the practice. These reports should provide a measurement of how well the practice is doing. Standard reports include monthly and year-to-date production activity: charges, receipts and adjustments by provider, as well as information on accounts receivable performance and aging reports. This type of information can be captured from the computerized billing system. The manager can then prepare a report in graphic format with summary analysis.

Other reports include income and expense information and detailed cost for staffing—including new hires, training, bonus expense and overtime costs. Often physicians will ask their manager to prepare additional reports they feel will be useful in strategic planning and understanding “the state of the practice.” For example, if you use multiple hospitals, you may want to track admissions by hospital. If a new physician in the community is encroaching on your territory, you may want to look at your procedure revenue reports, to see if you are experiencing a drop in the number of procedures you do. Perhaps you plan to target a certain aspect of growth, such as workers compensation. If so, it will be important to measure the productivity of that particular pay class to determine if your marketing dollars are bringing the desired result.

In less than two hours a month, physicians and their managers can review practice performance and make data-driven decisions that are prudent for the over-all stability and growth of the practice. If you aren’t doing this now, it’s time to get started.

If you are experiencing any of these signs of trouble, start investigating the causes now. Begin by working with the practice administrator/manager. She or he can provide insight and may help you understand the reason for the problems. In addition, physicians and the manager may be able to formulate a plan to resolve the problems. However, if the problems seem to require more aggressive action, you may want to turn to outside advisors.

You can obtain an unbiased report of the practice performance by hiring a consultant to conduct a practice assessment. The consultant will look at major aspects of the practice by reviewing reports, conducting an on-site assessment and examining systems, procedures and the culture of the practice. The costs will vary, depending on whom you hire and how extensive a survey is conducted. Such an assessment provides an excellent base line to guide you in setting and achieving benchmarks for improvement.

Rebecca Anwar Ph,D., is president of The Sage Group, Inc., and is past president of the National Association of Healthcare Consultants.