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Managing Expense and Revenue in Today’s Medical Practice

Why I care?

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Agenda

• Finance 101

• Revenue Ideas

• Expense Ideas

• Strategy Discussion

Revenue by any other name…is truly the rose!

Main Entry: revenue [rev-uhn-yoo, -uh-noo]

Part of Speech: noun

Definition: income, profit

Synonyms: acquirement, annuity, bottom line, cash flow, credit, dividend, earnings, emolument, fruits, fund, gain, gate*, get*, gravy, handle*, interest, means, net, pay, payoff, perquisite, proceeds, receipt, resources, return, reward, salary, split*, stock, strength, take*, takings, wages, wealth, yield

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Classic Revenue Focus

• Providers

• Volumes

• Service Mix

• Payer Mix

• Reimbursement Rates

• Accuracy and Efficiency of Processes

Services Delivered (Good Sold)

• Revenue = BCBS Price x Volume, and

• Revenue = Medicare Price x Volume, and

• Revenue = Medicaid Price x Volume, and

• Etc…

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Simple Math…

Revenue = $0.00 x 100 = $000.00…OrRevenue = $0.00 x 1,000,000 = $0,000,000.00

Profit

Revenue – Expenses = Profit (Loss)

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Expense by any other name…

Main Entry: expense [ik-spens]

Part of Speech: noun

Definition: cost, payment

Synonyms: amount, assessment, bite, bottom line, budget, charge, consumption, debit, debt, decrement, deprivation, disbursement, duty, expenditure, forfeit, forfeiture, insurance, investment, liability, loan, loss, mortgage, obligation, out of pocket, outdo, outlay, output, overhead, payroll, price, price tag, rate, responsibility, risk, sacrifice, spending, sum, surcharge, tariff, toll, upkeep, use, value, worth

Classic Expense Reduction

• Appropriate mix of staff

• Efficient use of staff

• Equipment purchase vs lease

• Multi-year vendor contracts

• Constant evaluation of costs and service

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Profit Loss Statement

Year 1 Year 2 # Change % Change

Revenue 4,078,901 3,874,956 (203,945) -5%

Staff Salaries/Benefits 1,467,163 1,496,507 29,343 2%

Building 324,584 326,207 1,623 1%

Medical Supplies 318,754 326,723 7,969 3%

Administrative expenses 194,652 184,920 (9,733) -5%

Equipment-Non-medical 193,617 189,744 (3,872) -2%

Equipment-Medical 137,205 141,321 4,116 3%

Malpractice Insurance 105,383 103,276 (2,108) -2%

Utilities 48,294 47,811 (483) -1%

Interest 20,186 19,782 (404) -2%

Other 49,653 50,646 993 2%

Total Expenses 2,859,491 2,886,936 27,445 1%

Profit 1,219,410 988,020 (231,390) -19%

Benchmarks Per FTE Physician

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Practice 477,708 165,262 333,799 143,909

Better Performing 723,588 203,539 380,975 314,712

Other 630,938 189,725 381,593 237,017

Total Medical Revenue

Total Support-Staff Cost

Total Operating Cost

Total Medical Revenue after

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Expenses

Staff Salaries, 52%

Equipment, 12%

Building, 11%

Supplies, 11%

Malpractice, 4%

Other, 11%

Consulting Tip!!!!

• Problems with revenue can usually be traced to one

of these three areas….

• Volume

• Payer Mix Shift

• Procedure Mix Shift

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Providers and Volume

Dr. A Dr. B Dr. C Dr. D

Jan-Mar 150,000 100,000 125,000 150,000

Apr-May 140,000 120,000 130,000 120,000

Jun-Sep 50,000 125,000 120,000 140,000

Oct-Dec 75,000 130,000 125,000 150,000

Total 415,000 475,000 500,000 560,000

Visits GI Proc Cd Proc Dexa

Year 1 26,200 2,400 1,250 500

Year 2 26,500 2,000 1,200 600

Change 300 (400) (50) 100

% Change 1% -17% -4% 20%

Revenue by Doctor and Quarter…

Volumes…

Mix of Services

0

100

200

300

400

500

Int Med Op Card GI

Office Visits Labs Procedures

Average Revenue/Service:

• Office Visit: $50

• Labs: $18

• Procedures: $250

Monthly Revenue:

• Int Med: $40,400

• Op Card: $62,700

• GI: $69,300

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Payer Mix (Charges)

Year 1 Year 2 Change % Change

Medicare 3,428,571 3,492,040 63,469 2%

Medicaid 166,667 170,303 3,636 2%

BCBS 2,727,273 2,403,948 (323,325) -12%

United 1,562,500 1,482,930 (79,570) -5%

Cigna 1,000,000 950,293 (49,707) -5%

Other 98,039 94,203 (3,836) -4%

Self-Pay 125,000 127,000 2,000 2%

Total 9,108,050 8,720,717 (387,333) -4%

Opportunity Costs -Understanding Reimbursement Rates

CPT Description Charges Medicare Payer 1 Payer 2 Payer 3 Payer 4

99214Est Detailed OV $ 130.00 86.39 106.27 98.40 90.53 86.91

80061 Lipid panel $ 51.00 18.72 12.17 6.00 9.36 14.02

93350 Stress Echo $ 263.00 160.57 189.06 175.08 86.86 156.35

45385 Colon w/ Snare$ 1,435.00 468.23 870.99 597.55 946.00 788.00

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Impact of Various Rates

Medicare38%

Medicaid2%

BCBS30%

United17%

Cigna11%

Medicaid1%

United18%

Medicare29%

BCBS38%

Cigna12%

Share of Revenue

Expense Denominators

• Work rvu’s

• Categories

• CPT

• Locations

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Accounting Terms for Expenses

• Fixed Costs

• Variable Costs

• Opportunity Costs

• Sunk Costs

• Return on Investment

What to do with Profit?

• Take it out as bonus/dividend

• Create a savings account/investment account

• Rainy day fund

• Invest in the organization

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Making money isn’t evil…

• Business owners deserve the “reward” of success

• Action is appropriate given ownership strategy for

future

What to do with a Loss?

• Run screaming into the night.

• Review both revenue activity and expense activity.

• Understand what occurred and begin

corrections/enhancements…

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Why do I need to know this…

• New payment models

• Value based

• Restructuring practice models

• Independence AND employed

• New organizational structures

• CIN and ACO

Medicare Allowable from 2008 to 2018:Decreased or Flat Reimbursement?

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

99213 $57.24  $58.89  $64.99  $66.83  $67.17  $69.35  $69.86  $70.26 $70.29 $70.73 $69.98

36556 $237.42 $212.94 $217.82 $226.64 $224.63 $227.06 $224.88 $226.77 $226.35 $225.98 $201.16

29876 $557.86  $564.01  $568.89  $617.87  $616.32  $625.52  $   634.83  $646.15 $642.67 $641.27 $633.96

64483 $272.26  $232.18 $232.98 $231.47 $227.80 $219.82 $213.10  $211.71 $212.28 $209.79 $209.45

66984 $600.36  $614.76  $650.76  $710.39  $718.32  $629.70  $637.96  $622.75 $620.84 $622.84 $619.39

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Medicare Trend

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

All

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ab

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Medicare Rates

99213

36556

29876

64483

66984

Medicaid Allowable from 2008 to 2018:Decreased or Flat Reimbursement?

Flat reimbursement since 2009 (rates frozen per state law) apart from a decrease in 2014

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Medicaid Trend

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

All

ow

ab

les

Medicaid Rates

99213

36556

29876

64483

66984

Revenue Sources

• Direct

• Standard services

• Ancillary services

• “Convenience” services

• Online services

• Tangential

• Clinical trial participation

• Speaking presentations

• Educational sessions

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Simple revenue leaks…

• Coding…This area should be reviewed regularly…

• Collecting before the patient leaves

• Annual managed care contract reviews

• Credentialing properly

• Financial audit of payments (variance analysis)

Does the patient know they need us?

• Practices must begin to understand how to grow

the revenue of the practice.

• Relying on the model of waiting for referrals or simple

word of mouth is becoming much more difficult to

sustain…

• What does the patient need…AND…

• What does the patient want?

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Paternalistic Facilitative Model of Care

The patient is now a vital part of the care team

Expenses

THIS THATNOT

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Technology and the Consumer

Embrace Technology

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#1 Expense = Labor

• Online scheduling

• Online communication

• Online bill pay

• eStatements

• Telehealth

Tablet = Kiosk

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Do More with Less

Take a Proactive Approach

• Eligibility Check

• Batch report, Payer resources

• Patient Estimation – Credit Card On File

• Authorizations

• Know which procedures require auth/precertification and stay updated

• Clean Claims

• NCD/LCD

• MUE

• NCCI Edits

• Medicare Preventive Services Billing Rules

• Global Periods

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“Doing the things we do now and doing them better, cheaper and faster will take us so far. But it will not take us far enough. We're going to have to do new things in new ways.”

- Peter Bonfield (b. 1944) British C.E.O. of British Telecom

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Thank You

MSOC Health(866) 347-0001

200 Timber Hill Place Suite 221Chapel Hill, NC 27514

www.msochealth.com

Thank You

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