IT costs continue to rise for practices, with more going to anti-ransomware efforts.

Aug. 1—Physician practices that hire more support staff and non-physician providers (NPPs), such as nurse practitioners and physician assistants, improve their chances to increase revenue and profits, a new survey found.

The Medical Group Management Association’s (MGMA’s) 2017 “DataDive Cost and Revenue Survey” found that one key factor in medical group profitability and productivity is greater utilization of physician extenders and key support staff.

Between 2015 and 2016, practice operating expenses increased at nearly the same rate as revenue, the proprietary survey found.

“The practices that came out with increased revenues owe it namely to increased non-physician providers and support staff,” the survey’s authors concluded. “The practices with a higher [NPP] to physician ratio (0.41 or more NPPs per full-time equivalent [FTE] physician) earn more in revenue after operating cost than practices with fewer NPPs (0.20 or fewer NPPs per FTE physician), regardless of specialty.”

The survey found that physician practices with more support staff per FTE physician report 34 percent to 55 percent increased productivity in addition to higher revenues.

Dave Gans, senior fellow for industry affairs at MGMA, said the survey was compiled from 3,200 responding practices.

“Revenue is going up, but physicians are reporting increased productivity to increase output to deal with the issue of expenses going up. Practice physicians are working harder and smarter to keep pace,” Gans said in an interview.

The MGMA survey also showed drug costs rising by 11 percent for non-surgical specialty and primary care practices per FTE physician and 16.5 percent per FTE physician for multi-specialty practices, which incurred the largest increase in drug costs over the last five years (53 percent more per FTE physician).

Practices are implementing better inventory control and management processes and appropriately rotating stock before expiration, gauging the cost of managing drugs and insuring they’re appropriately compensated, Gans said.

Information technology (IT) expenses continued to grow, with physician-owned practices spending an average of $2,000 to $4,000 more per FTE on IT operating expenses than in the previous year. IT was an annual expense of $14,000 to $19,000 per doctor per year. Those IT expenses, which include the purchase and maintenance of electronic health records, patient portals, and other hardware and software products, equipment and maintenance, are lower for hospital-owned physician practices.

“Practices are spending more money on IT, but for different reasons. A few years ago it was implementation and training for EHRs. Now most practices have those and they’re spending on anti-ransomware and cybersecurity,” Gans said.

MGMA also found that primary care practices with lower percentages of government payer mix report higher operating costs and even higher revenue after operating cost per FTE physician in both physician-owned and hospital-owned practices.

“Within the physician-owned primary care groups, those with a mix of 30 percent or less yield $159,307 more in revenue per physician than those with a mix of 50 percent or more,” the survey found. “In hospital-owned practices that difference is $221,497.”

Practices also have hired nutritionists because they have large diabetic populations and some are hiring psychologists or other mental health providers to address mental health needs or opiate addiction, Gans said.

“They’re also are using care coordinators, scribes, and medical assistants to move patients in and out of examining rooms and helping doctors maximize their time with patients,” he said.

AR Improvements

Over-120-days percentage of accounts receivables (AR) has decreased from 21.2 percent in 2014 to 14.8 percent of total AR in 2016, Gans said.

While median total accounts receivable was virtually unchanged, the median number of days of billed charges in AR (65.2 days versus 62.8 days) have decreased, according to MGMA data.

“We’re seeing a decrease in aging AR that’s partly due to an improving economy and partly due to more people having health insurance,” he said.

The MGMA report comes on the heels of other research identifying mounting pressures on physician practices. A May 2017 report (registration required) by Moody’s Investors Service found that the same economic factors facing physicians have been impacting U.S. not-for-profit and public hospitals. The annual medians report showed a growth of 7.5 percent in operating expenses from 2015 to 2016, compared to 6.6 percent growth of annual operating revenues during that same period.

In the report, Moody’s attributed the increase in expenses after two years of stronger revenue gains to rising labor and pharmaceutical costs.

A June report from Fitch Ratings concluded that the ongoing implementation of the Medicare Access and CHIP Reauthorization Act is encouraging more independent physicians to seek hospital employment.

Non-Physician Trend

Gary Sokolow, manager of Fitch’s healthcare group, said “top of license practicing” by non-physician providers is growing more common.

“We’re seeing it across the board,” Sokolow said in an interview. “It frees doctors to see more patients, which then drives more revenue. This mirrors what we’re seeing in hospitals in general: price increases on specific drugs, often around cancer, have been impacting hospital margins in the last few years and information technology has become a larger cost on the implementation and upkeep side.”

Ripley Hollister, M.D., a board member of the Physicians Foundation who operates a two-physician practice, said the MGMA study highlights trends in his practice.

“Our [physician assistant] is considered part of our team and helps to reach out to patients and improve their experience and seek efficiencies. She’s engaged in all quality improvement tasks and works at the top of her license,” Hollister said in an interview.

“CMS and other insurers are addicted to data. And a physician practice needs extra staff to deal with growth in data requests,” Hollister said. “I have a care coordinator reaching out to patients, doing follow up work insuring we have the labs and test results, talking about medications and compliance. Our scribe follows me and documents everything. We’re seeing many new dollars now by performing and documenting these quality measurements.” 

David Muhlestein, chief researcher officer for Leavitt Partners, said in an e mail interview that as value-based payment models continue to increase, the need for NPPs will continue.

“Practices are continuing to learn how to most effectively deploy NPPs.” Muhlestein said. “They are part of an effective care management team, which will include a wide variety of caregivers with various levels of training and backgrounds.”

Costs Favor Scale

Farzad Mostashari, MD, founder and CEO of the consulting firm Aledade, said “the road to value-based reimbursement (VBR) is profitable” for his firm’s 230 client physician practices.

Mostashari, the former chief of the Office of National Coordinator for Health Information Technology (ONC), said in an interview that practices earn more on VBR contracts based on the competence they gain.

“Staffing to provide more transitional care management is hard to do, but compensates well,” Mostashari, said. “Wellness and prevention are hard to do, but there is revenue in there. You need to hire more support staff to phone patients and provide care management services.”

Mostashari conceded that the ability to cover those higher overhead costs favors scale, but does not require merging with larger groups or selling to hospitals. He said 10 to 20 practices can come together virtually and access population health data and other benefits without surrendering their independence.

 “The key point that shouldn’t be lost is that there are many thriving independent group practices,” Mostashari said.

Mark Taylor is a freelance writer based in Chicago. 

Publication Date: Tuesday, August 01, 2017