Healthcare’s soring costs, reimbursement declines, mounting operating expense, rising numbers of uninsured and underinsured patients, and weak margins necessitate a focused corporate business model designed to deliver sustainable profit margins and practice longevity. Key to any structure is proven practice management, institutional knowledge, financial skills, and experienced leadership.  Hoping for salvation is not an effective business plan. 


Simply, there are issues the medical practice can directly influence and those issues the practice cannot control.  You may not be able to effectively influence favorable payor reimbursement rates but you can hire and train skilled staff to provide cost-effective support services. 

The number one systemic problem confronting today’s medical group practice is the lack of effective practice management expertise including organizational skills, and the ability to work in concert with physicians and their support teams. Yes, there are a number of critical practice management issues, however, the majority can be directly attributed to ineffective management, poor communication, and the inability to successfully marshal available resources and meet defined goals. While the traditional medical group practice continues a successful healthcare delivery model, the practice must also financially support the business and provide income for the staff and owners. Ensuring the practice’s financial health requires acknowledging and effectively adjusting to change. Their clinical excellence and financial health need not be mutually exclusive. 

For example, you may not be able to effect favorable payer reimbursements at a per-service level, but you can implement and monitor effective coding, charge capture validation and billing, and audit EOB’s for correct reimbursement. You can control and implement effective internal operational management policies and processes, and enforce and reward accountability. You can select and reward talented staff. You can establish and implement consistent internal scheduled communication venues for both business office and clinical teams, and for providers to promote optimum practice operational integration.

Uncertainty surrounding the future and evolving implementation of the Affordable Care Act will continue pending the Supreme Court’s decision and November’s presidential elections. Regardless of the outcomes, it’s not unreasonable to expect physician reimbursements to continue declining as the government looks for ways to reduce unsustainable healthcare costs and rising fiscal deficits. CMS will continue with ongoing declining physician reimbursements and new reimbursement models. Since CMS sets the rate standards, private insurance payors will continue to follow the lead and offer similar reimbursements rates. They have little incentive to offer higher rates and will adjust payments in line with government reimbursements.  In this insidious reimbursement environment the practice should plan for sustained downward pressure on gross revenues. Knowing the effects of a declining top line, the net effect on the bottom line is absolutely critical. The practice must clearly identify the cost of providing care and services to remain competitive in the new environment of expanding accountability and weak margins. The current fee-for-service payment model is already under assault. You should expect this change to accelerate as the government and the largest private payors adjust from activity-based reimbursement models to payments focused on rewarding primary care and providers for demonstrating quality, outcomes, and cost effectiveness. Again, it’s not unreasonable to expect outcome-based payments to be directed by the dominant payors.

Savvy practice leaders will understand this and prepare contingency plans to address the challenges: declining revenues, changing reimbursement models and risk sharing, and increasing demand for services. While not easy or popular, it is essential the practice prepare for the potential draconian outcomes. Successfully navigating the challenges will require experienced leadership, organizational acumen, effective communication, and a dose of good luck. Bad news is never easily digestible and the messenger is often the first casualty.

Key internal practice management issues the practice can control: 

Internal management and group cohesiveness

Team leadership, both physician and administrative

Rewarding effective operational management expertise, skills, and communications

Defined goals and objectives, and supporting metrics

Strategic or tactical planning, and data based decisions

Procedural coding, billing, and charge capture validation for the level of services provided 

Management of the appointment, billing, and collections processes

Fair and enforced practice financial policies

Understanding the true cost of services and reimbursements

Identification of poor payors and reimbursement levels

Internal Management Solutions   

Work smarter…not harder. Pay attention, as situational awareness is critical, and prepare for change

Concentrate on services that still contain profit

Understand the cost of providing services.

Payor agreements must be profitable. 

More volume will not make up for weak margins.

Invest in technology and skilled staff necessary for efficient operations.

Require data-based business decisions

Promote profitable joint ventures and alignments. 

Share assets, patients, and market share.

Increase practice reach and patient access with ancillaries and mid-level utilization.

Ensure accurate procedural coding, documentation, and charge capture validation for all services. 

Simplify how the practice is reimbursed for services. This will require ongoing education and training and focused processes reviews.

When possible, collect all patient payments, deductibles, co-payments, and co-insurance at time of service. 

Monitor all EOBs for proper reimbursement. 

Know fees and that the practice is paid correctly, and submits accurate clean claims and prompt denial follow up actions.

Verify all patient insurance and payments before services, and have easy access to patient data.

Access to accurate key practice data are powerful tools. 

Follow up collection actions are costly: rejected claims, staff, time, delay in payment, cost-of-capital, etc.

We have reviewed some key issues confronting the group practice and obtainable solution models. Understanding the dynamics of change and having effective leadership and management and a flexible business action plan is the first objective for success.