Opportunities in Outsourcing
by Dr. Ralph McKibbin
Each year most of us perform an annual strategic plan review. A SWOT analysis is performed where we evaluate the strengths, weaknesses, opportunities and threats to our operations. Unfortunately, these days threats are everywhere. Federal legislation and regulations are forcing revenue reductions. Narrow networks are limiting access to the patients market. Carrier cost reduction strategies are further limiting our ability to provide basic services as we and our patients see fit. This results in top-line revenue being constrained while our managers are also forced to perform an increasing number of duties with limited resources.
It is a fundamental truth in our business that revenue minus overhead equals what the doctor makes. Rising costs of living and new costs such as information technology and electronic health records are increasing practice overhead. Flat revenue and rising overhead leave us in a precarious position. Opportunities are needed to find new sources of revenue. We all want and need to meet rising overhead costs with these new revenues. We stereotypically think of opportunities as such things as new endoscopic procedures, hiring new partners, or opening a new office or endoscopy center which can raise incoming revenues. But opportunity can also be found in improving internal operations.
As practices grow and operational efficiencies change, productivity can be lost if we stick to old policies and methods. To find these hidden opportunities, we need to take a serious look at ourselves in the mirror to assess our operational strengths and weaknesses.
In today’s world we are being asked to think of our clinical operations in terms of value equals quality divided by cost. This same equation can be used to assess our internal operations. Outsourcing can provide benefits in terms of improved quality and reduced cost. Additionally, outsourcing can add new services or fill gaps in service by adding an outside source for services.
Just like living organisms, organizations have a life cycle with growth and development stages. Some departments or functions will be mature with well-established policy and procedure, while others will be brand new and struggling to establish their place in the organization. For example, most medical practices have well-established billing operations, as this function is a basic part of what we do. Our billing personnel typically have internal relationships with co-workers to help with day-to-day problems and utilize community and organizational networks to stay up to date. Even brand new practices need a revenue cycle.
You can consider these well-established units as low-hanging fruit. Assessing a revenue cycle is fairly routine and provides a good starting point for a self-assessment. The lessons learned can be carried over to other areas of the practice. A concrete system of measurement is needed. Utilizing reports from our practice management systems, we can create an efficiency analysis. Employee costs of salaries and benefits establish a base cost of the operation. Don’t forget that additional costs of training, equipment, system licenses and office space are also added. Audits of coding and billing accuracy can be done to establish total charge efficiency. Accounts receivable and aging are evaluated on industry norms.
Support groups such as the Medical Group Management Association provide national benchmarks which allow us to compare ourselves to other practices. Practices falling below the industry average or demonstrating a deteriorating year-over-year performance may be candidates for outsourcing. Costs also need to be weighed against the percentage of net collections. Average performance for above-average cost doesn’t make much sense. Prospective vendors can be analyzed using readily available tools such as these, which allows for informed decision making.
Many entrenched services can be enhanced with outsourcing, but new service areas can be added to improve operational efficiency, enhance the patient experience, and increase referrals.
What do you outsource in your practice? What works best for you? Do you have questions? Comments?
CONTINUE THE CONVERSATION ON THE GI CIRCLE.