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Slide 1: Improving Orthopedic Profitability
Slide 2: Profit Not a four letter word
Slide 3: General Rules • Two approaches to increasing profit – Enhance revenue – Cut costs • Time / work is limited – Can only increase own work so much • You can only control what you can control – Contracts are rarely negotiable • Contract leverage is rare – Cost containment is difficult
Slide 4: Changing Times • Employer Sponsored Healthcare (ESHC) is evolving – Covering 80.3% of non-elderly adults – Down from 85.3% in 1998 • Total healthcare spending is in excess of $1.8 • trillion dollars Within ESHC there is a shift toward the employee paying for more in terms of premiums, deductibles and co-pays
Slide 5: Changing Times • Insurers continue to try to limit their medical loss ratio • Medicare continues to look to limit surgeons fees – • • – Restrictive contracting with “proprietary” fee schedules make contracting difficult to manage – ASO contracts are growing joints, hip fractures Medicaid (Medi-Cal) is growing in numbers especially through the SCHIP program Worker’s Comp reforms are tough to manage – Surgery Centers took the biggest hit
Slide 6: Changing times • Patients are being asked to pay more – Deductibles, co-pays, exclusions – More first dollar costs are being put on to patients • Practices need to be prepared to handle these changes – Patient Centric care is coming
Slide 7: Understanding Our Craft • June 2006 Orthopedic Manpower Report – Workforce is aging – average 49.8 years • 24,015 AAOS members – 13,679 responded • 75% of members are fellows • 15% under age 40, 5% > age 70 • California added 113 surgeons • • • – Workforce increased by 500 surgeons, but overall density declined – – Generalist 29%, specialist 39%, mixed 32% Private practice 81% 31% solo practice, 60% group, 9% multi-specialty 42% have academic appointment (74% non-comp) 85% of academicians are specialists – 8% of all orthopedists are academicians
Slide 8: Understanding Our Craft • June 2006 Orthopedic Manpower Report – Fellowships – 28% sports medicine • Hand 20%, Spine 14% – 8% hand CAQ, but 22% list as specialty – 1 in 10 received research funding in past 5 years – Hours worked • Academic 69, HMO 53.9 • 2 in 3 take trauma call – Solo 61.5, group 60.6 – Only 25% receive compensation • Income proportional to hours except in academics
Slide 9: Understanding Our Craft • June 2006 Orthopedic Manpower Report – Payer mix Managed care 32% , Medicare/ Medicaid 33%, Work comp 12%, Private pay 16%, 4% pro-bono – Average number of cases per month – 32 • Arthroscopy of the knee still most common • 245 surgeon reported doing at least 4 spinal disc replacements per month
Slide 10: Understanding Our Craft • June 2006 Orthopedic Manpower report – Retirement • 10% of respondents retired • Mean age 59 • 12% retired before age 65, 46% retired after age 70 – 8% expect to retire within 2 years • 13% of generalists
Slide 11: Benchmarking • Data is key in making practice management decisions – Need information from outside the practice to decide where to focus energy – Not following other examples • Rather compare outcomes – – – – For example – x-ray revenue / costs: Ankle series Cost fully loaded $6 per film = $18 Net revenue $72 per series Profit $54
Slide 12: Evaluate New Technologies • Cost / Benefit approach to capital investment – Need to justify investment – return on investment • PACS system – Digital based – easy approach to EMR – Cost: $50,000 plus $2,000 per quarter or $666 per month • Current x-ray - $6 per film – Average 80 per day – 1,600 per month = $9,600 – Tech cost $4,000 per month - so real cost $5,600 per month • Save $4,934 per month or $59,208 per year
Slide 13: Areas of Financial Impact Revenue Enhancement Contracting, Collections, Credit cards Imaging, Surgery Center, PT Cost Control Rent, Personnel, Soft goods, Insurance Wealth Preservation Pension, Tax strategy, Retirement planning
Slide 14: Key: Practice Specific Data • Financial variables must be measured – Practice overhead – How many employees – – – • Benefits, 401K, Pension, PTO Fully loaded cost per office visit X-rays costs including cost per click Collections percentage – payer specific • Credit card utilization – Contract revenue per work RVU – Insurance – Soft goods, disposables, braces • Medical Malpractice, Office liability, Worker’s comp
Slide 15: Key: Practice specific Data • Measure work RVUs • Understand your revenue per wRVU, cost per wRVU – Compare your data to other similar practices – Understand what you need to focus on • Do not copy other practice styles, refine your practice by comparing data metrics with other similar practices
Slide 16: Work RVU Data • National Data - 2006 – By specialty: • Spine • Pediatrics • Sports • Foot / Ankle • General • Hand • Trauma • Shoulder • Joints 77 60 81 42 37 66 73 23 69 # Docs Median wRVU 9,716 7,533 8,299 7,649 5,910 8,571 7,891 8,608 8,480
Slide 17: Focus on Marketing • Focus on what you can control – Determine what area of practice you want to grow or expand – Identify your marketing target – Goal oriented approach – Number of patients – Improved W2 • Measure impact of marketing
Slide 18: Goal • The Goal of successful Marketing is to have the ability to increase both practice efficiency and profitability without having to increase the amount of work performed
Slide 19: Approach to Marketing • Understand your particular type of practice – Academic, Group, HMO, Solo • Determine what makes money for your practice and what does not – Define Profit Centers • Focus approach to enhance those profit centers – Determine target for marketing those profit centers – Detail a marketing game plan to enhance profit centers
Slide 20: Practice Specific • Need to understand type of practice • Need to define goals • Need a general game plan • Execute the game plan
Slide 21: Type of Practice • Academic • Integrated Group Model • Large Group Practice • Small Group Practice • Solo Practice
Slide 22: Academic Practice • Clinical work, teaching, research • Revenue models – Salary – Salary plus production – Private practice with “Dean’s” tax • Alternative Revenue – University stipend, pension
Slide 23: Integrated Group • Large Multispecialty • Revenue – Salary – Salary plus bonus – Partnership – Kaiser, Hill Physicians • Alternative Revenue – Limited to bonus calculations
Slide 24: Large Group Practice • Greater than 12 Docs • Revenue – – – – SCOI for example Partnership based / tiered Production based minus expenses Production minus expenses minus partner “tax” • Alternative Revenue – Surgery Center, Imaging Center, PT – Physician Extenders – Fellows, PA, NP
Slide 25: Small Group Practice • More than 1 but <12 Docs • Revenue – Most less than 6 Docs – Office manager not CEO approach – Production based – may be shared equally – Shared expenses – Surgery Center, Imaging Center, PT • Alternative Revenue
Slide 26: Solo Practice • 31% of all Orthopedic Surgeons Nationally • Revenue – Production minus expenses • Alternative Revenue – Surgery Center, MRI partnership, PT partnership
Slide 27: Revenue - Contracts • Academic • Integrated – Medicare, Medicaid, HMO, PPO, capitation – HMO, capitation, Medicare, Medicaid, Work comp – Medicare, HMO, PPO, Indemnity, Work comp – Medicare, PPO, Indemnity, Work Comp, Private FFS – Private FFS, may or may not contract • Large Group • Small Group • Solo
Slide 28: Marketing Focus • Practice Specific – Academic • Rely upon host institution • Develop research ties - consulting • All contracts, all comers – Integrated group • Define subspecialty niche • Establish research ties – consulting if possible
Slide 29: Marketing Focus • Practice Specific – Large group • Develop “Brand” approach to marketing • Surgery Center, PT, Imaging Center • Direct mail, E mail, Referring provider letters – Small group • Individual marketing to patients / providers • Surgery Center, Imaging, PT participation • Referring provider letters, web site
Slide 30: Marketing Focus • Practice Specific – Solo practice • Develop patient to patient network • Personal interactive web site • Marketing to sub-specialty niche – Worker’s Comp • Contract only when necessary
Slide 31: Conclusions • Need to understand where your practice stands – Need data to compare practice profile against similar practices • Identify areas to improve financial health – Fix what you can fix – Market to your practice style
Slide 32: Thank You