Decosimo was selected as the business consultant for a local pulmonary practice established more than 30 years ago.
About the Pulmonary Practice
Located in an East Tennessee metropolitan area the practice was founded with a newly trained pulmonary physician from the Harvard School of Medicine. Over the years the practice added several physicians and was the only provider of pulmonary services in a five county market. The practice was instrumental in establishing a federally funded black lung clinic and later became nationally known for its service to patients and research into beryllium disease.
The client hired Decosimo to help stabilize the finances of the practice. In spite of volume growth, the practice finances had begun to deteriorate and physician compensation was significantly impacted. Additionally, the practice experienced significant disruption due to several partners leaving the practice in a short period of time. The remaining partners were earning well below Medical Group Management Association (MGMA) norms.
The practice was the only pulmonary practice at a large community hospital and the practice had secured intensivists and medical director contracts with the hospital. When we analyzed the practice operations, we determined that the amounts earned under their hospital contract did not cover the loss of efficiency in their office. The practice physicians were late getting to the office, exhausted and less productive from being on call the night before as required by their hospital contracts. As with most physician specialties, the key to economic success is efficient production of volume. Private practice pulmonologists earn the highest rate for hours worked by a large volume of office visits. These visits produce significant tests and treatment revenue as well as the visit charge.
In consulting with medical practices, the best answer may not always be the most obvious or what is currently in vogue. Decosimo recommended dropping the hospital agreements and only taking call for the practices’ own patients. The increased efficiency improved collections and decreased overhead. We were also able to negotiate more appropriate office space than what was leased from the hospital. In addition we encouraged them to invest in a CT scanner on a time share basis.
Our approach was to show the physicians the financial impact each segment of the practice and to project the improvements that could be expected by altering how they conducted their practice. Charge is particularly difficult to accomplish in a long established physician practice. In this case our primary goal was to earn the role of their trusted advisor. This made the changes we proposed easier to sell and it made our projections more readily accepted.
In the end, the remaining partners had a stronger and much more financially successful practice. The physicians achieved a significant return on their investment in a CT scanner. Their productivity improvement more than offset the revenue they had been receiving from the hospital and their compensation returned to national norms.
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