Understanding the Competition

Practice managers must be keenly aware of what competing practices are doing as well as practices outside of their catchment area. Practice management requires a firm focus on the competition; identifying its strengths and vulnerabilities is crucial. Since managing a successful practice requires decision and action based on situational awareness, identification of your competition’s expectations and preparations is also important.

Because the healthcare landscape is changing so rapidly, accurate and timely information regarding what competing practices are doing is a prerequisite for success. It is said that Field Marshal Erwin Rommel (an intelligent German WWII commander dubbed the “Desert Fox”) once declared, “It is not that one general is more brilliant or experienced than the other; it is a question of which general has a better appreciation of the battlefield.”

This is why I maintain that knowledge of your competition is a key function of effective practice management. To be clear, practice management is about making and executing decisions, but a market analysis can help support a smart decision-making process.

What is a market analysis?

A market analysis is not just a product, but also a process. A market analysis seeks to identify and evaluate existing conditions and capabilities, estimate possible competitive courses of action, and assist in the development of your practice’s course of action.

Gathering information

Information gathered during the course of managing a practice is essential to the development of a timely and accurate market analysis. Indeed all staff members are involved in information gathering in one way or another and thus their knowledge should be tapped in order to better shape the market picture. Aside from gleaning information from your own staff, turning to your professional colleagues is certainly another great trusted source. Beyond those two avenues, you may want to consider linking up with a qualified consultant. These individuals have access to multiple markets, associations, networks and resources (perhaps even your competition). Additionally, they also can prepare a detailed analysis based on your particular specialty and service line and can more easily pulse the market due to their independent status.

Interpreting the information

Once you have obtained the information necessary to build a picture of the competitive landscape, you are confronted with other challenges. Most importantly, you must properly interpret the information. Many mistakes in market analyses are not the result of a failure to collect the correct information, but rather a failure to discern the correct meaning from the information collected.

Admittedly, any assessment of the competition’s intentions is ultimately an estimate. While a good market analysis can identify the possibilities and probabilities, there will always be an element of uncertainty in these estimates.

However, when properly focused and given adequate time and resources, a market analysis can come close to meeting these standards. It is important to note though that practices operate in a healthcare environment characterized by uncertainty. Uncertainty is also a fundamental attribute of competition. So, even if the correct information is obtained, there is no guarantee that it will be interpreted correctly or that it will not change.

Gaps in our knowledge of the competition are a natural and unavoidable characteristic of operating within the healthcare industry. We must remember though that a competent market analysis can help reduce some of that uncertainty and help pave the way for strategic planning and business operations within your practice. Practice management is about making decisions, but strong practice management is about making smart decisions.

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Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.

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Slashing Healthcare

Physicians don’t really need to cover their expenses, right? And we don’t really want our physicians to care for Medicare patients, do we? It appears the U.S. government is paving the way to answer both of these questions . . . so physicians, take heed.

The Sustainable Growth Rate (“SGR”) has been a point of contention for years and there certainly is no end in sight. The latest SGR fix expires at the end of March, at which point physicians will immediately face a 21.2% payment reduction. As always, there is much talk about resolutions, but never any action. It appears that 2015 will be no exception as many congressional members and staffers are already accepting of another six- or nine-month punt next month, which would once again put physician practices in limbo through the end of this year. And with 2016 being an election year, does anyone really think the SGR fix will be tackled next year?

What may be of more immediate concern is President Obama’s proposed Medicare cuts. The President’s budget proposal included $423 billion in Medicare spending reductions over the course of ten years. Here is the breakdown as outlined in his 2016 budget proposal:

  • $116.1 billion reduction by requiring drug companies to pay rebates on payments for low-income beneficiaries
  • $102.1 billion reduction by cutting post-acute care provider reimbursement at the rate of 1.1% per year
  • $36.2 billion reduction by lowering Medicare Advantage reimbursement
  • $31.1 billion reduction by lowering bad debt coverage to physicians
  • $29.5 billion reduction by equalizing outpatient care reimbursement of hospitals and physicians
  • $20.9 billion reduction by lowering the trigger of the Independent Payment Advisory Board to GDP +0.5%
  • $16.3 billion reduction by cutting 10% of the hospital graduate medical education payments
  • $9.3 billion reduction by bundling half of the provider reimbursement attributed to post-acute care.

This outline is by no means all-inclusive as it relates to the impact on healthcare. There are many other significant proposals the President included, such as the increase in authority given to the Secretary of Health & Human Services (“HHS”). President Obama proposes to give the Secretary the power to negotiate the prices of high-cost drugs in the Medicare Part D program. He has also proposed to give the Secretary the power to suspend payment and coverage for “questionable” Part D prescriptions.

Recipe for success? Or formula for disaster?

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Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.

Crafting a Plan for Medical Practice Success

Physicians are well aware of the need for planning. Indeed, they devise clinical plans on a daily basis as they formulate the best way in which to care for a patient. However, when is the last time you spent time working on operational planning for your practice?

Many physicians reading this will be thinking, “Who has the time for that?” And while that may be true, those practices that do make the time or work with consultants to help them through operational planning are the practices that are better able to compete. There should be no argument on the value of planning. Operational planning will keep your practice oriented on objectives, despite the problems and requirements of the present situation.

There are many types of planning that do (or should) take place within a practice and at varying frequencies. For example, capital planning is generally done annually while preparing budgets, whereas marketing planning may be done quarterly to coincide with various advertising timelines and community events. Nonetheless, all planning should contain four basic categories of information:

1.  Desired outcome. This element of a plan includes the purpose for achieving that outcome and often includes a time by which the assignment must be accomplished. Goals and objectives here may be either general or specific. In a complex and difficult industry like healthcare, few things are as important or as difficult as setting clear and useful goals. This is a skill set requiring judgment and vision. The reality is that, given the nature of today’s healthcare environment, we will often have to act with unclear goals. Unclear goals are generally better than no goals, and waiting for clear goals before acting can paralyze your business.

2. Actions intended to achieve the desired outcome. Most plans include several actions which are organized in both time and space. These actions are usually tasks assigned to secondary components. Depending on circumstances, these tasks may be described in greater or lesser detail over farther or nearer planning horizons.

3. Resources to be used. In order to execute actions, the plan must describe the type, amount, and allocation of resources. Furthermore, the plan must include the how, when, and where those resources are to be provided. Resource planning covers the staff assigned to different tasks and other resources.

4. Control process. This element allows you to supervise execution of the plan and includes necessary coordination measures as well as some feedback mechanism to identify shortcomings in the plan and make necessary adjustments. It is a design for anticipating the need for change and for making decisions during execution. In other words, the plan itself should contain the means for changing the plan. Some plans are less adjustable than others, but nearly every plan requires some mechanism for making adjustments. This is a component of plans which often does not receive adequate consideration. Many plans stop short of identifying the signals, conditions, and feedback mechanisms that will indicate successful or dysfunctional execution.

Diligent operational planning will allow you to see if at some point your practice will encounter a problem. A solid operational plan will allow you to proactively adjust to an oncoming crisis, rather than face the crisis unexpectedly.

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Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.

GPOs Help the Bottom Line

Group Purchasing Organizations (GPOs) have proven to save hospitals and physician practices a vast amount of money over the years and with the continual increasing financial pressures being placed on healthcare providers, their use is certainly likely to rise. Hospitals alone have shown savings of 10% – 18% as GPOs help to reduce non-labor spending. GPOs also have other services that clients value such as data analytics, purchased services, clinical outcomes data and revenue cycle.

The Wharton School of the University of Pennsylvania recently conducted a national survey of hospital executives. The resultant data from 1,210 executives is the largest number of respondents to any such survey. Here are some highlights of the survey’s findings:

90% of U.S. hospitals utilize a GPO and report being satisfied with the results

40% reported using two GPOs

88% state GPOs save them money via lower prices; 86% experience huge cost savings

84% obtain savings from contract standardization

66% state their GPO’s role and impact has grown over the past five years; a majority of respondents have an average relationship length of 11 years with their GPO

58% state their GPO provides valuable benchmark data

54% report that their GPO does not block them from accessing innovative manufacturers

One drawback appears to be with procuring physician preference items. Only 39% rely on their GPO to do this procurement, whereas 55% claim to get better prices on these items by not going through their GPO contract.

The survey can be found here.

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Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.