Financial Performance Management of Medical Practices

No matter how good a medical practice’s healthcare services, unless the practice is successful financially, it is doomed.  Because, in the most basic sense, financial success is medical practice success.

Business history is littered with stories of companies that had innovative products and visionary ideas, yet couldn’t translate those assets into sustainable success in the marketplace.  In today’s healthcare environment, with healthcare reform pressures, stiff competition, and increased regulatory scrutiny, achieving that all-important financial success demands effective financial performance management.

So just what is financial performance management and how does it differ from the various other species of performance management that consultants preach?  Financial performance management is a specific set of capabilities that includes defining key performance indicators, formulating strategic plans and forecasts, handling performance reporting, and increasing finance operational efficiency and execution throughout the medical practice.  It is a continual process of identifying the financial strengths and weaknesses of the practice.

Managing the finances of a medical practice takes discipline, systems and controls, and the desire to manage them well.  Through financial performance management, the medical practice can adapt quickly to changing conditions, instead of following the dictates of a rigid annual budget.  In addition, certain capabilities such as scenario modeling and rolling forecasts allow practice managers and physician owners to anticipate and prepare for what’s ahead.  Not only does it help in short- and long-term forecasting, but practice growth can also be identified with the help of a structured financial performance management process.

Many medical groups know that in order to keep your medical practice financially sound, you must be able to collect financial data and understand what this data is telling you about your current collection rate and your future collection rate.  However, it is also extremely important to delve deeper and identify the financial strengths and weaknesses of your medical practice.  You should have a process of detailed financial statement review focusing on principle elements that are critical to your particular practice.  The overarching goal here is to evaluate the financial position of your business in terms of solvency, profitability, activity, and key financial ratios.

To achieve optimum performance, you need to zero in on problems, evaluate options and make the right decision — without delay.  Lack of timely, actionable information masks and enables a multitude of sins (e.g. increasing costs, decreased productivity, revenue declines, technology utilization issues, deteriorating referrals, etc.).  When assessing the financial status of your practice, keep reports simple and relevant, and present data in terms of time.

Running a small business is never easy.  Financial analysis provides the primary tools for monitoring your practice’s performance and diagnosing problems that impair productivity.  Smart medical practices seek competitive advantages wherever they can be found.  Financial performance management is what allows practices to identify those advantages, to compete, and to succeed in today’s fast-paced healthcare environment.

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

Interim Management Value Proposition

Have you given thought to engaging an interim manager while simultaneously taking on the recruitment process?  Do you have issues that perhaps need to be resolved before onboarding a permanent employee manager?  Are you sure you know the duties for this newly created position before the “new hire” starts working at your company?  Do the decision makers really agree to the roles and responsibilities of the person who is about to be hired?  If there is any ambiguity or uncertainty in your hiring decision process for managers, you may want to consider engaging an interim manager first.  For the recruiters in the audience, are you confident that placing a candidate into one of these types of scenarios will not backfire on you and thereby trigger your contractual guarantee?

An interim manager is someone whom you can employ in your business for a short period of time to solve a specific business problem.  Interim managers can offer instant experience and capability since they often know what best practice looks like and may even have had a recent assignment at a similar business.  They are committed to their role as a short-term staff member and their varied experience in critical situations gives them a strategic advantage when handling new problems.  An interim manager is hired as an independent person on the basis of his or her personal abilities and reputation.  They handle challenging leadership situations with a combination of sensitivity and seriousness so they can integrate themselves into organizations and quickly engage a workforce.

Unencumbered by company politics or culture, interim managers provide a fresh perspective and are able to concentrate on what is best for the business, highlighting areas that require attention. Being independent operators, they are able to contribute honestly without constituting a threat to the existing management team.  Interim managers are provided the authority and credibility to effect significant change within a company. Unlike a “temp”, they are not just there to hold down the fort. They actively add value to the client’s business as a result of their expertise and approach, even when the work and the decisions to be made are difficult.

By definition an interim manager should be hired on a temporary basis and are known for their impartiality.  Successful interim managers can roll with the punches and are not being fazed by uncertainty and ambiguity.  Remember that interims speak very openly to clients! They can be objective and won’t be side-tracked into office politics.

Interim managers are adept at appropriately pointing out the elephants in the rooms. Not tied to employment, they are well placed to address uncomfortable truths, difficult discussions, and unpopular activities.  Interim managers can professionally and candidly share with clients things that they need to know, regardless of political expediency. What the client does with the information is up to them, but the insight can be priceless.  Consequently, interim managers need the authority and control to make a difference, or they will have one hand tied behind their back, reducing their value to your business.

Interim management assignments often address needs in the change management space.  The individual oversees the company’s current operations, develops strategies for improvement and then implements the strategies.  However, businesses who attempt to interview the interim manager as if they were a permanent employee run the risk of having a cross-purpose conversation that fails to unlock the added value of the interim manager.  Assignment discussions should not be thought of as a permanent interview. Interim managers are not a candidate for a permanent employee role.  Rather, an initial assignment meeting should be used to qualify the individual for a finite project or situation.

Another benefit is that interim managers are often available immediately, whereas it could take a minimum of four months to hire a permanent employee serving a notice period.  Note that once a contract is signed, an interim typically needs five working days to fully understand the role and requirements but they can hit the ground running.  Interims should have a clear scope of work and terms of reference for their assignment.  You should agree to the aims and timescales of the assignment at the outset, so that both parties understand their key objectives. Review these objectives and progress often.  Furthermore, communicate to employees that you have hired an interim and that the success of any assignment depends on support from the business. Ensure employees also know that they can learn from the interim.

Finally, don’t compare the pay levels of permanent employees with interims; it is misleading. Remember, an interim charges an inclusive rate and does not enjoy benefits such as pensions or holidays.  The interim manager will negotiate a daily rate with the client since they are usually only paid for the actual days worked.

An interim management solution can be very effective in resolving business problems, whether the need is for a change in direction, climbing out of a hole, invigorating a business or dealing with an unexpected situation.  Interim managers provide businesses with a seasoned, flexible capability and resource to achieve a wide range of outcomes. They give added value in their ability to transfer skills and competences into organizations and to drive outcomes in the most challenging circumstances. Their commitment to a comprehensive exit plan is a unique, transparent offering of great benefit to clients.

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Nick can be reached at info@abisallc.com.

Why Physicians Should Join a Professional Organization

There are plenty of healthcare professional organizations, but are the yearly dues worth it to join? As budgets get squeezed, many physicians and practice managers have been cutting back on the number of professional associations they belong to. Although there is often a lack of perceived benefit, membership in professional associations yields a number of benefits.

Education

Perhaps the most important benefit is education. (A plea here to physicians is to remember this applies to your practice managers. If you want a successful practice, run by a talented practice manager, you must be willing to support his or her professional continuing education.) Most associations provide an enormous amount of access to resource information such as: case studies, articles, white papers and books written by experts in your field or area of interest. Providers and managers can keep up with the newest developments (clinical and operational) through their association membership benefits, including conferences. Take advantage of all the information your associations provide and remember that most of it is online and free.

Networking

Another important benefit is networking. There is no better way to connect with peers and industry experts than through professional association membership. There is often a variety of possible venues to network at (e.g. listservs, membership connections and groups, national conferences, regional seminars, etc.), providing you are willing to get engaged with other members. Networking with professionals outside your place of employment can give you a broader perspective on the market and healthcare in general.

Industry standards

Webinars are frequent these days as a means to deliver information on hot topics such as best practices, new statistics, etc. No matter what your specialty is, staying on top of all of these issues is important.

Policy updates

All of us in healthcare know how much one piece of legislation can impact our profession. Professional associations not only update members about these types of changes but also often play an advocacy role on behalf of the membership. I have been involved in this with professional associations and it can often be a tiring effort to work with legislators at the state and national level. However, associations involved in this are able to inform members how to prepare for any upcoming change.

Jobs

Most people already know that they can often search for jobs on association job boards as members. Keep in mind that your practice may want to utilize these job boards to post positions for your practice. Recruiters will often post on the job boards as well, so if you are working with a recruiter, be sure to let them know about your preferred associations.

Intrinsic value

In addition to money, associations need support to survive. Associations are always in need of new blood to help organize their annual meetings, workshops, CME courses, and legislative committees. This means taking an active role in leadership positions or committees can not only help the association, but also help you personally (from leadership development to networking, to potential job searches). As the saying goes, “You get out of it what you put into it.” Undoubtedly the members who get the most out of an association are the ones who get involved and are more interactive.

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

Global Demand by Patients for Personalized Treatment

Many healthcare visionaries are not just looking at efficiencies and compliance, but also focusing on outcomes and patient engagement.  It’s also no secret that healthcare consumers are increasingly focusing on convenience.  Furthermore, there are differences amongst the various generations.  “Millennials buy on price. The Baby Boomer generation buys on cost and quality, and the builder generation buys based on quality and trust,” says Dave Dimond, Chief Technology Officer of EMC2.   There are many disrupting technologies impacting the healthcare industry at this time, causing a shift in the manner in which healthcare is delivered.

EMC2 has conducted extensive research of 3,600 global leaders including 236 healthcare leaders in 18 countries.  Their report suggests five business imperatives are needed to keep pace with patient demands:

  1. Predictively spot new opportunities (e.g. population health, value-based care, patient-centered medical home)
  2. Demonstrate transparency and trust (e.g. treatment options, success rates, access to secure medical records)
  3. Innovate in an agile way (e.g. clinical research, clinical integration, Internet of Things)
  4. Deliver a unique and personalized experience (e.g. 3600 patient view, wearables, genomics, precision medicine)
  5. Always on, operate in real time (e.g. telemedicine, mHealth, medication adherence)

The report notes however, that less than 25% of healthcare leaders address each of these imperatives extremely well today.  Here are some noteworthy results of the survey from global healthcare leaders:

89% of healthcare providers say technology has changed patient expectations

53% of patients want faster access to services

47% of patients want personalized experiences

45% of patients want 24/7 access and connectivity

42% of patients want access on more devices

19% of healthcare leaders say they have the data insights they need to act in real time at the point-of-care

17% of healthcare leaders say they are very good at turning data into useful information to impact the clinical setting

Many providers around the globe are trying to improve the patient-centered culture within their own healthcare environment, from the United States to the United Arab Emirates, from Canada to Mexico, and more.  I would only stress that innovations that aim for patient-centeredness should aim to strengthen the doctor-patient relationship, for this is truly the strategic recipe for success globally.

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

Mexico’s Healthcare Challenges

Mexico’s current healthcare system is not equitable, efficient, nor sustainable.  Additionally, the current structure of the country’s healthcare system is not achieving a good price-to-quality ratio.  While public spending on healthcare has increased over the past ten years (from 2.4% to 3.2% of GDP), 10% of the country’s health budget is spent on administration and individuals’ out of pocket spending on healthcare services exceeds 40%.

Angel Gurria, Secretary-General at the OECD*, recently made these remarks regarding some of Mexico’s healthcare system issues:

“Another real challenge lies in the fact that the Mexican health system functions as a cluster of sub-systems that operate in isolation.  Each offers different levels of care, at different prices, and with outcomes that are also very uneven.  In effect, people are unable to choose their type of insurance or their service provider, as these are predetermined by their employment status – public, private, formal, informal, or none.”

Mexican healthcare is delivered through a number of separate social security institutes and the country has a publicly-subsidized health insurance plan known as “Seguro Popular” which has extended coverage to 50 million people over the past ten years.  Unfortunately, out of pocket spending for consumers is very high which is reflective of problems in providing effective insurance and high quality healthcare services.  Furthermore, as alluded to by Mr. Gurria’s comments, approximately 33% of Mexicans each year are forced to change their physician simply because they have changed their job.

Mexico has high rates of diabetes, heart disease, and obesity.  Of Mexican adults, more than 15% have diabetes.  Since 1990, deaths attributed to heart disease have decreased a mere 1%.  In the past 10 years, the percentage of overweight or obese adults has increased nearly 10% to a staggering 71%.  Moreover, one in three Mexican children is overweight or obese.  To make matters worse, Mexico has an average of 2.2 physicians for every 1,000 inhabitants.

In a recent report by the OECD, three priorities emerged for Mexican health system reform:

  1. Mexico must extend service-exchange agreements so that members can more readily move from one system to another.
  2. Greater emphasis should be placed on improving quality of care and outcomes.
  3. Mexico needs to align the various areas of care and medical service (e.g. care pathways, prices, information systems and administrative practices).

 

* The Organization for Economic Co-operation and Development (OECD) works with governments around the world measuring productivity and global flows of trade and investment, analyzing and comparing data, and setting international standards on a wide range of things, from agriculture and taxes to healthcare and more.  Ten years ago, the OECD published its first “Health System Review of Mexico” and it has just released its second publication on the same topic (which 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.