THE PRACTICE PROFITABILITY INDEX 2013 Edition 1
About The Practice Profitability Index (PPI) The PPI was created to provide a voice to physician practices across the US regarding issues that impact their financial and operational health. It reflects the belief that better health outcomes for Americans are more likely to be achieved when practices themselves are thriving and efficient. The PPI was conceived as part of a partnership between leading cloud-based health technology provider, CareCloud, and QuantiaMD, the largest online community and collaboration platform serving more than 170,000 physicians. It involved gathering insights via an interactive online survey and related discussion groups. The result is intended to serve as an annual barometer for the operational wellbeing of US medical groups in the year ahead. 5,012 physicians contributed their insights to the PPI during April of 2013 making it one of the largest efforts of its kind in the industry. - Specialties represented were roughly proportionate to the composition of QuantiaMD members. They were led by a diverse group of family practitioners and internists (77%), with sizeable numbers of pediatricians (5%), psychiatrists (5%), cardiologists (4%), OB/GYNs (3%) and general surgeons (2%), also accounting for hundreds of respondents each. - High-population states were represented in large enough numbers to provide a window into local experiences and insights. Those included New York, California, Pennsylvania, Florida, Illinois and Texas ranging from 567 and 231 physicians apiece. Michigan, New Jersey, Ohio and Massachusetts accounted for approximately 200 physicians each. 2
Key Findings: There is an overall downward trend in profitability among US physician practices. In fact, physicians are almost two-thirds more likely to foresee a negative profitability trend, rather than a positive one, in the year ahead. Declining reimbursements lead physician concerns; Reform efforts create the strongest operational headwinds for physicians, with administrative requirements coming at the expense of patient care. For example, nearly half of physicians say they do not have the resources to bring on any of the 30 million new patients entering the system as a result of the ACA. Meanwhile, the majority of physicians spend more than 20% of their time the equivalent of one day a week on administrative tasks instead of patient care; Despite these challenges and contrary to what many of today s pundits are saying today s independent physicians largely want to stay that way. For now, many are not looking to be acquired by larger practices or hospitals; Physicians across the board are targeting operational changes to improve their performance. Top priorities include renovating their billing processes and underlying technologies, with findings confirming a growing rip and replace trend. Who do they turn to for guidance? Their peers, first and foremost. Old practice management systems are a focal point of uncertainty moving forward. More than 40% of physicians say they don t know whether theirs can accommodate upcoming regulatory requirements and changes. 3
Research Report: The pace of change is accelerating for US physician practices as healthcare reform unfolds. Achieving the vision of improved patient outcomes at a cost that the nation can bear relies on fundamental shifts in regulation, payment and infrastructure that is impacting practices in ways the industry is only beginning to understand. With that in mind, the Practice Profitability Index (PPI) engaged with more than 5,000 physicians nationwide to take the pulse of their practices financial health. Profitability Trends Point Downward For 2013-2014 Physicians are almost two-thirds more likely to foresee a negative profitability trend, rather than a positive one, in the year ahead. Just 22% of practices surveyed expect profit increases. Among the remainder, 36% describe their profitability as trending somewhat or very negatively (see Figure 1). Figure 1: Physician Profitability Trends Cardiologists have a more pessimistic outlook on their profitability than other specialists, with 49% saying their trend will be somewhat or very negative in the next year outnumbering peers foreseeing a positive outlook (15%) by more than 3-to-1. OB/GYNs are also more concerned about profitability, with 40% foreseeing a negative trend rather than a positive one (17%). Profitability outlooks are largely consistent across states. However, physicians in Florida and Pennsylvania are somewhat more pessimistic than their peers, with 39% anticipating a decline. Somewhat negative 28% Very negative 8% Very positive 5% Somewhat positive 17% Staying about the same 30% Not sure 12% 4
The Leading Source Of Financial Pain? Reform Requirements The top issue cited across all physician practices as negatively affecting profitability in the coming year is declining reimbursements (65%). Interestingly, four of the top five financial challenges are government-related (see Figure 2). Reimbursements are followed by: rising costs (e.g., supplies, staff, etc.) at 57%; requirements related to the Affordable Care Act (48%); coding and documentation changes, including ICD-10 (44%); and costs related to the push for EHR adoption (26%). Cardiologists see some higher hurdles than colleagues in other specialties. They are more likely to cite as impediments: declining reimbursement, (69%); rising costs (60%); and the ACA (58%). OB/GYNs feel more taxed by the demands of EHR adoption than other physicians (33% vs. 26%). Figure 2: Issues With A Negative Impact On Practice Profitability Declining reimbursements 65% Rising costs 57% Affordable Care Act 48% Coding/documentation changes (e.g. ICD-10) 44% EHR adoption 26% 0% 10% 20% 30% 40% 50% 60% 70% Administrative Demands Take A Toll On Patient Care Physician practices typically employ dedicated staff to manage day-to-day administrative, billing and other operational needs. But the PPI shows that, taken together, the burden created by activities such as coding, documentation and other administrative tasks is very often falling on the shoulders of physicians at the expense of patient care. 5
When asked how much of their time was spent on coding, documentation and administration, rather than patient care, the majority of physicians (58%) said they sacrificed more than 20% of their time this way (see Figure 3). That s the equivalent of one day per week for a full-time physician spent at a desk rather than in an exam room. About 30% of physicians spend one-third of their time or more on administrative tasks. Figure 3: Time Spent On Administration Rather Than Patient Care Pediatricians are somewhat less likely to spend more than 20% of their time on administrative tasks rather than patient care, although nearly half still do (48%). Physicians in New York and Pennsylvania spend the most time on paperwork, not patients, among those in high-population states (with 37% and 34% allocating more than one-third of their time to administration, respectively). Many Doors Will Be Closed To The ACA s 30 Million New Patients The passage of the Affordable Care Act in March 2010 included numerous provisions that, among other things, will result in the expansion of health coverage to approximately 30 million Americans who were previously uninsured. Where will they go for care? The answer, according to nearly half of physicians: elsewhere. Operational pressures leave 48% without the resources to take on the increased patient volume (see Figure 4). This finding is especially concerning, given the dominance of family practitioners and internists among PPI respondents. These physicians serve as the traditional gateways into the healthcare system for patients. More than 50 percent: 6% 41-50 percent: 9% 31-40 percent: 16% 21-30 percent: 27% 11-20 percent: 26% 0-10 percent: 15% Figure 4: Physician Willingness And Ability To Take On ACA Patients 6 There is little variation in results among practices of different sizes. Those unable to take on patients as a result of the ACA range from 44% (among those with 2-9 providers) to 54% (among those with 26-49 providers). This indicates a fairly united front with respect to ACA patient flow. Among psychiatrists, a full 59% say they will not be able to take on additional patients. Pediatricians and OB/GYNs, however, are much more likely to accommodate new patients 61% say they can do so. In high-population states, California physicians are most likely to say that they do not have the resources to take on ACA patients (55%). By contrast, their peers in Massachusetts are more likely to be accommodating (44% cannot, but 56% can). Yes 52% No 48%
Rumors Of The Death Of Independent Practices: Exaggerated For Now In contrast to the conventional wisdom of industry pundits and to the wishes of some hospitals, delivery networks and nascent ACOs independent physician practices largely want to stay that way. Few are actively looking to sell out to another entity in the coming year. Of 2,094 respondents who own their own practice, only 11% are actively looking to sell joining 10% who say that they already have, due to profit challenges (see Figure 5). Nearly 60% say they are not looking to sell their practices at all. Perhaps surprisingly, solo practitioners who may experience the greatest operational uncertainty are the least likely to want to sell out. In fact, desire to sell a practice increases as the number of providers grows to 50. Specifically, 65% of solo practitioners say they are not looking to sell their practices only 6% are actively pursuing this outcome. By comparison, 64% of practices with 2-9 providers, 46% of 10-25 providers, and 42% of 26-49 providers do not wish to sell. Large practices with more than 50 providers are again very interested in going it alone, with 61% uninterested in selling. Among psychiatrists, a full 70% are not looking to sell their practices, and only 16% are considering it. Pediatricians are also less likely to want to sell their practices 68% are not considering it. Cardiologists are more likely to entertain selling their practices. Fewer than half 44% say they are not looking to sell their practices. 19% have already sold due to profitability issues, with 14% actively seeking suitors. Physicians in Texas are the most independent-minded, followed by peers in Massachusetts and California. The percentage of physicians who reject selling out in these states stands at 71%, 66%, and 63%, respectively. Physicians in New York and Illinois are more likely than average to seek a buyout. Figure 5: Most Physician Practice Owners Want To Stay Independent Not looking to sell 58% Considering selling 21% Actively looking to sell 11% Already sold/other 10% 0% 10% 20% 30% 40% 50% 60% 70% 7
Physicians See Better Billing, Technology As Keys To Higher Performance What do physicians identify as the most important levers to improve their operational performance? The top target: billing and collections processes, cited by half of respondents and mirroring the challenges with declining reimbursements cited earlier (see Figure 6). Figure 6: Target Areas To Improve Operational Performance Billing/Collections processes 50% Technology Staffing 31% 31% New cash-based services Joining an Accountable Care Organization Facilities 16% 15% 19% 0% 10% 20% 30% 40% 50% 60% Underlining that need, just 9% of physicians describe their staff, technology, and processes as very effective at securing quick and proper payment today. Among psychiatrists, only 6% describe their ability to secure quick and proper payment as very effective, and another 26% as effective. Pediatricians are slightly more confident than physicians in other specialties, with 11% describing their collections as very effective, and 34% as effective. Technology and staffing are the next most common areas for focus, each cited by nearly one-third of physicians. Further down the list were changes to the practice s payment models, specifically offering new cash-based services (19%) and joining an Accountable Care Organization (16%). Psychiatrists are also most likely to identify billing and collections (45%) as their primary area for improvement. However, they are much more likely (34%) to cite technology as a priority, followed by staffing (23%) and new cash-based services (23%). 8
Those With Plans Target Technology Implementation And Replacement Despite their belief that billing processes, technology and staffing hold the key to profitability improvements, many practices lack specific plans for getting there. 59% do not have specific changes planned for those domains in the coming year. Figure 7: Practices Make Plans For The Coming Year Of the 41% of practices that have specific plans aimed at operational improvements in the coming year, the main interventions cited are: implementing a new EHR (41%), replacing their existing EHR (25%), outsourcing billing/collections (18%) and replacing their practice management system (16%). Within the context of all US physician practices, that means that 17% will implement a new technology (EHR) in the next year adding to the 75% who already have one while 17% intend to rip out and replace what they currently use (10% EHR and 7% practice management systems). Seven percent intend to outsource their billing and collections staff in order to improve revenue capture (see Figure 7). EHR penetration is much lower among psychiatrists, at just 56%. It is highest among surveyed cardiologists, with 82% having an EHR. Practice Management Systems May Become Next Year s Problem With the arrival of 2014, bringing with it an influx of new patients as well as ICD-10 and other regulatory requirements, there is evidence that the EHR spotlight will shift focus to practice management systems. Why? Many physicians simply don t know whether the central nervous systems of their practices which most have had for many years are up to the task. When asked whether their current practice management systems have the ability to support additional patients from ACA as well as their billing requirements/changes, only 36% said yes. 22% said no, while the largest number 42% said they don t know at this point (see Figure 8). Of the 41% of physicians planning specific changes: Implement new EHR - 41% Replace EHR - 25% Outsource billing/collections - 18% Replace PM system - 16% Figure 8: Will Current Practice Management Systems Support Regulatory Needs? Among psychiatrists, practice management confidence is even lower, with 47% saying they don t know whether they can accommodate new requirements and 27% saying no. Pediatricians are very uncertain, with 49% saying they don t know. Don't know - 42% Yes - 36% No - 22% 9
Physicians Turn To One Another For Guidance As physicians adjust to the changing landscape, they place the opinions of their peers above all other sources. When asked where they get information to help improve their practices operations, nearly half (48%) cited their peers (see Figure 9). Other prominent sources include conferences (42%), professional societies such as the AMA (41%) and consultants (34%). Further down the list were vendors (18%) and industry trade groups (17%). Psychiatrists are more likely to consult peers than other physicians (59% do) and much less likely to turn to industry trade groups (only 8%). Cardiologists are less likely to turn to their peers (43%) and much more likely to turn to industry trade groups (28%). Figure 9: Sources of Information To Improve Operational Performance Peers 48% Conferences Professional societies (e.g. AMA) 42% 41% Consultants 34% Vendors Industry trade groups (e.g. MGMA) 18% 17% 0% 10% 20% 30% 40% 50% 60% Closing Thoughts: Physicians Remain Resilient In The Face Of Change The first Practice Profitability Index (PPI) found ample cause for concern in the operational health of US practices. The greatest challenges stem from the gap between changes underway at a systemic level and their real-world impact on the daily lives of physicians, staff and patients. In turn, this gap creates uncertainty around the ability to realize the vision of reform at either a policy level such as with the ACA or at the level of individual patients who compete for time with their physicians administrative demands. 10 Despite this backdrop, the PPI found that the majority of physicians remain focused on sustaining their practices at all levels and often independently, when possible. Most are looking to implement operational improvements even if this interest does not always translate into specific plans. For those with defined priorities, upgrading processes and old technologies are at the heart of their approach, with evidence of a renaissance in practice management investments as the industry begins serving a greater volume of patients amid the complexities of ICD-10. These, combined with the guidance of peers, are providing the foundation for successfully charting a course through the year ahead.
About Power Your Practice Power Your Practice is an authority on medical practice management strategy, industry news, insider tips and answers to common healthcare provider questions. Powered by CareCloud, our website is a trusted resource for physicians, office managers and medical billers who need expert information on practice management, medical billing, collections, healthcare IT and industry trends. Our goal is to help you enrich your practice by providing valuable information from our network of experts and contributors. Over the past two years, we have helped thousands of physicians, administrators, billers and managers to improve their practice operations through guides, checklists, whitepapers and how-to articles that are easy to incorporate into daily activity. It is our belief that a better-informed medical community will lead to more profitable practices, happier providers and more efficient patient care. Follow @PracticePower Like facebook.com/poweryourpractice Visit www.poweryourpractice.com CareCloud is a leading provider of web-based practice management, revenue cycle management, electronic health record (EHR), and medical billing software and services for medical groups. The company s products are connecting providers to one another and to their patients through a fully integrated digital healthcare ecosystem that can be accessed on any browser or device. CareCloud is helping physicians in 45 states increase collections, streamline operations and improve patient care. The company was named a winner of IBM s SmartCamp Silicon Valley 2010 for its innovative technology and received over $20 million in Series A funding from Intel Capital and Norwest Venture Partners. To learn more about CareCloud, please visit www.carecloud.com. 1-877-342-7519 hello@carecloud.com 11