Challenges
The office of Philip A. Gelacek, M.D. & Associates, PC was facing a series of challenges common to many of today’s medical practices:
- Enhancing the quality of patient care, while offsetting the impact of rising costs and lower reimbursement rates
- Attracting, retaining and rewarding skilled clinical and support staff
- Implementing succession planning
- Boosting retirement plan funding
- Automating form-driven paper processes to more efficient electronic systems
“I wanted to create a precision-run, state-of-the-art office,” says Gelacek. I realized we were giving money away because we weren’t efficient enough, and that had to change.”
In addition to improving the efficiency and profitability of his team, Gelacek had a goal of planning for his retirement while growing his practice so that it could serve the community well into the future. Key
to achieving this goal was the development of a method for new partners to buy into the practice over time and for outgoing partners to decrease their involvement – while assuring that everyone was reimbursed in an equitable manner.
To make certain that his office had the capability and cash flow needed to meet these challenges, Gelacek called upon Performance Associates.
The Process
Pay for Performance focuses on improving the efficiency of your team: first by accurately measuring each medical provider’s profitability (such as Doctors and Physician Assistants), then by giving them a clear picture of how to succeed. Lastly, the process motivates and rewards partners and employees with a bonus based on their net income. The terms of the bonus program are customized for the needs and resources of each practice.
“Labor is the most costly – and most valuable – resource you have, and it needs to be managed effectively or your profitability will suffer,” says Steve Blaney, founder of Performance Associates. In fact, for most practices, including Gelacek’s, personnel expenses top 70 percent of the business’ total costs.
Performance Associates begins the process by conducting a full operational assessment –analyzing work activities by employee, function and profit center, and profit improvement strategies. The goal is to improve productivity by helping team members work smarter, not harder.
Performance Associates began the Pay for Performance process of Dr. Gelacek’s practice by:
- Analyzing charges, collections and cost structures
- Evaluating margins and profitability
- Comparing the practice to others of similar size and structure nationwide
- Developing their Dynamic Scorecard™, including:
- Collections per provider by profit center
- Collections per patient
- Patients seen per hour
- Net income generated per provider per month
The Pay for Performance program utilizes strategic financial data from the business’ Profit and Loss statement to accurately assess the net income attributable to each provider. Individual “Performance Scorecards” are typically presented to the practice’s team every month, with corresponding bonus payouts each quarter.
“Give your team the information it needs to succeed – and then get out of the way.”
– Steve Blaney, Principal and Founder, Performance Associates International
The Profit Analyzer™
The Profit Analyzer™ is at the heart of the Pay for Performance process. This monthly measurement tool, which is provided to each provider, details parameters (such as collections by profit center, provider direct costs and apportioned overhead) to calculate the profit or loss attributable to each provider. Bonuses are determined based on scorecard results.
“The Analyzer is an objective measurement tool that everyone can easily understand,” says Blaney. “It outlines what each contributor needs to do to be successful — what key measures they need to improve to achieve increased profits and bonuses.” The Analyzer also makes it easy for partners to evaluate the performance of each provider and of the overall practice.
Gelacek’s practice manager, Deborah Lightner, agrees. “The system has allowed us to actually see the progress we’re making,” she says. “There’s more accountability, but there’s also more incentive. The scorecard gives the doctors a clear picture of where the money is going.”
The end result is an enhanced focus on delivering patient care while empowering and rewarding practice staff. Savings in time and money can then be reinvested into the business and used toward bonus incentives, as providers and staff begin to accomplish more with the same or fewer resources.
Results and Benefits
As a result of the Pay for Performance process, Dr. Gelacek’s practice realized the following results in a period of just one year:
- A four-fold increase in net profit
- A five percent reduction in operating costs
- Increased employee motivation, performance and loyalty
- Successful implementation of a tax-effective ownership transition program to provide for the ongoing evolution of the practice (i.e., succession planning)
- A positive, proactive practice management approach, the new Pay for Performance system also provided new partners with an easy and effective mechanism to buy into the practice: Now they can use their bonus payment toward their investment, without impacting their base salaries and/ or incurring a loan. Efficiencies achieved throughout the process also helped free up resources to address improvements such as the implementation of a new electronic health records system.
Pay for Performance – Net Income Effect
- The bonus structure rewards all practitioners (partners and non-partners), along with clinical and support staff.
- There is no need to purchase software; data is uploaded through a secure Web portal.
- The provider scorecard design is simple and easy to interpret, and provides specific input on areas for improvement.
- Because the program ties to the practice’s P&L, only one set of books is required.
- Providers can monitor their year-to-date or quarterly scorecards electronically.
- Time spent to manage the process typically totals less than 30 minutes per month.
For more information about how Pay for Performance™ can help your medical practice, call 412-362-9708