Synopsis of the Practice

**** Practice Associates has been in business for 15 years and has 7 M.D.’s, 3 P.A.’s / N.P.’s and 35 other staff members, of which 6 are part-time. They started with two partners, one of whom is from **** and the other originally from **** but who trained at ****. One or the partners, Dr. **** is still actively involved in the practice and is the figurehead for decision-making body, which includes all the physicians. Dr. **** has retired and now resides in another state. The practice has an office in downtown ****, the northwestern suburb of **** and the northern suburb of ****. They are considering a fourth office in **** County, which is one of the fastest growing counties in the country.

The main concerns facing the practice from the initial interview process are:

1. The practice brings in over $6.7 million in revenues, yet the doctors each take home on average only $236,000, which they consider low considering the total revenues and looking at the latest compensation surveys in Medical Economics.
2. HIPAA has made them consider purchasing an EMR package, but they are concerned with the high price of the system offered by their existing billing software company, Medical Manager. Also, some of the doctors have seen ASP products like Greenway and like the concept, but they also have looked at products like Nuesoft, MicroFour and two others.
3. They believe that they can cut out expenses, such as transcription and other service, if they go to a paperless solution.
4. There are concerns that they should not be doing billing in-house and would like to assess the advantages and disadvantages of outsourcing billing.
5. Many of the staff and physicians are apprehensive about using computers. There is concern that many of the staff, some of which have been with the practice for over a decade, will leave if the office becomes paperless.
6. There are concerns about the actions that **** Medical Center has taken recently which could help or hinder the practice.
7. The practice had a 6.7% decrease in revenues from OMMS.
8. Some physicians feel that the compensation is unfair, as there are variances on fees collected and A/R’s based on the physician’s primary office location and main admitting hospital
9. There are questions on lower cost malpractice options, as MAG Mutual has raised rates of late and they may no longer be the best alternative.
10. The practice has not done any new marketing since 1994 and is now considering which mediums might best help them retain and find new patients.
11. There is a perception by the owners that the staff have become too “cozy” with certain medical supply companies or their representatives and that the practice is not getting the lowest prices for supplies and equipment. There are many expensive items kept in stock, which may be unnecessary and ties up capital and revenues unnecessarily. They also do not think they have an adequate system to train employees to be better negotiators. They would like to make each of those involved in ordering a “Clark Howard” as one of the physicians stated.
12. There is not doubt from the administrative team’s perspective, that the practice would not comply with HIPAA and that they are not ready to meet major points in the Patient Privacy Act. They are concerned that the physicians do not take the threat of fines and criminal charges seriously with the enactment date approaching rapidly.
13. The doctors want to put more control in the hands of the practice administrator, if they felt they could easily look at more financial information on a daily, weekly and monthly basis.
14. The practice would like assistance in choosing a location for the 4^th office, look at the most efficient lay-out and find ways to cut down on facility costs.
15. The current computer system uses Unix for the billing system, but all other programs, including the QuickBooks accounting software and MS Office use Windows. Many of the computers are 5 years old, use Windows 95 and must be upgraded for any new computer system in any case. The practice would like to look at new wireless solutions, as well as see what can be done with its current LAN and Frame Relay solution, now linked to the three offices.

Scope of I-Med’s Work

I-Med provided the following to the practice under its standard $7,500 “Practice Management Tune-up” contract:

I. ACCOUNTING

Evaluation of available accounting systems, computer systems, and/or vendor-based systems;

II. REVIEW OF BUSINESS PLAN

A. Review of a business plan, which should include the following sections:

i. Overview

ii. Mission Statement

iii. Corporate Structure

iv. Five-Year Financial Projections

v. Source and Use of Funds

vi. Other Supporting Documentation

III. EQUIPMENT:

A. Consultant will prepare a list of medical equipment, medical supplies, office furniture, office equipment and data processing needs for the efficient operation of the medical center.

IV. MARKETING:

A. Consultant will review the marketing plan, which will outline general programs designed for the Client’s benefit. Recommendations will be made as to which promotional, advertising and public relations programs will be most effective, and Consultant will, upon request, assist in retaining advertising and/or public relations firms to assist Client. Consultant will also assist in the establishment of a proposed advertising budget for the first year of operation.

V. STAFFING AND COMPENSATION:

A. Consultant will assist in the preparation of a set of job descriptions for all staff positions, and will further complete an organizational chart outlining each employee’s responsibilities and authority. Consultant will also provide recommendations regarding salaries and employment contracts for prospective employees.

I-Med’s Research & Review Process

I-Med spent three days on-site at the practice. Each of the three facilities were visited by I-Med staff, all of 7 of the physicians were interviewed as part of the assessment process, as were all the senior and middle management staff. We even looked at the proposed office site for the 4^th practice location in **** County, near **** Medical Center.

The practice provided the following documentation to I-Med Personnel:

• Quarterly tax returns and last two annual tax returns, which were reviewed by I-Med

• 60 days worth of invoices for all supplies and equipment for any purchase were supplied to I-Med as well

• Current Standard Operating Procedures Manual

· Compilation of all staff member’s wage and benefits were given to I-Med

· Copy of the job descriptions

• Staff comments were solicited regarding OSHA, CLIA, ADA and potential HIPAA compliance issues to ascertain areas where the practice could strengthen self-enforcement and lower exposure

• I-Med staff examined all computers, the networking infrastructure, back-up procedures, computer training, support of the current vendor and was given information on the current Frame Relay provider

• Three months of phone and utility bills were provided

• Web address of the practice, so I-Med staff could review it for content, marketing concerns and usefulness for patients and staff

• Copies of all commercial, health insurance, workers’ compensation and malpractice insurance were provided

• List of current fee schedules

• Information on current electronic claims clearinghouse and direct transmission systems in place at present

• Reports from the Medical Manager billing system showing the A/R’s, aging, break-down of revenues based on financial class, major payers, break-down of revenue and A/R’s by provider and comparison of level of service

• Any other information for the American College of **** or MGMA related to the practice’s fees, A/R rate

• Compilation of referral sources for new patients,

• Marketing materials, including brochures, referral letters, Yellow Pages ads (in three different directories the **** Metro area), tapes of three radio ads run in 2001, newspaper ads, coupons and a videotape of a proposed TV ad with **** Cable, that was never aired.

• List of current inventory on hand (Note: this was the first comprehensive review of all inventory in stock in over 2 years at the practice)

• List of all equipment in the practice valued over $100 (Note: this was the first list even done by the practice, which subsequently was sent to the current property & casualty insurer for their records)

• Business plan completed in 1995, but had not been reviewed since then.

• Marketing plan developed in 1999, but had not been implemented by the practice.

I-Med Materials Provided and Recommendations

Extensive changes to the business plan to reflect the current situation, and to incorporate recommendations made by I-Med

Updated marketing plan, including strong recommendations to move forward with TV advertising, which is virtually non-existent for **** specialists in the **** Metro area

Suggested consideration of a full-time marketing person not only to co-ordinate the advertising, public relations and marketing, but to also have more face to face with primary care providers who are the largest source of new patients to the practice, but who have been ignored by the practice

Consideration that the group look at other methods of compensation for the principals (I-Med offered two alternatives)

A proven plan wherein the staff has more incentives based on productivity, net revenues, cost savings and other areas that staff can influence and help raise revenues or lower costs

I-Med found over $16,000 in annual savings on office and medical supplies, with a detailed explanation for the staff to use in their negotiations and price shopping to assure continuation of these practices

Although the current billing system is adequate, clearly an integrated system would cut costs dramatically. I-Med recommended several systems and the practice will most likely retain I-Med to develop a full request for proposal (RFP), help with assessment of the various systems selected for review and demonstration, help with the final selection of hardware, software, networking options and inter-office connectivity and be the overseer of installation, training, implementation and initial technical hardware and network support of the system when it is put in place.

Although the total cost of ownership of a new computer system will be approximately $270,000 per year, the current system is costing almost $75,000 annually, transcription is costing $102,000 per year (the staff had thought it to be much lower, until I-Med reviewed all invoices) and each provider should be able to increase revenues by at least $30,000 each. Therefore, the practice will actually gain $117,000 in net revenues annually by implementing a paperless office.

A paperless system will also help with HIPAA compliance, which the practice had projected to cost over $80,000 to secure the files at four offices and to make changes to fax and phone systems (location of clinical staff phones primarily) to meet the proposed HIPAA regulations.

A complete financial pro-forma for five years (with the next two years broken down on a monthly basis) was provided to the practice.

A proposed staff & compensation projection for the next five years was provided which gave projected target FTE’s. It is apparent that there are three full-time billing people who could be replaced by an integrated paperless system, which could save over $96,000 annually (wages, benefits and taxes). I-Med also set-up a meeting with two billing services to review the current billing procedures to ascertain if outsourcing this process completely could yield higher revenues, which would offset the fees charged by these services.

I-Med found that savings of over $6,500 a year could be obtained by changing to one of three telephone providers recommended by using configurations unknown to the staff of the center.

Changes to the current malpractice policy could yield savings of $2,500 by making some minor changes in the policy, which would not raise exposure nor increase liability.

Several changes were suggested to lower utility bills in the practice.

I-Med made suggestions on how the overall patient experience can be improved. This includes methods for better assessment in the patient follow-up process, better reporting on how patients are referred to the practice, more patient amenities and other enhancements to make the patients happier.

Major changes with how faxes are handled at present. A lot of time, paper and ink are currently wasted and faxes are routinely lost or misplaced or are not routed to another office in a time-efficient manner.

The medical records are currently centralized and three staff members could be replaced through attrition after 12 – 24 following the implementation of a paperless system. During the transitional period, these staff members will scan documents, reports, and other printed matter into the EMR system. This will also cut costs dramatically, as there is a huge overhead in trying to have information passed back and forth between the various offices.

I-Med made some specific suggestions on “load-balancing” techniques so that physicians and patients can be easily moved from place to place, which is not possible with the current paper-based system.

Visio diagrams of several potential layouts converging all tele-communications and computer systems for seamless integration of these systems were provided to explain how higher productivity, efficiency and increased patient satisfaction could be achieved.

I-Med gave specific cost projections on various implementations of systems to compare wireless to wired configurations. There were also detailed explanations on how providers could interface with the system virtually anywhere at anytime.

I-Med gave specific recommendations on how to make the existing web site more usable by patients, to help with overall marketing of the practice and to even assist the staff in various ways.

Specific recommendations were made regarding OSHA compliance.

The practice was not in compliance in several areas of CLIA and the practice will make these changes immediately at the offending centers.

The practice was not in compliance with certain parts of ADA and with little additional expense, can make changes to avoid any penalties.

Numerous changes were made to the job descriptions. Although they may be acceptable, if ever challenged, with no expense, the practice made immediate changes to lower the chance of challenge by disgruntled or dismissed staff.

The staff review and appeals process was adjusted based upon information supplied to the practice by I-Med.

Major recommendations were made regarding the new practice location and concerns about the proposed layout were raised. The practice is now considering I-Med to take an active role in negotiating the lease, finding the best patient flow, looking at the various systems in the building, such as HVAC, electrical, computer wiring, placement of phones, printers and faxes to increase productivity and patient flow for a set project fee.