Medical Practices Struggle With Finances in 2009

Recession Forces Focus on Patient Collections

By Sheri Porter
9/9/2009

A good way to take the pulse of America's medical practices in tough economic times is to survey medical practice managers. And for the second year in a row, the Medical Group Management Association, or MGMA, a membership organization for professional administrators and leaders of medical group practices, has done just that.

According to results from MGMA's 2009 survey, -- Medical Practice Today: What Members Have to Say -- the top concerns responders list as extremely or considerably challenging are

dealing with operating costs that are rising more rapidly than revenues (73.2 percent);
maintaining physician compensation levels in an environment of declining reimbursement (68.9 percent);
selecting and implementing a new electronic health record system (61.6 percent);
collecting from self-pay, high-deductible health plan, and/or health savings account patients (60.1 percent); and
managing finances with the uncertainty of Medicare reimbursement rates (56.4 percent).

Collection Concerns Rise

Although the top-five list of challenges remained practically unchanged from 2008 -- the No. 1 and No. 2 challenges switched spots -- the standout change was in patient collection concerns. That issue ranked No. 9 in last year's survey, but in 2009, collection challenges gained 10 full percentage points (up from 50.1 percent in 2008) and leapt to the No. 4 spot on the list, pushing recruiting physicians down to No. 6.

Kenneth Hertz, C.M.P.E., a certified medical practice executive and principle of the MGMA Health Care Consulting Group, told AAFP News Now that patients often don't understand their health insurance plans, particularly health savings accounts, or HSAs, and other high-deductible policies. The result is that many patients "may not be prepared (to pay) when they come to the (medical) office," he said.

A May 2009 report (16-page PDF; About PDFs) released by the Center for Policy and Research arm of America's Health Insurance Plans found that in January 2009, 8 million people in the United States were covered by HSA and high-deductible plans.

The increase in these types of plans as well as the weak economy and patients with too many bills and not enough money to go around can amplify collection problems, said Hertz. Patients often don't prioritize the medical bills that arrive in the mail with their utility bills and the mortgage reminder, he noted. "The doctor bill comes in, and I say, 'Geez, I'm really feeling a lot better … I'll put that aside.'"

That's why, Hertz said, physician practices are aggressively trying to accelerate their cash flows by collecting copays and outstanding balances at the time of service. However, in the case of HSAs, usually there is no copay, and the patient balance often isn't collected until after the bill is submitted to the insurance company to determine the physician's contracted rate.

"I think everybody is concerned about the ability to collect from patients, and one of the things that we know for sure is that it's easier to collect from me when I'm standing in front of the receptionist than when I get home," said Hertz.

He called the new collections push a "huge change" and a necessary one.

If physicians want to be paid, they must respond proactively by understanding the nuances of different health plans, said Hertz. "The front desk now becomes a much more critical part of the billing department," because staff members must be able to explain medical charges and health plan coverage to patients.

Patients have been trained to walk out of their physicians' office thinking "my insurance will take care of it," said Hertz, but for self-pay or high-deductible plan patients, that's no longer the case.

Additional Survey Results

Survey respondents also found some parts of running a medical practice relatively easy. For instance, at the bottom of the survey list, practices listed as no challenge at all or a low challenge

designing and implementing a practice Web site (54.6 percent),
collecting payment from Medicare (52.1 percent),
implementing new policies and procedures to improve patient safety (51.4 percent),
dealing with the hospital physician credentialing processes (50.1 percent), and
modifying contracts to comply with changing physician self-referral "Stark" requirements (49.3 percent).

Practices also answered questions about how the recession is affecting their medical groups and how they are responding. Respondents said they are seeing an increase in the number of uninsured patients and decreased revenues. They are postponing capital expenditures, cutting operating budgets and implementing hiring freezes.

According to the survey, one upside of the uncertain economy is an improvement in billing and collection and claims denial management processes.

MGMA President and CEO William Jessee, M.D., summed the findings up in an Aug. 11 press release when he said, "Running a successful business that provides medical care is an incredibly difficult task in these economically challenging times."

"At their core, medical practices are small to medium-sized businesses," said Jessee, "and the recession has affected them in many of the same ways as other businesses."

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