Data Mine: Good management is timeless

For the past 23 years, MGMA has used its extensive database of practice expense and revenue information to identify practices with superior performance. While the specific criteria for these “Better Performers” have evolved over the years, multiple measures have been used to assess different areas of the practice. 

Having multiple measures recognizes that a practice can outperform its peers in one area while being constrained in others. For example, a practice can have excellent revenue cycle operations but, due to its payer mix, report financial performance similar to its peers; or a practice’s physicians and staff can be highly productive but work in a high-cost community, which affects profitability.

Having multiple categories also recognizes that there is no single measure that defines a high-performance group. Currently, MGMA recognizes “Better Performer” practices in four categories:

1. Operations: evaluating the revenue cycle by identifying practices with better and faster collections while also having lower total accounts receivable (A/R)
2. Productivity: evaluating provider and staff output at the practice level and individually
3. Profitability: recognizing practices with lower operating costs per unit of output and greater revenue after operating costs
4. Value: identifying practices that report quality metrics while qualifying as having better performer status in operations, productivity or profitability.

While every medical organization has its own specific goals, opportunities and obstacles, there are common elements that contribute to its success. This was identified in the first Better Performer reports when the practice leaders in these practices were interviewed and asked to identify what contributed to their success. 

The 1998 Performance and Practices of Successful Medical Groups Report described how better performing practices followed consistent routes to their success.1 The report described how these organizations employed formal strategic planning, rigorous financial management and customer-focused innovations. It also described their culture as having open communication, effective compensation mechanisms, trust between physicians and administrators and high levels of physician job satisfaction.

In the interviews, practice leaders identified “rewarding our physicians for hard work” as the factor contributing most to their financial success and that basing provider compensation on productivity, efficiency in managing care and seeing more patients benefited the practice and provider. The report also identified that these medical groups reported more staff than the norm, mostly in direct patient care or physician support positions: registered nurses, licensed practical nurses (LPNs) and medical assistants. Having extra staff relieved the physicians of administrative tasks and enabled them to be more productive, and the added revenues more than covered the cost of the extra staff. Another hallmark of these better performing groups was a commitment to serving their many customers — patients, insurers, employers and group physicians.

The 1999 Performance and Practices of Successful Medical Groups Report outlined six performance areas in which Better Performers excelled:

1. Strategic and profit planning
2. Cost management
3. Capital structure and instruments
4. Tax policy and management
5. Internal controls
6. Financial reporting and performance evaluation.2 

The 2003 Performance and Practices of Successful Medical Groups Report described a qualitative analysis of better performing practices over the previous five years that identified the characteristics, elements and systems that contributed most to practice success. Its findings were not that different from what was identified previously; the most common elements among Better Performers were:

• Implementing effective recruitment and staffing techniques
• Compensating physicians based on productivity
• Improving patient flow
• Using data to drive decision-making
• Employing technology to improve efficiency
• Providing adequate staffing and employee cross-training.3

The 2020 MGMA DataDive Cost and Revenue quantifies how little has changed in how Better Performers outperform their peers. Figure 1 shows that in physician-owned multispecialty groups, Better Performer practices reported almost 9% greater medical total operating cost per full-time-equivalent (FTE) physician than their peers. Consistent with what was reported for previous Better Performers, these groups also had substantially greater total medical revenue per FTE physician, which translated into 19% higher median total physician compensation and benefits in these practices, showing that investments in staff, facilities and operations pay off in the bottom line.

Those higher staffing levels contribute to slightly higher expenses for Better Performer multispecialty groups. Figure 2 shows how these practices have a greater investment in the business office (which results in better collections) and in their clinical support staff. Better Performers reported 20% more staff in the business office and 18% more nursing staff than the median of all multispecialty practices. As reported more than 20 years ago, having additional nursing staff enables providers to care for additional patients, thereby increasing overall practice productivity. This is shown in Table 2, as Better Performer groups had 20% more encounters, which is reflected in these practices having 24% greater work RVUs (wRVUs) and 10% greater total RVU production.

These similarities in financial performance between 2020 and the earlier reports suggest that good business practices have not changed much. In 1998, the Performance and Practices of Successful Medical Groups Report concluded:

Successful group management is no mystery. It involves the application of tested business strategies to the unique challenges of medical group practice, day-to-day maintenance of relationships and finances, and keeping an eye on what’s happening in the local environment.4
 
What was true 22 years ago is still valid today — good management techniques are timeless.

Notes:

1. MGMA. 1998 Performance and Practices of Successful Medical Groups Report. 1998. Englewood, CO.
2. MGMA. 1999 Performance and Practices of Successful Medical Groups Report. 1999. Englewood, CO.
3. MGMA. 2003 Performance and Practices of Successful Medical Groups Report: Based on 2002 Data. 2003. Englewood, CO.
4. MGMA. 1998 Performance and Practices of Successful Medical Groups Report. 1998. Englewood, CO.