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June 23, 2011

10 signs of a well-run practice

Jill Stoller, M.D., managing partner
A lot of young physicians have their eyes opened when they get into a practice that they haven’t evaluated,” says Jill Stoller, M.D., managing partner of Chestnut Ridge Pediatric Associates in Woodcliff Lake, N.J.

Location, location, location. Along with compensation, it’s one of the first considerations when physicians job search. But you can golf most anywhere and ski in most northern and Rocky Mountain states. Even if you return to your hometown, you might have several practice opportunities from which to choose. So don’t overlook how well a practice runs when researching places to work.

Most physicians would agree that resident programs don’t prepare physicians well for the business side of medicine. Jill Stoller, M.D., FAAP, managing partner of Chestnut Ridge Pediatric Associates in Woodcliff Lake, N.J., says there isn’t much emphasis on practice management. "But I think it may be changing a little bit," says Stoller, who also chairs the American Academy of Pediatrics’ Section on Administration & Practice Management. "A lot of young physicians have their eyes opened when they get into a practice that they haven’t evaluated."

Physicians don’t better vet practices because they may lack the business savvy to do so or they run out of time. Many simply must adjust after so many years in medical school and residency. Ryan Mire, M.D., FACP, is an internal medicine physician with a multispecialty practice in Nashville, Tenn., who has been in private practice since 2002.

He says that many residents are used to getting through short-term challenges: four years of medical school, three to five years of residency, and maybe one to three years of fellowship. "However, employment is a long-term objective very similar to a marriage, and there is a lot at stake," he says. "Physicians have to think globally as they make decisions and also understand aspects of the practice that they are not necessarily taught to assess." Mire began sharing his job search experiences with residents soon after beginning practice, and self-published a book on transitioning into medical practice because he saw that residents needed information and advice.

Quality of life and location certainly are important, but you can’t enjoy them if you’re stressed out or working more call and making less money than expected. "It goes hand in hand," says Stoller. "If you want a good quality of life, you have to be sure to have a financial basis for it. You want to be able to have that day off a week and that six to seven weeks of vacation a year. And the only way you’re going to get that is to make sure you’re running an efficient practice from a business standpoint."

To effectively evaluate a practice, you’ll need to ask lots of questions and gather information beyond what a recruiter typically provides. You may not ask all of the questions on your first visit, but try not to get caught up in the remodeled office with the golf course view until you consider the less flashy, long-term issues that will make the days go more smoothly.

Impress with finesse

Still not sold on the idea of asking some tough - even probing - questions of a potential practice? Think again. Asking these questions is much more likely to impress than to upset future physician colleagues and leaders, so long as you go about it with timing and finesse.

"It will definitely give you a leg up on most of the applicants coming right out of residency," says pediatrician Jill Stoller. She says they’ll realize you not only have good clinical skills, but that you seem to understand what private practice is all about from the business perspective.

Get a feel for when to ask the questions and how, says radiation oncology administrator R. Scott Krewson. "I tell our residents that I’m giving them some questions but that they’re going to have to see how the conversation goes and when and how to ask," he says. Krewson advises that applicants generally not bring up salary until it’s brought up to them. Internist Ryan Mire says that once you narrow your choices down to the top two, return for a second interview at each. "This is your opportunity to open all closet doors, speak with other employees of the practice … and do a brief chart review to make sure the group is practicing the standard of care that you would expect for your patients."

When you ask about details, have a list to remind you. But don’t start firing off questions like an interrogation. Krewson gives an example for determining patient volume: "Now that I have a sense of your practice, I’m really excited. How busy do you think I’ll be?" He says, "it’s a fine line, using finesse, sitting back and not being offensive."

Question #1: Can we crunch some numbers?

Both sides will want to discuss lots of financial numbers and markers that dance around physician productivity. You also need to talk about how the practice shares numbers with physicians after they join.

"What’s the collection rate for the practice?" asks Mire. "Once off guarantee, your income is determined not by what you charge, but rather what the practice collects on your behalf." It’s good to know daily volume or census, or at least ballpark expectations. Of course, you’ll eventually want to ask about fixed and variable costs or overhead rates. If you don’t get specific amounts, at least ask for ratios of overhead to revenue. Compare those rates against the current practice environment. For instance, if the practice is bringing you on to ramp up for a new service, does the overhead rate reflect the new support staff the service may require? Were capital costs (like equipment) paid for in advance, or will there be a monthly payment or lease? And what’s the projected monthly revenue?

"How easy is it to get reports out of their practice management system?" asks Cindy Dunn, RN, FACMPE, a principal consultant with the Medical Group Management Association Health Care Consulting Group in Cocoa Beach, Fla. "If they roll their eyes and say ’We’re working on it, but it’s not that easy,’" think twice. Dunn also suggests asking for a sample financial board packet. "If it’s 20 pages long, that’s a problem," she says. "They ought to offer a dashboard that is one or two pages long with key performance indicators - at a bare minimum, net collection and days in A/R." And Dunn suggests asking about days in A/R greater than 90, not 120.

Try not to get caught up in the remodeled office with the golf course view until you consider the less flashy,

long-term issues that will make the days go more smoothly.

Question #2: Have you gone electronic?

There’s a reason some practices have lagged behind others in converting to electronic health records, or EHR. It’s expensive and time-consuming, but worth it. The MGMA recently revealed that private practices with an EHR reported nearly $179,000 greater median gross revenue per FTE physician. Do you want to go through the expense and training curve or walk into a practice with that out of the way? It’s a personal decision, but one that warrants some fact-finding.

Stoller says first to ask if the practice has one and if not, if they’re thinking about it. And according to Dunn, "If you’re told ’We’re working on it,’ then you need for them to share their timeline." Ask about the selection process, implementation plan or provider training, depending on where they are in the process, Dunn advises, adding, "I think it needs to be in place."

Sarah M. Stewart, M.D., is a family medicine physician living in Red Lodge, Mont., who finished her residency in 2008. She has worked in a rural health clinic and staffed a small hospital, including its critical access ER. In December, she took a position as hospitalist at St. Vincent Healthcare in Billings. "Some of the EHRs are outstanding," she says. "As you’re dictating your progress notes, they’ll pop up with cues." For example, Stewart says she often looks at patients’ breathing efforts, which can make the difference between visit levels, and the EHR reminds her. "It’s not overcharging patients, it’s trying to optimize what you get from a payer," she says.

The earlier, the better

It’s really never too early to start your search for employment. You’ve invested a lot of time and money, and this may be the most important step you take.

"I advise that the employment search begin in the middle to late part of the second-to-last-year of residency," says internist Ryan Mire (pictured). "In general, practices tend to be aware of their strategic plan for recruitment well before they start their active search for candidates," he says. Mire says the process takes time not only for the interviews, visits and negotiations, but also for credentialing with insurance companies and hospitals.

It’s also a good idea to start educating yourself about the business side of medicine, says family medicine physician Sarah Stewart. "It’s something you won’t be passively given, so start pursuing information in your third year of residency," she says. Medical economic journals and young physician and practice management sections of specialty societies are good resources. Pediatrician Jill Stoller heads a practice management section for the American Academy of Pediatrics that has a handbook for launching a career in the specialty. "There’s also an active listserv where members can bounce questions off one another," she says.

Question #3: Who audits charges and financials?

Stewart advises asking prospective practices who does their billing and coding, and who audits them. Has the practice consulted with a coding and reimbursement specialist? "If you get a practice that says ’No, we don’t need that, it’s a waste,’ that’s a red flag," says R. Scott Krewson, CPA, MBA, department of radiation oncology administrator at Wake Forest University Baptist Medical Center in Winston-Salem, N.C. He says that you can try to keep up with ever-changing coding with educational meetings, but if you don’t have a consult from time to time, how do you know your practice is up to date? "I don’t care if you’re an academic practice or a private one, you want to maximize revenue."

Krewson, who has prepared a list of questions to help Wake Forest’s graduating residents in their job searches (see sidebar), adds that a financial audit is equally - or more - important. A smaller practice may not call in an outside auditor yearly, but any audit is better than none. "If they say, ’No, we would never do that; my brother-in-law does the books,’ that’s not good," says Krewson.

Question #4: How efficient are your billing and coding?

Ryan Mire, M.D., Nashville physician says employment is similar to a marriage.
"Employment is a long-term objective very similar to a marriage, and there is a lot at stake," says Ryan Mire, M.D., who practices in Nashville, Tenn.

Coding, billing and documentation - oh my! Like Dorothy in the Wizard of Oz, it’s best sometimes not to know what’s behind the billing wizard’s curtain.

Or is it?

No matter your arrangement with the new practice, revenue ultimately determines your income, so efficient billing and coding ought to be a concern. Aside from staff, EHR and other technology comes into play. If you don’t have an EHR, how do you help physicians optimize charges? What are your documentation logistics? How does the practice keep up with new codes? Stoller suggests asking about the practice’s mechanism for educating physicians on proper use of new codes. She also says that physicians right out of residency are sure to encounter some unfamiliar codes. "Ask, ’Who do I go to if I have a question about coding?’"

Question #5: How do you handle physician outliers?

Let’s say you come in as the new physician and learn all of the new codes and document like a pro. But the practice’s long-time high producer simply doesn’t have time to document and actually costs the practice revenue. Or maybe the practice makes a decision to use a certain supplier or policy, says Dunn, and one physician doesn’t go along.

"If you ask and they look at you dumbfounded and say, ’Well, that’s not an issue here, everybody just does what’s right,’ you know you’ve got a problem," she says. She says nearly all of her consults with practices - when a physician calls to say he or she is working harder than ever but making less - result from physician leaders not dealing with outliers. "They need to have a governance plan," Dunn says. "Because you can have the best operations team in the world, but if your physicians stand in the way of it, it won’t matter."

Question #6: Can I see the handbooks and materials?

Dunn says that a practice’s employee handbook is the main marker she looks at for a practice, and prospective physicians should ask to see it. Say, "I understand I’m going to be a provider employee, but I’d like to see a copy of your employee handbook."

According to Dunn, "it gives you a good idea of how the practice is managed." The handbook should outline expectations for all staff members. A good practice should ask you to sign one if you join; policies like harassment should apply to provider staff.

You also should expect to receive a decent recruitment packet, says Susan R. Miller, RN, FACMPE, administrator of Family Practice Associates of Lexington in Kentucky. "I would expect any practice that’s recruiting to have a pretty sophisticated packet of materials for the physician with information about the practice," says Miller.

At a minimum, it should include patient marketing materials, a work practice model, and what’s expected of a new physician. Salary and compensation information and a pro forma for a new physician and associated costs also need to be available when the time comes. "If they can’t do that, you’ve got to figure that there might be some other issues," says Miller.

Question #7: Can I meet the administrator and staff?

As administrator of a medium-sized practice, Miller not only is a source of great information for incoming physicians, but also the person who negotiates with new hires. Her physician CEO approves everything but still carries a full patient load. "I think the administrator or practice manager is a very important person for you to meet and observe," she says. She also says that you can easily observe staff courtesy and efficiency by walking through and meeting staff around the office.

Mire says speaking to employees - including business office, front desk and clinical staff - definitely should be part of a second interview. For example, business office staff collect your payments, and clinical employees can make or break your efficiency. "And ask who manages the staff," says Mire. "Are there regular performance reviews for both physicians and staff?"

Question #8: How do you evaluate technology and cost centers?

One way Miller recruits top staff is with technology. It also helps her retain the staff and recruit physicians. Krewson says you should ask the practice how much they’re investing in new technologies. No matter how you feel about high-tech clinical and practice tools, you need to know how progressive the practice is and how the investments affect the bottom line.

Likewise, take a look at major cost centers or potential revenue streams, especially for your specialty. "For pediatrics and family practice, you should know how they handle their vaccines," says Stoller. "It can be a revenue source if it’s done correctly, but some practices don’t, and end up losing money." She advises asking if they belong to a group purchasing organization for vaccine buying. "And do they negotiate payments on new vaccines when they come out?"

Question #9: How do you manage essential tasks?

Stoller’s question about vaccines applies to all payer negotiations. She notes that it’s important to know the insurers a practice accepts, who negotiates their contracts, and how often. "Which payers are your problem payers, and how are you dealing with that?" she asks. If you have payment problems, how often do you meet with the insurers’ reps? Depending on the specialty and practice type, remember they also may have to negotiate contracts for hospital-based services, leases, ancillary agreements and other arrangements that can affect the bottom line.

You want to be sure they’re tough but fair and experienced and that they’re calling in professional help when appropriate. Credentialing is also important, especially to new physicians, says Dunn. "There’s nothing worse than getting there and being told you’re not going to get paid," she says. "Ask them, ’Tell me what your credentialing process is like,’" she says. It can take six to eight months to complete credentialing, and you’ll want to know they intend to start right away, have a plan and timeline and hopefully an experienced staffer to help it along.

Question #10: How do you handle new patients?

Of course, you also won’t get paid if you don’t have patients. Ask the physicians and administrator how they handle new patients. First, is the practice growing - or are you replacing a departing physician? In most situations, you need to make sure the practice and staff make it easy for new patients to schedule appointments.

"If patients can’t access the practice by telephone and the practice doesn’t have a schedule formatted for new patients and same-day appointments, then you simply will have a lot of difficulty building a practice," says Miller. She adds that any time a new physician joins a practice, it drains other physicians’ incomes. "So another question is, ’How are you going to help me build my practice?’" says Miller.

You also might ask whether other physicians are accepting new patients, how much spin-off you might get from other physicians, and how you can expect to keep building your practice. Don’t forget to touch on marketing; if a practice has no marketing plan at all and room to grow, that might be a red flag.

These certainly aren’t all of the questions to consider, and there are other ways to investigate a practice, such as looking at its Web site, asking friends and colleagues what they know, observing critically during residencies and fellowships or working as a locum.

It’s also probably unusual to find one that’s in the location you want, with the top salary and perks, best clinical tools, perfect patient mix, the best colleagues or partners possible and the most tightly run ship. But don’t shortchange the significance of operations and management. "None of these suits is tailor-made for you exactly," says Stewart. "You figure out which one fits best, knowing they’re not all 100 percent perfect."

Which employers will make your cut?
R. Scott Krewson, CPA, MBA, department of radiation oncology administrator at Wake Forest University Baptist Medical Center in Winston-Salem, N.C., developed the following questions to help residents begin evaluating practice opportunities.

  • Is the practice incorporated? LLC? LLP? S Corporation? Partnership? Sole Practitioner? PA?
  • Who are the principals? What is their ownership share of the entity?
  • How long has the business been in operation?
  • Who owns the building and equipment, if applicable? Is it leased to the practice?
  • How are new partners admitted? Dollar buy-in? Time period to work?
  • Does the practice have an employment contract?
  • What benefits are offered? Ask about health insurance, dental insurance, profit-sharing, 401(k), disability insurance, life insurance, malpractice insurance, annual vacation days
  • given and annual meeting days allowed.
  • Are there outstanding malpractice claims against the practice?
  • Does the practice have a certain law firm it uses that is necessary for practice representation?
  • What is the daily census of the practice?
  • What types of technologies are available?
  • What type of equipment (make and model) is available, and how old is the equipment?
  • How is the billing performed?
  • Who keeps the books and records? Internal or a CPA firm?
  • Who audits the practice’s books and records?
  • What is the break-even point?
  • How does the practice market itself?
  • Who negotiates and reviews managed care contracts?



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