Practice Management - Selective Contracting

As editor-in-chief of Physician Practice Options, a monthly newsletter devoted to practice efficiency, I sometimes run across someone with a nuts and bolts approach to practice management – someone who can explain their approach in a few well-chosen words.


There are many excellent practice management firms in the U.S., and I don’t favor one over another. This blog simply represents the thinking of one pragmatic practice management leader.


John McDaniel, President and CEO of Peak Performance Physicians, a physician practice advisory company in New Orleans, says physician are increasingly turning to selective contracting to manage their patient mix. McDaniel has worked with hospitals and physician groups across the United States, first as a hospital administrator of 15 years and for the last 20 years as a physician advisor.


According to McDaniel, five levers of profitability for physicians exist.


1) Reimbursement systems, where physicians review their coding proficiency, their management contracts, and their professional fee schedules.


2) Billing and collection processes – how to bill and collect more profitably and efficiently.

3) Accounts receivable management. Accounts receivable are the largest single asset of most physicians.


4) Operations improvement, basically anything within the four walls of the practice – scheduling to ancillary services.


5) Practice growth – how to position the practice to grow volume.


I asked McDaniel what innovative trends he is seeing these days among physicians. He focused on “selective contracting” in “mature practices” where physician are being more creative in patient scheduling as opposed to “first come, first serve.”


In certain markets with a high percentage of Medicare, Medicaid, or “poor paying” managed care organizations, the “first come, first serve” philosophy erodes profitability over time. It happens slowly, and doctors may not realize what’s happening until it’s too late.


McDaniel encourages practices to monitor their payer mix and the percent of patients who are Medicare, Medicaid, managed care, and private pay and to look at the charge/collection ratios among those payers. He says doctors should be more targeted in patients they want to encourage, and in some cases, discourage.


After doing the analysis, the practice can determine what percent of patients in each category they want. For example, if an internist is seeing 20 patients a day and wants Medicare patients to be 20% of the mix, he or she can schedule 4 Medicare patients a day.


When the fifth Medicare patient calls, presuming the problem isn’t urgent. that patient goes to the next Medicare appointment on a future day, That way the practice can balance its payer mix.


Some people may argue selective contracting is “rationing of care,” but McDaniel says it isn’t rationing per se because appointments are available to all. It’s really no different than the practices of airline, restaurants, or other businesses who strive for greater efficiencies. It is simply serving patients on a different basis and being more selective in their clientele.