Ethical dilemmas are always a debatable topic when it comes to ‘for-profit’ medical practices. In 1969, The AMA Judicial Council Opinions and Reports simply stated that “the practice of medicine should not be commercialised, nor treated as a commodity of trade.”

However, earlier in 1957, the AMA Board of Trustees stated that “The type of financial arrangement between a physician and a hospital, corporation or other lay body is important and relevant in determining whether or not such an arrangement is ethical. We further believe that the amount of a physician's income or whether or not an institution is making a profit on his services is irrelevant in whether an arrangement is ethical.”

The line that separates profitability of a practice and ethics is becoming increasingly blurred. Nonetheless, this year The Medical Group Management Association (MGMA) unveiled key findings from the 2017 MGMA DataDive Better Performers data report at its annual conference. Some of the takeaways include standards for understanding how to improve practices in the areas of operations, profitability, productivity, and also value.

High performance leads to profit

According to the report, the easiest way to increase profit is by performance of practices. The research aimed at studying how practices displayed top performance through faster patient scheduling, same-day appointment availability, and minimising no-shows and cancellations. It was discovered that physicians in most better-performing practices reported higher productivity – and in return, earning more compensation.

On top of that, the research revealed that better-performing practices among those that were physician-owned spent less in information technology costs per full-time equivalent (FTE) physician as compared to all reporting practices; while their hospital-owned counterparts reported spending more. The report further concluded that better-performing practices spent less operating costs.

Observation: More is not necessarily better

Before MGMA reported their findings, a group of healthcare professionals have come up with business plans for medical practices to cover their costs and result in profit.

According to Tessie Quattlebaum, CHBC, FACHE, president and chief executive officer of Quantrex Healthcare Business Consultants in Lilburn, Georgia – one of the ways medical practices can improve is by maintaining their patient panel size.

When a practice increases the number of patients, they have to increase their facilities and staff, too. Quattlebaum said she expects to see primary-care physicians (PCPs) maintain an overall panel size of about 1,900 patients per year.

“As they grow a single patient, they don’t want to generate USD1,000 a year... It’s better to generate USD2,000 a year off each patient,” remarks Crème.
“As they grow a single patient, they don’t want to generate USD1,000 a year... It’s better to generate USD2,000 a year off each patient,” remarks Crème.

Andrew Cremé, MBA, a consultant with MD Practice Consulting, Lake Mary, Florida said that practices dedicated specifically to family medicine makes money conventionally on consultations and less on subsidiary services. If a practice offers more subsidiary services, it will need less patients to maximise profit.

“As they grow a single patient, they don’t want to generate USD1,000 a year… It’s better to generate USD2,000 a year off each patient,” elaborated Cremé.

Cremé pointed out that another way to increase profit is by minimising overheads. Practices that should include things like malpractice insurance, facility costs, legal costs to ensure that all of the practice’s contracts into their business plans to avoid extra costs later. Practices should also be aware of their human resources costs, staffing costs, marketing costs, credentialing, and information technology and update them regularly, in case a chance to reduce costs occurs.

Usually the biggest cost other than physician salary will be the facility used to run the practice, according to Cremé. Rent can go up to USD15,000 per month alone (based on 2013 findings), not including equipment costs.

High standard for high return, while merging may not be the way to go

To save facility costs, a lot of practices are opting for mergers. However, a 2013 study showed that merging does little to cut cost. The report stated that such an arrangement can give practices increased negotiating power with payers, mostly leaning towards big practices, and could have a significant effect on reimbursement rates.

“We’ve heard some terrible stories about hospitals essentially abusing [PCPs] and using them as a referral source for their specialty services,” said Cremé.

As evident in the discussion by health experts in 2013 and MGMA findings, it is proven that medical practices do not need to question ethics to increase profit.

"When you are doing the right things, you get the right results. We found that practices that have higher expenses often have much higher revenue because of their ROI in capital and human resources, helping doctors to be more productive, and technologies. There's a return that goes back to the practice in well-managed practices," asserted David Gans, MGMA senior fellow for industry affairs. MIMS

Read more:
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Practice models that independent doctors should consider

Sources:
https://www.medscape.com/viewarticle/886816_1
https://www.ncbi.nlm.nih.gov/books/NBK216766/
http://medicaleconomics.modernmedicine.com/medical-economics/news/modernmedicine/modern-medicine-feature-articles/6-keys-profitability?page=full