Bottom line blues (MGMA annual meeting)

Months before the Medical Group Management Assn. annual conference, the MGMA asked its 2,800 members about their biggest challenges in running a group practice.

No. 1 on the list: maintaining physician reimbursement in an era of declining revenues. No. 2: dealing with operating costs rising faster than revenues. Thirty-two other areas -- most linked to the top two -- were called "considerable" or "extreme" challenges.

Total operating costs for practices have risen 43.1% since 2001, said William F. Jessee, MD, president and CEO of MGMA, while the Consumer Price Index has risen 24.2% and the Medicare conversion factor has flatlined at 0%. The factor converts the geographically adjusted number of relative value units for each service in the Medicare physician payment schedule into a dollar payment amount.

Physician income barely kept pace with inflation this year, especially in specialty practices, according to MGMA's annual physician compensation and production survey. Dr. Jesse said this is prompting many doctors to sell their practices to hospitals. Those remaining are less likely to invest in the practice.

"The only way a practice can keep up is to increase volume," Dr. Jessee said. "But if you're running as fast as you can, you can't run any faster."

The MGMA conference had many sessions on tips and tricks to cut costs or add business. But the gloomy consensus was that physicians on their own could only do so much and the answers need to come from payers -- private, commercial and, especially, Medicare.

"We've automated everything and taken our staff size down to one full-time equivalent per provider. ... We need patients to understand they need to pay for their services, and we need to get commercial payers to increase their reimbursement," said Deborah Milburn, administrator of Dublin Primary Care, Colorado Springs, Colo.

At the conference, American Medical News reporter Karen Cafferini listened in on sessions and talked to attendees, eliciting thoughts from physicians, practice administrators and other experts on how physicians can handle their challenging environment, and what greater challenges the future likely holds.

Physician compensation (No. 1, 69.9% said this is a "considerable" or "extreme" challenge)

Deborah Milburn, administrator, Dublin Primary Care, Colorado Springs, Colo. "Our reimbursements are stagnant at best, if not going down, while expenses continue to go up. If we as managers do anything sloppy along the way, pay too much for something or our accounts receivables aren't coming in, it will reduce the amount we can compensate our physicians. We have got to do a better job at managing."

Maureen Mondor, vice president, physician education, ProMutual Group, Boston-based liability insurers "I don't know if the other 30 [MGMA survey] points can help improve physician compensation. It was going to be tough anyway, but with the economy it's gotten even tougher. Solo practices and those with two to three physicians have gotten very nervous."

Diane Vasa, administrator for a family practice in Fremont, Neb. "We have two physicians and three physician assistants. We not only need to make sure the doctors are compensated, but that the PAs get paid fairly, too. They work hard, too."

Jeff Milburn, MGMA consultant and conference speaker "You need to be fiscally responsible. You need to have the money to pay the physicians or you will lose them."

Dealing with rising costs, declining revenues (No. 2, 68.0%)

Carol Bower, financial analyst, Redwood Regional Medical Group, Santa Rosa, Calif. "Something is going to have to happen to increase revenues or practices won't be viable anymore."

Mick Kasher, MGMA director of survey operations, speaking on his 22 years as a practice administrator "One of our biggest challenges was to control costs. In today's world, if costs go up too much, the money goes right out of the doctor's pocket. You can try to control costs, but some costs, such as fuel, are out of your control."

Implementing a new EHR (No. 3, 67.8%)

Renda Jones, practice manager, Margaret Mary Community Hospital, Batesville, Ind. "EHRs help improve a practice's efficiencies, but their costs are unreal. Not only does it cost to buy the equipment, but to train staff and maintain the equipment. It is a no-win situation in the medical field anymore."

Robert Tennant, senior policy adviser for informatics, MGMA "Only 14% of practices have fully functional EHRs, although it was President Bush's goal to have widespread use of EHRs by 2014. It's been difficult to get practices to adopt the technology due to cost and return on investment, too many choices and security/privacy concerns."

Recruiting physicians (No. 4, 61.4%)

Steven DeMaiolo, DO, internist, Prima Health Care, Youngstown, Ohio "We have a shrinking pool of primary care physicians with a larger pool of people needing primary care services, which makes recruitment difficult."

William F. Jessee, MD, president and CEO, MGMA "The trend is more physicians are going to hospital systems. They are done, just can't make it anymore. For some of our members that means they also will become employees of the hospital instead of the physician or will lose their jobs."

Tim Watson, director, human resources, physician services, Ohio Health "I have no problems recruiting physicians in these times. More and more physicians want to be employed. We've even had to put a stop on recruiting."

Medicare reimbursement (No. 5, 56.9%)

Dr. DeMaiolo "This is a bad situation that is going to become much worse. If Congress makes cuts in Medicare payments it would be a death blow to solo practitioners. They don't have enough margin."

Nicholas DeMaiolo, administrator, Prima Health Care, Youngstown, Ohio "You need to be a larger practice to survive now. A dramatic cut in Medicare reimbursement [20%, if Congress does not intervene] ... would make it impossible for the old school practices of one or two physician offices to survive."

Dr. Jessee "If the sky isn't falling, it's certainly cracking, and Medicare is at the crux of the issue."

Collecting from self-pay, high deductible and/or health savings account patients (No. 9, 50.1%)

Vasa "The $20 deductibles of 20 years ago have become $1,000 deductibles. People are trying to pay $25 a month. ... We began seeing the trend when the price of gas started going up."

Mike O'Brien, director, Dept. of Orthopedics, Ohio State University "My biggest problem is the underinsured and uninsured. If they have elective work done, we ask for some money up front, show of good faith."

Tracy Spears, MGMA conference speaker and national consultant, Transworld Systems Inc., debt collections company with locations nationwide Patients "are more likely to pay people they like than those they don't. ... Don't say: 'How much can you pay, when can you pay or can you pay something?' Instead, say, 'How much are you short and are you paying by cash, check or credit card?' "

Susan Childs, president, Evolution Healthcare, Chapel Hill, N.C. "At what level does a patient go from insured to underinsured to uninsured? It depends on the deductible."

Collecting from commercial payers (No. 20, 28.7%)

Dr. DeMaiolo "Declining reimbursement is definitely affecting profit, particularly with private insurers that aren't even paying at Medicare rates. I've have had some success negotiating with them, with others no success at all."

R. Todd Welter, MGMA conference speaker, founder and president of R.T. Welter & Associates consultants in Wheat Ridge, Colo. "Jump into negotiations. You have more leverage than you think you have. When you get a 5% increase when the rest of the market is getting 2%, leverage is working."