Medical practices do not become profitable by cutting costs or adopting cutting-edge technology, according to a study released yesterday by Physician Practice Inc. (PPI), a Baltimore company that provides information for doctors on how to manage their businesses, and the Medical Group Management Association (MGMA).
Successful practices generally spend more per doctor. They have more support staff, and pay the staff better, said Elizabeth Woodcock, director of knowledge management for PPI. "They're hiring more people to get the job done," she said. "A physician doesn't have to go out and pull a chart."
Rather than cut costs, the study found, the most successful practices maximize revenue. For example, the more profitable practices do 25.7 percent more procedures - exams, shots, lab tests - per doctor per year than the average for all practices.
MGMA, a 75-year-old group based in Colorado, has been surveying physician practices for 50 years, collecting data on staffing, compensation and other issues. In 1997, it began a report based on its data on the characteristics of the most successful practices.
After initially reporting just data on the top-performing practices, MGMA decided "it was really valuable to understand the process," said David N. Gans, survey operations director for the trade and professional group.
This is the first time that PPI has been involved in the study, although Woodcock had worked on previous studies as a consultant. PPI publishes Physician Practice Digest and, in a variety of other ways, tries to "deliver business education to physicians," Woodcock said.
The study was based on a survey of about 1,100 physician practices of various sizes and specialties, supplemented by 15 visits by Woodcock to "better-performing practices," based on profitability and productivity. Woodcock said there were no available measures of the clinical success of the practices, but that, based on her visits, she was confident that they were providing quality care as well as posting profits.
In addition to having more support staff, Woodcock said, successful practices had some kind of professional management apart from a senior physician, "somebody with good business acumen." The type of management in practices she visited varied with size: a 200-doctor group would have a chief executive officer, she said, while a three-doctor practice might rely on a skilled office manager.
On the other hand, she found that top-performing practices involved many doctors in some way in governance, giving them an appreciation of the business issues the practice faces.
Rather than racing to embrace new technology, she said, the successful practices are "cautious investors." For example, she said, of the 15 she visited, two had bought medical records software, but junked the systems when they proved difficult to use.
Hank Yurow, CEO of Midatlantic Cardiovascular Associates, a successful 50-doctor group with offices throughout the Baltimore area, said the study's conclusions fit with his experience.
He said, for example, his group did not have medical records software, although he had been looking at products for five years, because it appeared to be "a $3 million investment with very little payback," in terms of cost savings or clinical improvements.