The Pathway to Increase Your Profit Margins

Management is always focused on how to make the independent physician more money without requiring more direct labor or unnecessary regulations. 2015 will be a year of significantly stepping up the pace towards achieving this goal. The PDA weekly message will carry this goal forward. The plan is to surround this goal with an ecosystem that houses benefits expertise, physician development and contracting, population management, transitional care, and a national provider service network.

The first step in growing profits is to aid in encouraging the PDA physicians to confront the core issue of their practice capacity. Reality is that every independent practitioner has a limited amount of productive capacity. Much of that capacity is significantly filled by Medicare and Medicaid (M&M) patients. These are “non-risk-reward patients”, i.e., there is no potential for a loss of earned income & no potential for any upside incentives. So, the M&M revenue production is based on unit output at a pre-determined price, i.e., piecework. Then, the question is how efficiently is the available capacity utilized? And, what is the profit margin after deducting expense of practice operation from the revenues billed?

If half of the capacity, i.e., patient throughput, is consumed by Medicare and Medicare Advantage patients, the physician must evaluate how this segment of available service is contributing to or limiting bottom line income. A financial analysis of the resulting profit margin is revealing and important to understanding how the practice is operating in the segment characterized by a predictable fee schedule paid from a government source.

The reimbursement by governmental benefits can then be compared to the segment of the practice representing managed care. It is then quickly seen that the managed care reimbursement variance by individual contracts are generally not material. So, the practitioner is limited both by the available hours in the day and a narrow range of reimbursement variances. This flattening of market differences between payors and payments explains much of how the profit from the practice of medicine has predictably declined.

The Clinically Integrated Organization (CIO) model is an interesting concept that hinges on a coordinated “hospital-outpatient-physician” bargaining for enhanced reimbursement. PDA/IPA is optimistically eager to learn more about the initiative of TENET Healthcare with key physician leaders of the Physician Performance Network of North Texas (PPNNT) to create a CIO that adds better margins and expanded market share. The plan would be for PPNNT to occupy a meaningful share of the participating physician’s capacity and attention. As capacity is a finite practice resource, the goal is to use the CIO strategy as a means to increase profit margins while operating at near maximum capacity. PDA is exploring every avenue to increase your earnings. More to come…

Season’s Greetings!

From all of the team that works to enhance the income of Physicians Direct Access, the IPA, while shielding the practices from new regulation and calls for working harder…the warmest of thoughts and best wishes for a Christmas and Hanukkah, that are filled with happiness and good health. May the coming year fill your home with joy, your heart with good feelings and your life with laughter. We have much to accomplish in 2015. And, we shall do great things together.


There is much to be learned by observing the powerful, disciplined forces of big healthcare distribution. Baylor Scott and White, THR, Tenet, HCA, Methodist, etc., are all in their own ways very impressive. While we, in our own way, also do a good job of caring for sick and troubled patients, we can be so busy down in the trenches of care that we lose sight of the goals that the integrated healthcare systems are pursuing with a single purpose. When we do that, it is a big mistake. So, we continuously study big insurance and healthcare with great intensity and energy.

Our identity as the voice of the independent practitioner is important. But, PDA must be insightful and strategic. We must add value. Still, our message is not different in any way from the marketing blitz of the healthcare giants. But, our audience is very different. We serve with single-minded focus, independent practitioners, clinicians, and other caregivers. We realize that while the mega-systems convene human resource executives in high profile, posh meeting places to present how they will improve population health, improve the care experience, and reduce per-capita cost we are out knocking on doors of buildings with flat roofs, and parking lots with less than 50 workers’ cars.

We bring the same message as the big healthcare systems and insurance companies to owners and managers that are not sure if they can afford benefits. That is a very important and necessary service. And, we find that many mid-market operators are not sure they will make the next payroll or collect what is owed them. They also know that their workers that enter 2015 without insurance face penalties of $325 per adult or 2 percent of gross income (whichever is greater). These folks must be enrolled by December 15th to have coverage by January 1st, 2015. Yes, it is financially tough in the world of the small business where so many things are made, assembled, serviced and packaged, etc.

So, please grasp that the message we bring is the same as “Big Health & Insurance”. We must improve population health, improve the care experience, and reduce per-capita cost. Tomorrow, we will again carry that message and capability to the marketplace. We have a growing cadre of colleagues that are transitioning from the role of the traditional insurance agent to becoming healthcare representatives. We have physicians who are learning to look beyond the next patient. They “get it” and are committed to pressing the conversion to the new world of healthcare.

The point today is our message and belief is universally spot-on. We are unique because we count on independent practitioners and are committed to mid-market commercial business operators. Hear that!