BY Catherine Lightfoot, CPA, CHBC, Director of Healthcare at EEPB
Overview of recent Medicare-Medicaid legislation
On January 5, 2023, the Centers for Medicare & Medicaid Services (CMS) announced an updated CY 2023 physician conversion factor (CF) of $33.8872. This update reflects a 2.5% positive adjustment from the initial quote of $33.0607 announced last November. That initial physician CF represented a 4.47% cut from the prior year.
The Consolidated Appropriations Act (CAA), signed into law on December 29, 2022, held off other Medicare cuts, including the PAYGO sequester of 4%. Providers could have faced an 8.87% cut without legislation, which is now just a bit over a 2% reduction. Considering that it was questionable that prior Medicare rates covered costs and that most of the country is experiencing some form of inflation in the 6-9% range, providers are not calling this a victory. Practices are already stretched with increased labor and supply costs.
Six Sigma to the rescue
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Running a medical business with lower revenue and increased costs is certainly a challenge. This is where an old friend needs a revisit: Six Sigma. As many know, it is a powerful tool for reviewing processes and ensuring quality management. In the context of today’s difficult financial environment, it can help reduce waste and avoid mistakes, offering a viable option for cost containment. Anytime there is a mistake or a redo or it takes longer than it should, valuable employee time is involved. Employee time translates to increased costs, either in overtime pay or a surplus of personnel.
Payroll is one of the top three expenses of any company, right there with medical supplies and rent. We will assume you have already reviewed your vendor list and limited the waste on medical supplies. You might even be considering closing down a satellite location; however, rent is often a fixed cost until the lease is termed. That leaves us with focusing on the payroll costs. With the labor pool stretched as thin as it is, it makes sense to fine-tune processes, so there is no wasted time or effort—mistakes cost you both.
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Large hospital systems are hiring Six Sigma “Black Belts” to review their processes. Reduced wait times, reduced medication errors when prescribing and administering drugs, and reduced turnaround time for lab results are some of the key focus areas. Similar strategies can be employed for improvement in other healthcare facilities.
Improving your own processes
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Improvements can also be made by you and your staff. The first task is to document the process of moving a patient through your system. Each step should be timed and noted for who is responsible at every stage of this process. (If you have multiple providers, you will want to review the patient process for each provider.) The improvement could be as simple as identifying who does it best and having the rest of the practice copy that process. It could involve more structure, like improved forms, changing office traffic logistics, or a complete overhaul of the scheduling process, itself.
Once the process is streamlined and updated, document it! Each employee should know exactly what their responsibility is at each stage of the process. Common decisions are triaged on a lead sheet. Documentation also helps the organization cross-train employees.
For example…
I don’t often use myself as an example, but this scenario illustrates the topic perfectly, so here goes… Late last year, my spouse had cataract surgery. It is a very common outpatient procedure. You have one eye done and then two weeks later the other one. As normal as it is, they do not want the patient to travel alone to and from these appointments or to the post-op office visit. So, I was the designated driver and as a healthcare consultant, the observer. I noticed how each procedure and process was exactly the same, from the timing of the pre-op phone call, the check-in, the briefing by the nurse, the visit by the doctor, the call for the driver (me) to pull up in the portico and reclaim the patient. Also, the ability to pivot, e.g., if the front desk person was with a patient that overruled their answering the phone, on the second ring, another person answered the call. It happened often and always the same.
We were almost bumped up because the patient above us was about to miss their 1- minute window (Houston traffic). They arrived just five minutes before the “window closed” and were swept in as my spouse held to his original time slot. The whole pivot, revert, and pivot back was executed like it had been practiced a thousand times.
And when that happens, that is when you save money!