The following article is written by Daryl P. Johnson, MAcc, AVA, Managing Partner with HealthCare Appraisers.
Benchmarking is a tool that is frequently used to assess the performance and productivity of physician practices. When using benchmark data, it is important to match actual performance indicators to those indicators reported by benchmark survey respondents.
For example, when reporting physician collections, Medical Group Management Association (MGMA), the American Medical Group Association (AMGA) and Sullivan Cotter and Associates (SCA) all "exclude" collections from physician extenders and ancillary services. SCA specifically states that "Collections include the collections generated for all direct professional services," and continues to say that, "This does not include collections for ancillary services and physician extenders." Therefore, when comparing collections of a physician practice to benchmark collections, caution must be taken to exclude the subject practice's collections related to services provided by physician extenders (e.g., nurses, physician assistants, and other mid-level providers), and ancillary services (e.g., laboratory services, imaging, and pharmaceuticals).
The importance of such comparisons takes on particular significance when a physician's compensation is established based on benchmark collections. Under such a compensation model, a physician, whose collections benchmark at the 75th percentile, might appropriately receive 75th percentile compensation. To accurately determine compensation under this model, the physician's collections must be determined in a manner consistent with the benchmark data (i.e., excluding collections associated with physician extenders and ancillary services). Including collections from physician extenders or ancillary services will inflate collections, and in turn, may overstate the associated compensation provided to the physician.
Typically though, physician practices do not have the ability to accurately report cash collections specifically related to their personally performed services. However, with a certain degree of effort, these collections can be established by analyzing the CPT codes and their modifiers as billed by the practice.
FMV pitfall
Employment arrangements that establish compensation using collections-based compensation models must ensure collections do not include collections from ancillary services or physician extenders. To ensure that a physician is not overcompensated under a collections-based compensation arrangement, the physician's collections base should be adjusted to exclude non-physician providers and ancillary services.
For more information, contact Mr. Johnson of HealthCare Appraisers at (561) 330-3488 or djohnson@hcfmv.com.
More Articles Featuring HealthCare Appraisers:
On-Call Coverage Benchmarks for 10 Common ASC Specialties
HealthCare Appraisers Expands to Offer Fixed Asset Appraisal Services
6 Observations From the 2011 HealthCare Appraisers Report: A Review of 2010 Trends and Transactions