Physicians planning to retire need to determine the value of their medical practice, which in many cases is their largest asset, and analyze factors that might affect what their practice is worth. Such a medical practice analysis can identify areas that could increase the value of a medical practice, said Vincent M. Brinly, Director of Valuation Services at Practice Valuation Group in Washington DC. “It is always cost-effective,” Brinly said. “Since a proper valuation can possibly save or benefit a doctor by tens or hundreds of thousands of dollars, or even a million, the appropriate fee is not a barrier to a peace of mind.”
Potential buyers rely on practice valuations to negotiate a reasonable purchase price. Practice analyses provide information buyers need to make sure they don’t buy “a broken practice,” Brinly said.
Pandemic’s Effect on Value
The pandemic may have led to changes in the value of medical practices, which have had to increase the number of exam room cleanings and the time required for each cleaning, he said. The pandemic also has made it more difficult to maintain adequate staffing levels. “If new cleaning procedures reduce the number of patients a doctor can see in a day, the bottom line of the practice will be affected as will the value of the practice. If staffing shortages affect patient flow, the same effect will be felt by the practice,” he said.
For doctors not at their retirement age, but starting to plan for the future, it may be an ideal time appraise their practice’s value when the pandemic ends. This would allow them to make strategic decisions regarding the path of the practice. “With so many doctors looking to retire, private practices may start consolidating even more so than before the pandemic,” Brinly said.
Understanding the objective value of a medical practice can put it in a better position to create a fair exit strategy for partners who are transitioning, leaving, or retiring, said Kearin Schulte, Vice President for Physician Enterprise Advisory Services at Premier, a health care improvement company based in Charlotte, North Carolina. If the practice is considering selling to a health system, a larger physician practice group, or venture capital group, this gives the practice better negotiating power when valuing or negotiating an offer.
Review Fee Schedules and Codes
Sandy Coffta, Vice President of Client Services at Healthcare Administrative Partners in Philadelphia, Pennsylvania, said a practice analysis can be highly beneficial in identifying problems with fee schedules and coding. An outdated fee schedule could mean that claims being filed with third-party payers are less than allowed amounts, drastically affecting revenue. “We are seeing more of a focus on fee schedule maintenance in terms of consistency and transparency, making sure charges are reasonable and there is a consistent plan for setting new procedure fees,” Coffta said.
An analysis of reimbursement by procedure code needs to include breakouts by payer and modifier combination. These steps help identify areas that can be improved in the pre-authorization, coding, or denial management process. “It will also show any codes where reimbursement is out of line with other similar procedures, and opportunities to strategically re-negotiate fees on high volume CPT codes,” Coffta said. “The biggest benefit of a medical practice analysis is the ability to identify issues across the billing process and ensure that the practice is capturing all revenue it is entitled to, and ensuring that as many claims as possible are paid on their first submission.”
Nelson Lowman, a managing director in the Healthcare Performance Improvement practice at Berkeley Research Group, a global consulting firm based in Emeryville, California, said fee schedule maintenance is paramount and should be part of managing reimbursement for all specialties. “All payers generally pay based on their reimbursement schedule or the billed charges, whichever is the lowest,” Lowman said. “Often physician groups don’t have a lot of market power to demand higher rates.” Setting slightly higher fees than called for contractually “creates an environment where payers are obligated to pay rates as contracted.”
Conducting periodic coding audits is always a good idea. Coding rules vary by specialty, and they are often quite complex, Lowman said. Particular attention should be paid to surgical procedure codes. “The coding of surgical procedures often requires the application of multiple modifiers and typically represents the most reimbursement for a practice group,” Lowman said. “Concentrating on surgical codes will give you the best [return on investment].”
Periodic operational and physician contracting assessments conducted by a third party can provide an unbiased set of improvement opportunities, he said. This can allow a medical group to proactively protect revenue and eliminate costs. “These assessments also are valuable as practices weigh external equity valuations and investments,” Lowman said.
It is important to understand the proper use of modifiers with procedural codes. By optimizing use of modifiers, a medical practice can submit “clean invoices the first time for the fastest payment,” Schulte said. “The more time you have to invest in addressing denials and rebilling slows down your payment process significantly and can impact cash flow.”