By Evelyn Eskin, MD
It is by now axiomatic that information is vitally important in
a managed care environment. Whether you are preparing for participation
with managed care plans, beginning to evaluate the results of
ongoing participation, considering expansion of existing managed
care arrangements, or assessing capitation, you will need a plan.
A successful plan requires accurate, relevant, and timely practice
information. Much of the data needed for a managed care plan is
quantitative; other information is more qualitative, addressing
professional goals as well as actual practice experience. Here
is a 20-question checklist to use as a guide in planning for the
future success of your practice in a managed care environment.
Your View of Your Practice
1. Who are your current and potential partners or affiliates?
Almost every physician has someone with whom he or she shares
some aspect of the practice-a physician or practice with whom
you share call, physician partners or colleagues, professional
networks, and institutions such as a hospital, nursing home, hospice,
or other provider organization with whom you work.
Assess your response to these partners and affiliates as the ones
who will join with you in the 21st century. Your partners need
to share your goals, values, and vision of oncology practice,
and be able to adapt and thrive in a managed care environment.
2. If you were starting your practice today, would you hire the
Many physicians have one or more persons on their staff who are
not team players, have not adapted to new practice demands, or
are simply burned out.
Retaining these staff members will be very expensive as you position
your practice to succeed in a competitive managed care environment.
Ask yourself seriously if you can move toward a situation in which
you feel positive about each staff member you employ.
3. What one thing would you most like to change about your practice?
The answers to this question run the gamut from "people"
to "systems" to "physical environment." Whatever
your answer, think about the importance of being able to change
the thing that bothers you most, so that your practice can approach
the managed care future from a position of strength.
4. What do you want to be doing in 5 years? Keeping your eye on
your personal and professional long-range plans is extremely important
in this changing environment. The decisions made by oncol-ogists
just beginning their practices will be different from those of
physicians contemplating retirement.
If your group includes physicians from both ends of the professional
life cycle, it is important to recognize these differences and
construct agreements that allow each doctor to achieve his or
her goals. You will need to develop a plan for handling changes
in patient volume, retirement of senior physicians, and additions
to the professional staff.
5. What are your sources of information about your practice? The
potential sources are many-computer,
office manager, bookkeeper, and accountant, to name a few. You
should list all the sources of information on which you regularly
depend. Then review their reliability, timeliness, and relevance
as resources for assessing your future and making decisions.
To handle the complex decision-making processes involved in managed
care, you will need information that helps you understand capitation,
develop a plan to maximize managed care incentives, and identify
the costs of the most common procedures done in your practice.
6. What do your patients consider the biggest strengths and weaknesses
of your practice? Patient satisfaction is the most common measure
of quality in a managed care environment. It is important to know
what your patients think and to be able to change the things that
bother them most, so that your practice will continue to be attractive
to patients. It is also good to ask these questions of employees,
physician colleagues, and your larger practice community.
7. How many patients have left your practice during the past 6
months? Many physicians do not track this statistic, but it is
extremely important in a competitive practice environment. Even
if you monitor the number of patient transfers, do not assume
that you know the reason patients are leaving.
You may think it is because you are not participating with a certain
plan when the real reason is a parking problem, long office waits,
or an inaccessible telephone. It is definitely worthwhile to follow
up with patients who leave the practice, to obtain valuable market
information and also to maintain good public relations.
8. How many new patients have joined your practice during the
past 6 months? New patients are the lifeblood of a practice. Track
both the number and the sources of new patients, to assess the
direction in which your practice is moving. Compare these numbers
over time, to measure practice growth trends.
9. What are your cancellation and no-show rates? The number of
patients who cancel or who simply do not appear for their scheduled
appointments is an important indicator of patient satisfaction.
Following up with these patients is important, not just from a
medical-legal standpoint but also for monitoring patient satisfaction.
10. What are the 10 most common diagnoses seen in your practice
during the past year? Knowing the answer to this question will
help you describe your practice to others, enable you to begin
collecting outcomes data, assist you in evaluating practice growth
and evolution decisions such as adding staff and equipment, and
help you to compare your practice with others in a managed care
plan's oncology practice profile.
In answering this question, it is important to include numbers
of patients and comorbidities with each diagnosis, and also to
make sure that each diagnosis is carried out to the highest level
of specificity. Severity of illness in a patient population can
affect reimbursement rates, and you need to have this information
for your practice, to compare it with others in your profile group.
11. What are the 10 most common procedures and services performed
in your practice? The reasons for tracking these statistics are
similar to the rationale given above for monitoring diagnosis
If you are considering capitation, know which procedures and services
are included in the capitation rates for each managed care plan
you are considering. Be especially careful to list specific drugs
used, so that you can be sure you understand how each managed
care plan handles the drugs you administer.
12. What are your gross and net collection rates? The gross collection
rate indicates the percentage of charges you are receiving-it
measures the discounts you accept on your charges. The net collection
rate is the ratio of payments to discounted charges-it measures
how much of expected revenue you are actually collecting.
If you know these two numbers for each payer in your practice,
you can identify which payers are problematic for your practice
and provide a key indicator of practice productivity.
13. What is the age range and distribution, and gender mix of
patients in your practice? Managed care organizations make certain
assumptions about the community as they establish capitation rates.
Thus, you need to compare your practice profile with their assumptions.
If a managed care plan's capitation rate is based on an average
age of 27 with a predominance of males, and your practice is two
thirds female with an average age of 45, the capitation rate is
not likely to be favorable for your practice.
14. What is your current payer mix? Payer mix describes your practice
by showing the percentage of charges, payments, or patients attributable
to each of the major insurers with which you participate. Knowing
the percentages of patients, charges, and payments represented
by Medicare is an important part of describing and assessing any
Comparing the percentages of patients, charges, and payments attributable
to a given insurer is a measure of the financial performance of
this payer within your practice. For example, if a certain managed
care organization provides 50% of your patients, 55% of the charges,
and 30% of the payments, you might draw some conclusion about
the productivity of that organization for your practice.
Monitoring payer mix over time is an important practice trend
indicator. Knowing your payer mix will help keep you from becoming
overly dependent on a specific payer.
15. Who are your 10 most frequent referral sources? Every physician
knows intuitively the major sources of his or her patients, but
it is important to check these perceptions with actual numbers
and to measure changes over time. Patients, primary care physicians,
and managed care rosters are all referral sources, but they have
different implications for practice stability and growth.
Tracking referrals over time will provide a good picture of changes
occurring in your new patient base. Knowing the managed care participation
status of each of your most frequent referral sources is vital
to maintaining existing referral patterns in a managed care environment.
16. What was the average number of office visits per active patient
last year? This is a straightforward but important number. Count
your active patient charts and determine how many office visits
you had last year. Divide the number of visits by the number of
Compare this to the assumptions used by managed care plans. Large
differences indicate either different expectations with regard
to practice style or differences in the kinds of patients seen.
17. What was the average number of hospital days per 1,000 active
patients last year? Lowering the number of inpatient days is one
of the most explicit goals of managed care. In an oncology practice,
it is vital to determine and monitor this statistic. Use a computerized
list of procedure volumes to calculate the number of hospital
visits, and divide this figure by the number of active patients.
When negotiating with managed care plans, ask about their assumptions
for oncology patients. Be sure that these assumptions do not differ
greatly from the actual usage patterns of your practice, especially
if you are considering capitation or if the plan's fee schedules
for hospital visits and procedures represent deep discounts from
your customary reimbursement rates.
18. How fully utilized are your office space, staff, and equipment?
Start with a full capacity premise, such as 10 hours a day, 5.5
days a week. Then work backwards to calculate the percentage of
full capacity that your space is actually used.
While space costs may or may not be a large part of your overhead,
each unused session represents excess capacity that could be leveraged
if you were part of a larger organization. In other words, with
more physicians, your space can be used more effectively.
Similarly, develop measures of capacity for your staff. For example,
if one person can handle two telephone lines, but two people are
needed to staff the front desk, look at the patient flow during
the week to see if your staff is working at full capacity. Also
carefully review usage patterns of your clinical support staff.
Finally, look at the utilization of special equipment, such as
chemotherapy chairs, against its potential capacity.
19. What is your overhead percentage and how is it changing? If
you do not routinely track overhead expenses, your accountant
can help you develop a current figure. Tracking this figure over
time will allow you to see how your practice expenses are changing,
ie, which items are stable and which are increasing.
It is useful to know the percentage of income spent on major practice
expense items, such as staff, drugs, and space, and to compare
these figures with national and local averages.
20. What is the cost of various kinds of patient encounters? To
find this cost, calculate your total expenses for a given period
of time and divide by the number of office encounters during that
same time frame. As you gain experience with this statistic, you
will be able to adjust for out-of-office time and revenue, as
well as to establish cost centers for chemotherapy and other special
It is important to have a general knowledge of the cost of each
patient encounter and to compare it with the reimbursement rates
you receive from each carrier. Remember, if the reimbursement
rate does not cover your costs, you cannot make it up with added
Dr. Eskin is president of Health Power Associates, Inc., Philadelphia,
and Dr. Presant is president of California Cancer Medical Center,