In the past year and a half, many pediatricians have been pushed to their limits and found themselves to be resilient in the face of incredible uncertainty and instability. As the dust settles from COVID-19, many practice administrators find themselves with new skills they garnered as a means of survival -- perhaps from navigating the steps of PPP loan forgiveness -- and have questions about how to mitigate the damages of an uncertain future again.
Building Solid Financial Foundations at your Pediatric Practice
Before the pandemic, pediatric practices typically reported operational overhead rates of 65% before considering reasonable compensation for themselves and staff, according to Paul Vanchiere of the Pediatric Management Institute. The financial constraints that practices were already feeling have been tightened further. Building a solid understanding of your practice’s key financial areas is just the starting point to creating a strategic, long-term financial plan.
We recently sat down with our own Chip Hart, Director of PCC's Pediatric Solutions consulting group, for a 30-minute webinar where he outlines critical areas that practices should focus on to perform a financial well-check on themselves and strengthen their future finances.
How much should you save?
Understanding how much cash you need on hand to ensure your business is secure for the next three months is certainly no small task. In the scarier moments of 2020, Chip notes that visits to pediatricians dropped so quickly that it took only 2 or 3 weeks before practices were struggling to keep staff and overhead expenses paid. Learning to look at recent visit volume is one first step practices can take to predict how much cash you’ll need on hand for the short and long term.
“There’s no belt tighter than one around a pediatric waist,” says Chip, and for that reason, it’s essential that practices focus on increasing revenue rather than reducing expenses when they examine how to manage their overhead expenses. When revenue significantly drops, and it’s out of your control, practices must look at where their revenue is being allocated. By leveraging our overhead formula and benchmark in the webinar, you can set the context for your practice’s financial performance and learn how to monitor growing expenses before they get out of control.
A Closer Look at Revenue Opportunities
Ironically, a poorly-run practice today has more short-term opportunities for new revenue than a well-run practice. For example, if well visit coverage over a practice’s total patient population is low, there’s an immediate opportunity presented to get more patients in the door. A well-run practice still has the strongest, long-term benefit, and in this case, it comes from being able to predict incoming well visits accurately. Every month, a new group of patients becomes eligible for a well visit, and if you’re a well-run practice who is tracking well visit coverage and who has a disciplined approach to patient recall, you can use well visit coverage as a strong predictor of your future revenue.
Auditing what services your practice offers and its revenue opportunities provides a clear starting point to begin examining your practice’s pricing. In 2021, the definition of RVUs and their value for E&M codes were changed. One of the fundamental changes that pediatricians haven’t yet grasped is that the RVUs of E&Ms has increased so much that it has lowered revenue in other specialties. By not updating your prices to reflect 2021 RVU values for E&Ms, your practice will be leaving money on the table when insurance payors flip to the new valuing system.
In today’s well-visit-centric world, vaccines make up to 30% of revenue for some of PCC’s pediatric practices. Pre-COVID, vaccines would account for about 5-10% of revenue. The recent significant increase has an especially large impact when that percentage of revenue is generated by something that is paid for directly as a cost. Additionally, keeping close track of how vaccine administration codes are entered is another key way that well-run pediatric practices ensure they’re maximizing their vaccine business.
In our latest webinar, learn more about the good habits of a well-run practice and what bad habits you can get rid of that won’t compromise the quality of patient care. We also visit E&M distribution for 2021 and discuss specific coding guidelines to follow to improve revenue-per-visit. Click below to watch Chip’s 30-minute presentation.