1. Copyright 2011. Medical Group Management Association. All rights reserved. Optimizing the Benefit of Using Nonphysician Providers MGMA 2011 Financial Management and Payer Contracting Conference Baltimore, Maryland David N. Gans, MSHA, FACMPE Vice President Innovation and Research Medical Group Management Association March 28, 2011

2. Copyright 2011. Medical Group Management Association. All rights reserved. About MGMA Our mission… To continually improve the performance of medical group practice professionals and the organizations they represent MGMA has 22,500 members… Who manage and lead 13,700 organizations With 275,000 physicians Providing about 40% of U.S. physician services

3. Copyright 2011. Medical Group Management Association. All rights reserved. Objectives 1.Describe how nonphysician providers affect a medical group’s economic performance 2.Outline strategies for employing nonphysician providers 3.Identify metrics to assess provider productivity and overall financial performance

4. Copyright 2011. Medical Group Management Association. All rights reserved. Name, credentials Organization Date What we know about medical group use of nonphysician providers How nonphysician providers affect economic performance

5. Copyright 2011. Medical Group Management Association. All rights reserved. What We Know about Medical Group Use of Nonphysician Providers Some practices use nonphysician providers and other don’t. Nurse practitioners and physician assistants can provide 80% or more of primary care services with equal or better patient satisfaction and at a lower cost than a physician. Differing ratios of nonphysician providers per physician have different financial outcomes and a different cost structure. There is a threshold at which a practice may experience diminishing financial benefits from adding additional nonphysician providers. There appears to be a “sweet spot” of having enough nonphysician providers to increase net income but not so many that total costs increase faster than revenue.

6. Copyright 2011. Medical Group Management Association. All rights reserved. Some Practices Use Nonphysician Providers and Others Don’t Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

7. Copyright 2011. Medical Group Management Association. All rights reserved. Methods Used to Increase Physician Productivity Performance Levels Better PerformersOthers Comparing individual performance to internal and external peers62.35%50.84% Ensuring efficient patient flow through the practice74.10%59.83% Employing nonphysician providers such as PAs, NPs, and CRNAs61.14%50.84% What Do Better Performing Practices Do? Source: MGMA Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data All Practices

8. Copyright 2011. Medical Group Management Association. All rights reserved. All Practices Effect of NPP Utilization Better PerformersOthers Accommodated patient demand65.57%55.46% Enhanced revenue57.49%47.34% Increased patient satisfaction48.80%40.06% Increased physician productivity55.39%48.74% What Do Better Performing Practices Do? Source: MGMA Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data

9. Copyright 2011. Medical Group Management Association. All rights reserved. Multispecialty Groups Source: Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data Per FTE Physician Better PerformersOthers Median Total Medical Revenue $938,754$556,452 Median Total Operating Cost and NPP Cost $580,829$446,402 Median Total Operating Cost and NPP Cost as a Percent of Total Medical Revenue 63.22%68.33% Total medical revenue after operating and NPP cost per FTE physician $339,879$211,095 Median Total Physician wRUVs 6,8696,276 Median Total NPPs 0.290.26 What Do Better Performing Practices Do? Source: MGMA Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data

10. Copyright 2011. Medical Group Management Association. All rights reserved. Surgical Single Specialty Groups Source: Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data Per FTE Physician Better PerformersOthers Median Total Medical Revenue $1,376,015$792,170 Median Total Operating Cost and NPP Cost $564,187$443,842 Median Total Operating Cost and NPP Cost as a Percent of Total Medical Revenue 54.74%55.24% Total medical revenue after operating and NPP cost per FTE physician $564,187$443,842 Median Total Physician wRUVs 13,0479,436 Median Total NPPs.63.44 What Do Better Performing Practices Do? Source: MGMA Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data

11. Copyright 2011. Medical Group Management Association. All rights reserved. Primary Care Single Specialty Groups Source: Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data Per FTE Physician Better PerformersOthers Median Total Medical Revenue $738,989$456,150 Median Total Operating Cost and NPP Cost $494,213$445,962 Median Total Operating Cost and NPP Cost as a Percent of Total Medical Revenue 67.76%73.58% Total medical revenue after operating and NPP cost per FTE physician $253,613$158,403 Median Total Physician wRUVs 6,5545,614 Median Total NPPs 0.450.39 What Do Better Performing Practices Do? Source: MGMA Performance and Practices of Successful Medical Groups: 2010 Report Based on 2009 Data

12. Copyright 2011. Medical Group Management Association. All rights reserved. Name, credentials Organization Date How the level of nonphysician providers affects medical group performance How nonphysician providers affect economic performance

13. Copyright 2011. Medical Group Management Association. All rights reserved. NPP Have Lower Compensation than Physicians NPP Also Have Lower Collections Source: MGMA Physician Compensation and Production Survey: 2010 Report Based on 2009 Data

14. Copyright 2011. Medical Group Management Association. All rights reserved. Revenue Costs Profit In a physician owned medical group all excess revenue after expense (profit) is normally passed to the physician owners as compensation and benefits. The Path to Practice Profitability To increase profit, a practice can either increase revenue or decrease costs.

15. Copyright 2011. Medical Group Management Association. All rights reserved. As the Ratio of Nonphysician Providers to Physicians Increases, Staff and Space Also Increase Nonphysician Providers, like physicians require support staff, examination and treatment room space, and increase overhead for billing, contracting. human resources, and other administrative costs. Physician-Owned Multispecialty Groups Zero FTE nonphysician providers.25 or less FTE nonphysician providers per FTE physician.26 to.5 FTE nonphysician providers per FTE physician Greater than.5 FTE nonphysician providers per FTE physician Median FTE Support Staff per FTE Physician 3.74 5.18 5.84 6.32 Median Total Square Feet per FTE Physician 1,714 2,295 2,429 2,892 Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

16. Copyright 2011. Medical Group Management Association. All rights reserved. With More NPP, Revenue Increases Along with Expenses With increased staff and square footage, total operating cost increases. Increased production allows total medical revenue and median total median revenue after operating cost per FTE physician to increase. Physician-Owned Multispecialty Groups with Specialty and Primary Care Zero FTE nonphysician providers.25 or less FTE NPP per FTE physician.26 to.5 FTE NPP per FTE physician Greater than.5 FTE NPP per FTE physician Median Total Medical Revenue per FTE Physician$595,388$807,437$960,184$1,059,645 Median Total Operating Cost per FTE Physician$332,291$506,815$571,836$600,817 Median Total Medical Revenue after Operating Cost per FTE Physician$225,197$321,817$363,729$425,005 Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

17. Copyright 2011. Medical Group Management Association. All rights reserved. Paying NPP Compensation and Fringe Benefits Reduces Marginal Revenue after Expenses Increased revenue must be offset by the increase in NPP compensation and benefits. The result is that the bottom lime may stagnate at greater levels of NPP staffing. Physician-Owned Multispecialty Groups with Specialty and Primary Care Zero FTE nonphysician providers.25 or less FTE NPP per FTE physician.26 to.5 FTE NPP per FTE physician Greater than.5 FTE NPP per FTE physician Median Total Nonphysician Provider Compensation and Benefit Cost per FTE Physician$0$16,080$38,018$64,838 Median Total Physician Compensation and Benefit Cost per FTE Physician$206,999$307,259$321,042$323,814 Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

18. Copyright 2011. Medical Group Management Association. All rights reserved. NPP Impact on Profitability Is Similar Across Specialties Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

19. Copyright 2011. Medical Group Management Association. All rights reserved. Median Total Physician Compensation and Benefit Cost per FTE Physician in Physician Owned Practices Zero FTE nonphysician providers.25 or less FTE nonphysician providers per FTE physician.26 to.5 FTE nonphysician providers per FTE physician Greater than.5 FTE nonphysician providers per FTE physician Cardiology$453,953$440,377$518,360$628,511 Family Practice$198,388$217,313$213,933$190,292 OB/GYN$286,681$231,033$360,528$373,095 Orthopedic Surgery$467,718$546,273$570,475$547,136 NPP Impact on Profitability Is Similar Across Specialties Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

20. Copyright 2011. Medical Group Management Association. All rights reserved. Standardizing Revenue and Expense per FTE Provider Reflects Practice Performance Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

21. Copyright 2011. Medical Group Management Association. All rights reserved. Impact of Increased Numbers of Nonphysician Providers on Support Staff per FTE Provider in Physician Owned Multispecialty Groups Zero FTE nonphysician providers.25 or less FTE nonphysicia n providers per FTE physician.26 to.5 FTE nonphysicia n providers per FTE physician Greater than.5 FTE nonphysicia n providers per FTE physician Median Total Medical Revenue per FTE Provider$595,388$735,199$712,027$636,434 Median Total Operating Cost per FTE Provider$332,291$447,595$410,915$335,099 Median Total Medical Revenue after Operating Cost per FTE Provider$225,197$281,094$269,429$269,674 Standardizing Revenue and Expense per FTE Provider Reflects Practice Performance Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

22. Copyright 2011. Medical Group Management Association. All rights reserved. Total Medical Revenue after Operating Costs per FTE Provider by Specialty Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

23. Copyright 2011. Medical Group Management Association. All rights reserved. Total Medical Revenue after Operating Costs per FTE Provider by Specialty Impact of Increased Numbers of Nonphysician Providers on Total Medical Revenue per FTE Provider in Physician Owned Multispecialty and Single Specialty Groups Zero FTE nonphysician providers.25 or less FTE nonphysician providers per FTE physician.26 to.5 FTE nonphysician providers per FTE physician Greater than.5 FTE nonphysician providers per FTE physician Cardiology$605,717$412,847$399,224$421,791 Family Practice$224,716$207,673$175,765$147,739 OB/GYN$300,238$255,093$293,682$268,286 Orthopedic Surgery$460,801$512,398$445,371$375,094 Source: MGMA Cost Survey: 2010 Report Based on 2009 Data

24. Copyright 2011. Medical Group Management Association. All rights reserved. What Do the Data Show? Nonphysician providers increase total practice revenue and total practice expense Net contribution to the practice is based on marginal contribution of net revenue over net expense Since income increases at a lesser level than expense, there is a diseconomy of scale.

25. Copyright 2011. Medical Group Management Association. All rights reserved. What Is the Optimal Level of Nonphysician Provider Staffing? Increasing the number of NPP in the practice generally increases profitability, but diminishing returns occur at more than.5 FTE NPP per FTE physician. The maximum ratio is reached at about 1.0 FTE NPP per FTE Physician. The optimal level will vary by practice. A practice with a high ratio of NPP per FTE physician is a very different practice than that which does not use NPP. The optimal level of nonphysician provider staffing is not only a function of the level of staffing but also how the nonphysician providers are used.

26. Copyright 2011. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Strategies for employing nonphysician providers

27. Copyright 2011. Medical Group Management Association. All rights reserved. General Scope of Practice Considerations Nurse Practitioners (NP): Can work independently –”hang their own shingle” Can develop treatment plans; order tests; interpret test results; formulate treatment plan Can perform initial and follow up visits; medication mgmt; Refer patients for addiction treatment Can prescribe controlled substances (except in Alabama and Florida –Medscape Updated 11/2/10) May be credentialed (in most cases) by insurance carriers and therefore do not need to bill “incident to” May gain hospital privileges (dependent upon the hospital bylaws) General Scope of Practice: Nurse Practitioners

28. Copyright 2011. Medical Group Management Association. All rights reserved. General Scope of Practice Considerations Physician Assistants (PA): Can develop treatment plans, order tests and interpret test results Can NOT work independently and must have a supervising physician. The State governing body may require chart reviews. May be able to prescribe controlled substances, but this is State specific (Missouri does not allow it) May be credentialed (in most cases) by insurance carriers and therefore do not need to bill “incident to” May gain hospital privileges (dependent upon the hospital bylaws) May be credentialed and bill as an assistant surgeon General Scope of Practice: Physician Assistants

29. Copyright 2011. Medical Group Management Association. All rights reserved. Strategies to Optimize Profitability for Using Nonphysician Providers Use NPP to the extent of their training and license. “Partner” NPP with physicians to share responsibility for patients. Channel less acute patients to NPP to allow physicians to increase average patient acuity. Substitute NPP for physicians for call, in extended hours clinics, and branches. NPP need to be supported with appropriate support staff, multiple examination rooms, and appropriate technology.

30. Copyright 2011. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Metrics to assess provider productivity and overall financial performance

31. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Expense Management (Comparing Expense to Revenue) Total Operating Cost as a Percent of Total Medical Revenue –Goal: Lower is better Staff Salary Cost as a Percent of Total Medical Revenue –Goal: Lower is better General Operating Cost as a Percent of Total Medical Revenue –Goal: Lower is better Supply Cost as a Percent of Total Medical Revenue –Goal: Lower is better 31

32. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Expense Management (Standardized per FTE Physician Total Operating Cost per FTE Physician –Goal: Lower is better Staff Salary Cost per FTE Physician –Goal: Lower is better General Operating Cost per FTE Physician –Goal: Lower is better Supply Cost per FTE Physician –Goal: Lower is better 32

33. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Expense Management (Standardized per FTE Provider) Total Operating Cost per FTE Provider (NPP and Physicians) –Goal: Lower is better Staff Salary Cost per FTE Provider (NPP and Physicians) –Goal: Lower is better General Operating Cost per FTE Provider (NPP and Physicians) –Goal: Lower is better Supply Cost per FTE Provider (NPP and Physicians) –Goal: Lower is better 33

34. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Provider Productivity Total Gross Charges by Individual Physician and NPP –Goal: Higher is better Total Collections for Professional Services by Individual Physician and NPP –Goal: Higher is better Total / Work RVUs per by Individual Physician and NPP –Goal: Higher is better New Patients - Overall for the Practice –Goal: Higher is better Appointment Cancellations / Patient No Shows - Overall for the Practice –Goal: Lower is better 34

35. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Provider Productivity Clinical Service Hours Worked per Week by Individual Physician and NPP –Goal: Higher is better Scheduled Appointment Hours per Week by Individual Physician and NPP –Goal: Higher is better Appointments per Week by Individual Physician and NPP –Goal: Higher is better Total Procedures by Individual Physician and NPP –Goal: Higher is better Evaluation and Management Coding Profile by Individual Physician and NPP –Goal: Profile should match patient acuity 35

36. Copyright 2011. Medical Group Management Association. All rights reserved. Key Performance Indicators for Patient Satisfaction Patient Satisfaction Scores by Individual Physician and NPP –Goal: Higher is better Transcription Turn-Around Time / Electronic Health Record Posting by Individual Physician and NPP –Goal: Lower is better

37. Copyright 2011. Medical Group Management Association. All rights reserved. More Information: August 2010 MGMA Connexion

38. Copyright 2011. Medical Group Management Association. All rights reserved. Name, credentials Organization Date David N. Gans, MSHA, FACMPE Vice President, Innovation and Research Medical Group Management Association 104 Inverness Terrace East, Englewood, CO 80112 Phone: (303) 799-1111, ext. 1270 E-mail: dng@mgma.comdng@mgma.com Are There Any Questions?

39. Copyright 2011. Medical Group Management Association. All rights reserved. Biographical Summary David N. Gans, MSHA, FACMPE Vice President, Innovation and Research Medical Group Management Association Mr. Gans administers research and development at the Medical Group Management Association (MGMA) and its research affiliate, the MGMA Center for Research. Current projects focus on four areas of interest: Patient safety and quality Administrative simplification, cost efficiency, and the dissemination of best practices Use of information technology by physicians Preparing physician practices for health care reform legislation and a transformed health delivery system. Mr. Gans received his Bachelor of Arts degree in Government from the University of Notre Dame, a Masters of Science degree in Education from the University of Southern California, and a Master of Science in Health Administration degree from the University of Colorado. Mr. Gans is retired from the United States Army Medical Service Corps in the grade of Colonel, U.S. Army Reserve. He is a Certified Medical Practice Executive and a Fellow in the American College of Medical Practice Executives. 39