A summation of practice management in the medical office setting can be defined as: Benchmarking performance, organizing patient and information workflows, training and task assignment, measuring performance through reporting, and constant refinement through continuous feedback.
Article Updated 08-18-22
Understanding Medical Practice Management
A simple definition of Practice Management is elusive as it comprises every responsibility of a practice manager.
Today’s medical managers wear an astounding number of hats—financial management including contract negotiation and business performance, business operations such as office procedures and staff efficiency, human resources like hiring and training, data/IT security including protecting patient data and HIPAA-compliance reporting, disaster recovery and patient-safety risk management, quality management (including patient satisfaction), and organizational governance such as licensing and financial compliance.
In short, practice managers are responsible for everything that happens in a medical office other than clinical work. They’re in charge of front-office activities such as scheduling, eligibility, and authorizations; clinical workflows and physician satisfaction; and back office tasks like revenue cycle management (RCM), referrals, collections, and patient checkout.
Practice managers must be extremely well-versed in the type of management activities a medical practice cannot succeed without: hiring and training, cashflow management, compliance, and patient satisfaction. But if the practice manager is doing his or her job, physicians are able to focus completely on treating patients, knowing that they’re being properly paid for their services.
What is Practice Management Software?
Below, we’ll delve into some tactics top practice managers are using to help them solve the multitude of responsibilities they’re asked to handle daily. But first, let’s look at some of the ways practice management software can help in this endeavor.
Measure what matters
Nothing is more critical to improving productivity and profitability than knowing your current metrics. Fortunately, practice management software simplifies this task, taking it out of convoluted spreadsheets and into the modern era of data gathering and reporting.
Here are some measures to consider for your front office:
- Timely patient verification
- Consistency of appointment reminders
- Prompt check-in
- Patient co-pays and balances collected
- Patient satisfaction with front-office interactions
For your back office:
- Insurance verification (timeliness and accuracy)
- First-pass claim rates
- AR resolved within 30 days and within 60 days
- Consistency of weekly deposits
For your clinical staff (RNs, PAs, etc.)
- Coding accuracy
- Number of patient seen per day
- Patient satisfaction scores
- Contributions to workflow processes
For your physicians
- Timely encounter starts
- Cost of staff per visit
- Cost of supplies per visit
- On-time completion of medical records
- Blind benchmark metrics for internal comparison (as a motivational tool)
Consider adding physician RVUs
Another tool practices are turning to for information on physician productivity is relative value units (RVUs). There are generally four categories of work:
- Physician work: time, mental effort, technical skill, judgement, stress, level of education
- Practice expenses: supplies, non-physician labor, equipment, and indirect expenses
- Malpractice expense
Start honest, stay honest
Regardless of which metrics you choose to measure, it’s important to let everyone in the practice know which are being used. Be open and honest about what’s being tracked and why—employees to believe they’re being aggressively monitored are likely to react negatively. It’s also a good idea to regularly review the measures for relevance to your practice and to survey staffers to see what data they think should be measured.
Management KPI Dashboards
Look for practice management software that makes it easy to set up productivity targets, quickly assess status using a dashboard, and dig into the collected data as desired to produce detailed reports showing gaps and areas needing improvement.
Benchmarking, Forecasting and Measuring Performance
Managing a modern medical office resembles the classic management model that dates back to the turn of last century’s industrial revolution where a scientific approach to tasks and organization resulted in significant strides in worker performance and overall organization performance.
In our Practice Management Hacks blog series, we offer practical tips from our smartest medical managers on creating more efficient office process and workflow. But here we will take the most recent advances in management thinking and offer applied examples in the context of Front Office, Back Office, Physician/Employee Relationships, and Senior Management – Employee & Finance. We will note the dimensions of process and workflow, culture and employee performance, financial performance, and time efficiency and productivity.
There are many ways to measure performance, but success is always a team effort. Your front-office, back-office, and medical staff must work smart as well as hard to keep the practice functioning at optimal levels. Relevant, measurable goals and metrics for every area of the practice enable all staff members to do just that. Effectively implemented metrics can also help you spot areas where your practice excels and those that need improvement. Following are some thoughts on measuring quality.
What to measure
Measures of back-office quality may include insurance verification timeliness and accuracy, first-pass recovery rates (the “cleanliness” of code resulting in prompt payment), the percentage of accounts receivable resolved within 60 days, and the consistency of weekly deposits.
Front-office efficacy can be quantified through timely patient verification, consistency of appointment reminders, promptness of the check-in process, patient fees collected at arrival, and customer service.
Metrics for healthcare staff (nurses, physician assistants, etc.) include the accuracy of coding of patient visits, the number of patients seen, patient satisfaction scores, and documented contributions to workflow processes. Practices consider such physician metrics as timely starts for patient visits, cost of staff per visit, cost of supplies per visit, and on-time completion of medical records.
Note that information collected on physicians can be used to fine-tune budgeting, staffing, and financial policies. When presented as blinded comparisons of in-house colleagues, physician data can be a powerful motivational tool as well.
Complementary Practice Analysis
- Benchmark Your Reimbursement Rates and Claim Efficiency Against Peers
- Review the Revenue Impact of No Show and Cancelled Appointments
- Identify Lost Revenue due to Patient Balances (especially > 90 days)
- Recoup Lost Revenue due to Unpaid Claims (especially > 120/180 days)
- Review Ways to Increase Patient Satisfaction and Referrals
- Strategies for Increasing Revenue for Routine Appointments and Pro-Active Patient Outreach
How to measure
Practices can collect metrics data in real time using the features available in robust practice management software. Information as simple as the time stamp on patients’ co-pay receipts or as complex as a physician’s lab orders or referrals to specialists can be highlighted and aggregated in the electronic medical record. Customized search engine agents can uncover external performance data such as online patient reviews.
With staff stretched thin, practices increasingly are turning to managed service providers for optimal billing coding performance and regulatory compliance. These external partners monitor financial performance, verify patients’ insurance eligibility and benefits, conduct patient balance reconciliation, and report results, freeing staff for other tasks.
When it comes to gauging physician productivity, some practices use relative value unitsv(RVUs) that consist of physician work (time, mental effort, technical skill, judgment, stress, and level of a physician’s education), practice expense (direct expenses such as supplies, nonphysician labor, equipment expenses and indirect expenses), and malpractice expense.
Make sure all goals and metrics are appropriate and that all staff members know what metrics are in use. Review these measures regularly to ensure their relevance to your practice. It might also be advisable to inform staff about the limits of your performance measurement methods. Employees who believe they’re being tracked or monitored too aggressively will be demoralized, perform worse, and might eventually move to another practice.
When To Measure
Performance must be measured consistently and there are several standard times to measure performance: In real-time (KPI’s), Daily (end of day cash reconciliation and deposits), Weekly (scheduling, front office performance), and Month-end reporting (all departments, all metrics).
Staff should not only know what is being measured, but when to expect a review. Performance can be checked weekly, monthly, quarterly, or yearly—whatever makes sense for the practice manager and the staff member. For many staff members, a yearly review/report is adequate. Closer scrutiny is expected for coders, accounts receivable, and collections specialists.
Benchmarking is necessary, especially when it comes to strategy and planning. Comparing a practice’s performance with an external standard can spur employees to commit to improvement and reflect more effectively on their own performance. External forces—from regulatory agencies to prospective patients—are already making these comparisons.
A summary of the history of management would look like this: (1) The classical school, (2) The behavioral school, (3) The quantitative or management science school, (4) The systems school, (5) And the contingency school.
Modern Management—No Need to Reinvent the Wheel
Humans are complicated, but practice managers have a wealth of information to draw from as they strive to create a productive, efficient workplace where staffers can do their jobs with a minimal amount of stress.
Some older management techniques aren’t relevant to today’s modern medical practices and should be avoided, even though bits of them persist in some managerial approaches. Frederick Taylor’s efforts to improve industrial efficiency were successful in the late 1800s, but are out of touch with today’s realities, as are Frank Gilbreth’s time studies. The same is true for Max Weber’s arguments for bureaucracy as the most efficient model and Henri Fayol’s 14 management principals (although a few still ring true).
Several authors in the last century were ahead of their time, including Mary Follett and Chester Barnard. Follett was known as the mother of modern management, believing in the art of getting things done through people. Barnard wrote that organizations must be both effective and efficient, meeting organizational goals in a timely way while satisfying the motives of its employees.
It’s not until Peter Drucker that modern management finally became mainstream. In 1954’s The Practice of Management, Drucker argued that businesses are there to create customers who decide what’s important (as opposed to internal structure, controls, and procedures).
He also introduced the idea of Management By Objectives and Self-Control, which is now widely referred to as Management by Objectives (MBO). Here are the six steps involved:
- Define organization goals. Goal-setting should include different types of managers and should be provisional, based on an evaluation of what the company can and should achieve in a specific period.
- Define employee objectives. Each employee is briefed about general objectives and strategies, followed by a one-on-one discussion about personal objectives.
- Continuous monitoring of performance and progress of each employee.
- Performance evaluation.
- Continuous feedback on results and objectives helps employees make corrections to their actions.
- Performance appraisal. Frequent performance reviews help employees know where they stand with regard to personal and overall objectives.
Importantly, Drucker believed that the difficult part of decision making is not finding the right answer but finding the right question. “There are few things as useless—if not as dangerous—as the right answer to the wrong question,” he wrote in The Practice of Management.
In 1980, Drucker wrote that middle managers had to shift their focus from controlling people to becoming an assistant, resource, and/or teacher, opening the door to later management gurus’ writings on servant leadership.
Total Quality Management (TQM) is another management framework that was initially used by manufacturers (it’s credited with Japan’s economic recovering after WWII) and later migrated to non-industrial sectors. Under TQM, all employees focus on quality management and continuous improvement, including identifying and rectifying employee skills deficiencies.
TQM’s focus on improvement creates a culture of excellence that leads to fewer defects (clean claims, for example), more satisfied customers, and lower costs. It also encourages employees to work as a team to find and fix problems in an atmosphere of mutual respect.
Areas of the practice that are running smoothly but could use minor adjustments can certainly benefit from TQM. Areas you as the practice manager have identified as inefficient (perhaps you’d like to reduce the time spent by front-office staff on prior authorizations) can usually benefit from business process re-engineering.
BPR involves a complete re-think of existing processes. The idea is to reduce unnecessary steps and/or unproductive activities. Sometimes, the process redesign involves introducing technology to streamline an activity. Done right, BPR results in reduced costs and improved quality. Similar to MBO, workers feel more responsibility for their output and are able to better measure their performance based on prompt feedback.
- “10 Metrics for Measuring Physician Performance.” Becker’s ASC Review, 31 August 2011.
- Witten, Jay. MGMA RVU Calculator Tool Overview.
- Henri Fayol. Wikipedia, accessed 27 July 2022.
- Peek, Sean. “The Management Theory of Mary Parker Follett. Business.com, 29 June 2022.
- “Chester Barnard: Informal Organizations and Acceptance Theory.” Study.com, accessed 27 July 2022.
- “Peter Drucker.” British Library: Business and Management, accessed 29 July 2022.
- “Management by Objectives (MBO).” Corporate Finance Institute, 24 January 2022.
- Kenton, Will. “Servant Leadership.” Investopedia, 17 June 2022.
- Pratt, Mary. “Total Quality Management (TQM).” TechTarget, accessed 29 July 2022.
- “Business Process Reengineering.” Bain & Company, 2 April 2018.
- Physicians Practice, June 21, 2014, “Using Measurable Metrics to Review Medical Practice Staff,” by J. Cloud-Moulds
- Huffington Post, July 27, 2017, “Ways Healthcare Changes Affect Providers and Consumers,” by Jill L. Ferguson
- Medical Group Management Association, Lessons for Financial Success, Chapter 5: “Productivity, Capacity and Staffing,” © 2009
- Bloomberg BNA, August 4, 2017, “Wearable Tech Offers Brave New World for Employers, Workers,” by Genevieve Douglas
- Managed Healthcare Executive, July 28, 2017, “Four questions to ask about healthcare benchmarking,” by Joseph Krause