Benchmarking survey results help nephrology practices optimize performance

At the end of the day, every nephrologist can use compensation as a measure of financial success for their efforts in the business of medicine. What is not answered with this metric is whether or not the compensation is the best it could have been. To help nephrologists answer this question, every two years the Renal Physicians Association (www.renalmd.org) publishes results from a national, nephrology-specific business benchmarking survey. This year, the RPA has transformed the survey results into an interactive online tool that helps practices identify areas of excellence and those that can be improved upon in ways not previously available.

Maximizing compensation

In private practice, compensation is the result of nephrologist effort, operational efficiency, and resource utilization. Defining potential is a much broader conversation and one that includes a large number of factors. The 2015 survey represents 1,397 full time equivalent (FTE) nephrologists from all practice sizes and regions. The survey breaks the country into four regions: East, Midwest, South and West. The distribution of the data by region approximately mirrors the composition of the Renal Physicians Association membership (see Figure 1). It contains detailed data elements relating to revenue, expenses, compensation, workload, service lines and more.

Survey composition

In order to define business potential, it’s not enough to identify a revenue target. While the survey contains revenue data at an aggregate level, it is the composition of the revenue that establishes potential. Revenue is divided by practice of medicine components (dialysis, hospital, office, and access), as shown in Figure 2, as well as other revenue streams common to nephrologists. These other revenue streams include medical directorship, dialysis joint ventures, quality program incentives, research and more.

To understand the nephrology practice’s performance, it is important to consider the composition of the various revenue streams. The practice’s revenue structure will drive revenue potential. For example, if a practice determines that its revenue from dialysis is above the 75^th percentile and its access center revenue is below the 25^th percentile, one could draw the conclusion that the access center performance is not meeting potential. The practice could then begin to dive into additional detail offered by the survey such as work RVUs, accounts receivable statistics, or dialysis population to identify areas of focus needing further investigation. Revenue composition that is more heavily weighted toward streams that are not directly related to the practice of medicine indicate a different business model altogether, and these factors must also be considered.

Although the state of health care reimbursement is changing, today, revenue is related primarily to volume. Volume drives cost. The benchmarking survey captures both of these categories in detail. Volume is captured in the elements of Relative Value Units, Services Performed, and Average Office Visits per FTE. Breaking the office visit category further into its components of new and established visits gives the practice a sense of its growth relative to other survey participants. Differences in new patient visits in the office can lead the practice to investigate office hours available and timeliness of referrals as they relate to patient outcomes and business potential.

Volume, revenue stream composition, and services offered will drive cost structure. The survey aims to assist nephrology practices by breaking down costs into the categories of Personnel, Occupancy, Medical Supplies and General and Administrative Expense to arrive at Total Operating Expense (see Figure 3). It also provides relevant data for certain high cost, revenue generating resources, such as new physician and advanced practitioner compensation. All of the cost data can be correlated to additional available survey data such as the number of locations, dialysis units, and hospitals serviced. Likewise, the survey offers insight into the ancillary services offered by practice. These services can create dramatic differences in cost structure and are relevant when making comparisons to survey statistics.

Performance in each of the above metrics ultimately drives the bottom line, which can be impacted positively or negatively by the practice’s performance and reporting of regulatory requirements, such as quality metrics and meaningful use participation. The survey provides insight into the number of practices successfully participating in these programs and are encompassed in the survey results.

In physician practice, the bottom line is directly correlated with physician compensation. Carefully setting goals and initiatives aimed at providing high quality, low cost care will lead to achieving a greater percentage of the practice’s potential and therefore a more favorable compensation number.

Survey segmentation and filtering

For each of the dashboards in the survey, national-level, aggregate data is available. The best data, however, is data that is relatable to your practice characteristics. Small practices, defined in the survey as practices with less than two physicians, perform differently than large practices (more than 10 physicians). Likewise, the Midwest is quite different from the East (see Figure 4). Practices that offer vascular access services have a different revenue and expense structure than practices that do not.

Benchmark practices are defined as those that have Net Income before Physician Expense per FTE Nephrologist greater than the median and Total Operating Expenses per Relative Value Unit less than the median. This year, 24 of the 134 participating practices qualified as those ascending into the Benchmark Practice category. These practices had Net Income before Physician Expenses per FTE greater than $399,339 and Total Operating Expenses per RVU less than $18.

Key findings from the 2015 report

Practices of all sizes have seen growth in the number of dialysis patients per FTE nephrologist—17.6% on average between 2013 and 2015.To take care of this growing population, the survey indicates there is an increasing reliance on advanced practitioners. In the survey, 44.5% of practices report using advanced practitioners to perform three of the four MCP visits, while only 21.1% report not using them at all.

Despite the increase in dialysis patients, total relative value units per FTE nephrologist has decreased on average. This metric is driven by the total volume of physician and advanced practitioner services provided, with practice revenue typically following suit.

Revenue per FTE nephrologist in the average practice has declined by 5.5%. Operating expense per FTE reported in the 2015 survey is also down across all practice sizes by an average of 9.9%. These declines, however, are associated with a less than 1% change in nephrologist compensation and benefits.

Interestingly, changes in compensation and benefits from 2013 to 2015 vary by practice size. Medium practices were hit hardest with a 5% decline while small practices experienced an increase of 7%. Large practice compensation remained flat with a less than a 1% increase.

Compensation and benefits per RVU by practice site

While an increase of 7% sounds promising for small practices, a comparison of work relative value units demonstrate that physicians in small practices are working significantly harder than their peers to generate a below average compensation and benefits package (see Figure 5). This is most likely due to a large practice’s ability to scale and offer additional services to patients and business partners that are not typically measured by RVUs. -by Jennifer Huneycutt, CPA, CMPE