It’s no secret that the Healthcare Industry—and specifically private medical practices—have seen tremendous change in the past few years. Like other industries, expenses are skyrocketing, and good talent is increasingly hard to find (and keep). But unlike other industries, healthcare practices have very little say in their pricing and policies.
In this episode, our hosts are joined by Maddox Casey, CPA, and Sae Evans, CPA, leaders of the firm’s Physician Consulting Practice Group, to discuss how private medical practices must be willing to adapt and stay alert in order to stay profitable and competitive in this ever changing healthcare landscape.
In this episode, you’ll hear:
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Commentators (0:02): You’re listening to The Wrap, a Warren Averett podcast for business leaders designed to help you access vital business information and trends when you need it. So you can listen, learn, and then get on with your day. Now, let’s get down to business.
Paul Perry (0:16): I want to welcome all the listeners back to The Wrap podcast. Happy to have you with us today. My name is Paul Perry. It’s always a pleasure to have these discussions. Today, we’re going to be talking about the healthcare industry and some of the challenges, issues and opportunities for them coming up. With me today as my co-host is Cindy Warren. Cindy Warren is the Office Managing Member of our Pensacola office. I have had the pleasure of working with her for many years, and we’re happy to have you on the podcast with us today, Cindy.
Cindy Warren (0:48): Hey, Paul, thanks. I’m excited to be here today. I’m looking forward to it, and I also want to introduce to you all: Sae Evans and Maddox Casey. Sae and Maddox are in our Healthcare Group. They lead our Healthcare team, and we’re excited to have you guys on today as well.
Sae Evans (1:08): So, I wanted to mention that when we say Healthcare…what Maddox and I do, you know, in our world, we’re talking about physician practices primarily. We do have a group at Warren Averett that does hospitals and hospital systems, but Maddox and I work primarily with physician-owned practices.
Paul Perry (1:26): We’re happy to have you all with us today. Maddox, can you just give us a quick background of your work history and what brought you into this physician practice healthcare realm?
Maddox Casey (1:37): Sure, by history, you mean I work on days that end with ‘y’, Paul. I think that’s what you mean in this industry and with healthcare practices. I’ve been with the firm for almost 20 years. You know, we work with healthcare practices, only private practices, all day, every day. We help solve their problems, whether it be billing, recruiting, staffing, counseling. Whatever need they may need, we’re there for them. Again, our basis? Accounting. We do that as our blocking and tackling. But, you know, a lot of advisory and consulting services in this strange environment that we’re living in for medical practices right now.
Paul Perry (2:16): And I think that’s a good segue into the first question, really. There’s probably a lot of challenges and opportunities that physician practices are facing that maybe others aren’t. How are those challenges impacting them uniquely? I mean, we had a podcast earlier that talked to nonprofits and trying to raise money in a recession is an issue there. So what are those challenges and opportunities that y’all are seeing?
Maddox Casey (2:42): Sure, I think the biggest challenge is the inability to raise prices. You talk about hamburgers going up a couple bucks. You know, you can raise the price of a boat and other items as well. But in healthcare, we can’t raise the prices, because we’re subject to what the insurance payers are going to pay us. We’re captive. We look at the high inflation rates. We all know that. I’m sure that’s been discussed many, many times. Our costs are going up, but we can’t keep pace with what our prices are going to pay us. So that’s probably the biggest challenge and has been a challenge for a while in these increasing inflationary times.
Cindy Warren (3:22): I’m just wondering, are there challenges in recruiting in the physician practice world and in the healthcare world as well?
Maddox Casey (3:30): Yeah. So you know, we joke and say, “If we could do this business without people, we’d be a lot better off.” I think that’d be the case for many service-based businesses, but we are a labor-intensive business. We are run by, you know…we talked about the physician only spends a few minutes with the patient, maybe five to 10. But the rest of the encounters happen with all of the rest of the staff. You know, in the world of customer service and in the world of: “I want to be seen right now, right this second.” That hasn’t gotten any better. So, we’ve got to have good people. Those good people dictate good wages as they should. We have absolutely seen a ton of staffing issues in the practices. In fact, that’s probably one of the biggest issues outside of the pricing structure that we have.
Paul Perry (4:22): They probably go hand in hand, right? Because you just said you can’t raise your rates, but you’re raising your employees’ salaries. So the two of those don’t make it an easy day for the physician practices would be my guess. Sae, your thoughts there?
Sae Evans (4:38): Yeah, it’s ultra-competitive trying to find the best talent. Maddox and I just did a roundtable up in Huntsville this week. One thing I remember from that roundtable is that we had a coder that had recently changed jobs. Her job is to take the work that the physician does and turn it into a bill so the practice gets paid. She had previously been with another practice. I think she had been there for a number of years, but that practice wasn’t willing to pay her. For her to advance her career, there was some credentialing experience she wanted. There were new credentials that she wanted at the end of her name to be a certified coder. They weren’t willing to pay for that. The place that she ended up going to was willing to pay for that. She saw that and wanted to change jobs, primarily based on pay. But another big factor in that was: are they willing to advance your career? The pay is super important. But you’ve got to go beyond just the pay and take care of that employee and help them in their career and what they want to accomplish. That’s the environment we’re in. Pay is super important, and you’ve got to stay competitive with that. But you’ve also got to go beyond that and give them the opportunity to advance.
Maddox Casey (5:49): Yeah, that’s right, I’d say the other part of that is a lot of the positions in a medical practice are entry level positions, just post-college. Maybe some of them don’t even need a college degree. So, if you look around the country at those positions that are somewhere in the $12 to $16 hour range. That’s where we’re seeing very large increases. I’m sure that David Salters would say the same but we’re seeing double digit increases for these positions. It might go in line, as you know Buc-ee’s and Costco. All the things that are in our region are there. My ongoing joke is if you don’t see me on the next podcast, Paul? I’m the car wash manager at Buc-ee’s, because it’s paying $125,000, and I can scrub bumpers like nobody else.
Sae Evans (6:35): And Maddox has six cars of his own for all his kids. So you know, he could keep it busy himself.
Paul Perry (6:45): Well, what are the physicians doing to make sure they’re paying the right rate? Are they comparing themselves to others? What does that look like in the industry?
Sae Evans (6:54): Yeah, so as a healthcare group, we’ve done a salary survey. That has grown significantly over the past few years, because so many practices want this information. There are over 100 practices now that participate, and it’s where we take data on all the different positions that you can have in a medical practice, and we collect that data and do benchmarks and share that information with all the participants. So that lets you know the high, the low and the average for every position in a medical practice. That gives them a reference point of: are they reasonable with their pay? Are they competitive with their pay? Then, they can use that not only to give their staff raises and stay competitive, but also explain to the physicians that own the practice, “Hey, these are the rates we’re having to pay, because wages have gone up so much.” Without that information of what the other practices are doing, it can be a tough job to get physicians to agree to those raises. So that’s the biggest thing probably that can be used right now is a benchmark tool to help substantiate those raises and know you’re being reasonable.
Cindy Warren (8:02): Such a great tool. You know, every successful business has a business strategy, a growth strategy or a plan. So I wonder, you know, when you can’t raise your rates and you can’t increase your prices…how do you strategize? What is the strategy? How are they working around that?
Maddox Casey (8:26): First, Cindy, they’ve got to see the ability to do a strategic plan or even embed themselves in strategy. So unlike many businesses, these physicians are in the clinic all day, every day. I mean, that’s the way to make money, right? See more patients, more money. There’s no magic to that. That does take them away from running the business effectively, unless they have a great team or they’re going to spend extra time outside of the clinic to run the practice. So first of all, I think they’ve got to put a strategy into place. That’s number one. We have a lot of practices that just don’t do that. Once the strategy does go in place, it’s getting down to the nitty gritty of: how do I make this thing more profitable? When we talk about profit, there’s two solutions. I already mentioned one. See more patients and build the top line revenue. A lot of times, that’s not doable. There’s only so much time in the day. Then, you get into how do I begin to carve out some of my expenses? Where am I overpaying? What’s not efficient? That could be all types of items down on their financial statement that they need to address and look at, such as credit card fees, bank fees and supply costs. Am I working with the right vendors? I mean, you can go all the way down from A to Z and see where you need to start carving some of these out in order to maintain the profitability at this stage of the game. We’d love for you to increase, but the environment we’re in with increasing cost and stagnant reimbursements? Just trying to maintain profitability is successful at this stage.
Sae Evans (10:00): You can only cut expenses so far. That’s definitely something you want to do. But at some point, it becomes counterproductive. Typically, our most profitable practices aren’t the ones that have the lowest overhead. They just know how to spend the dollars in the right place to be the most profitable. You can’t change your reimbursement for Medicare. That’s what you’re able to be reimbursed, but you can participate in programs like MIPS and ensure that you’re not taking cuts. So that’s the first thing: you can’t change your reimbursement, but just make sure you’re being paid the max from Medicare and the other commercial payers. Okay. The other thing is—and this is where we’re able to a lot of times help a practice identify holes in what they do—the physicians can only see so many patients in a day. But what are the all the things that those patients need, right? If you go to an orthopedist, you may see the doctor. But then, you may have an x-ray or an MRI, or you may have to go to PT. There’s a lot of things that happen that the physician doesn’t do directly. Helping practices understand: these are your gaps in what you’re doing for patients. Other groups are doing this, you’re not doing this, this could add “x” to your bottom line, and help you coordinate care for that patient throughout their full treatment. Just helping expose gaps in capturing the maximum payment but also filling in those holes in what you can do that your practice can take care of that maybe they’re not doing right now.
Cindy Warren (11:27): I imagine it’s hard to find time to work on the business when you’re so busy working in the business and trying to generate that revenue. It’s just like a cycle.
Sae Evans (11:38): That’s exactly right.
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Paul Perry (11:53): We talked a little bit about staffing as another unique challenge and how that impacts you. I’m sure technology is very much the same. We’re not going to go down every line item on that income statement, but I’ve got to imagine that technology in today’s world probably is a big expense that if they’re not doing it right or well enough, it’s going to hurt them. But if they do too much, it’s going to hurt them on the financial side. I’m sure that’s a huge challenge that they have to try to tackle. Is that right?
Maddox Casey (12:22): Yeah, that’s right. Yeah. You know, many years ago, we moved most people from paper charts to an EMR (electronic medical record) system. Now all of that’s built around that EMR, and all the patient data is stored in servers and systems. Spending a lot of time and money there. Obviously, tons of computers. Technology has got to work seamlessly as well. Then to that point, Paul, you know, we have very valuable data that we’re storing. If you’re a patient—date of birth, social security number, height, weight—everything that is HIPAA protected. We’ve got to spend extra money to make sure that we are protecting patient data, which does become a cost at that point.
Sae Evans (13:07): Converting from paper charts to electronic? That helped address an efficiency issue, but then you have additional exposure. Paul, you know all about this, because I bug you all the time asking you to help this client or if you can talk to this client with me because they just had some cyber issue or a cyber event. Just two days ago, I was talking to you about a client that had their banking information compromised. Those are the issues now that they’re having to deal with. That’s something that in most practices, they don’t have a technology officer, or maybe their IT group that they utilize is relatively small and may not be aware of all the things that a healthcare practice needs to address. Those are the issues that we’re trying to bring up with our practices that we work with to say, “Hey, this is what you need to think about.” How much cyber insurance do you have right now? $50,000? That’s not going to be enough to take care of the potentially multimillion dollar event that could happen to you.
Paul Perry (14:08): Just like all industries, but specifically we’ve already been talking about the issues with you can’t raise rates, and so you can’t get extra money. Most people and most companies, they spend what they can spend. It’s sometimes not enough. So they usually end up spending more once an event has occurred. Like we’ve seen across the board, with the ones that you’ve called us about: it’s that you spend the money now or you spend the money later. You’d much rather spend it now to protect it, then give it to somebody just because you didn’t protect it. I’m sure there’s a ton of issues, and they have to look at that and weigh the pros and cons of this expense versus that expense. So definitely an issue there.
Cindy Warren (14:46): When we talk about staffing, I know we’ve talked about some of the challenges there with recruiting and bringing in the right people, but are there things that the practices are doing? You know, remote work isn’t really possible when you need to be treating a patient. But are there other things in the staffing realm that they are trying to do to increase profitability or just to see more people?
Maddox Casey (15:15): Yeah, so you hit on the remote piece. I think it’s important to mention, you know, it’s tough to do remote work. My ongoing joke is: if we can remotely deliver a baby, then somebody’s going to be very profitable, right? That’s yet to happen. Practices have struggled with any level of remote. We may pull off our billing office. We may pull some triage people off to work remotely. But other than that, most of the staff is still there. In this environment, it seems like everybody wants to work remotely or have some level of flexibility. That has certainly added to the problems of the staffing issues.
Paul Perry (15:54): What does the immediate future look like for physician practices? How can they be successful in this environment? Some of the things you may have already talked about. Anything else that they need to be thinking about as they start working on their business or try to get back to working on their business?
Sae Evans (16:13): Yeah, I’ll say what is needed is to have the ability to adapt right now. What I mean by that is there’s changes in technology that are happening, have happened and will continue to happen. We’ve got to be able to utilize those to keep our practice competitive and efficient. You also need to be able to offer a place for a new physician to come and earn compensation that’s comparable or better than other places. If you can’t offer that, you’re going to have a really tough time having physicians want to come work at your practice and be a transition plan. So that is the very first thing. Then, I think, managing secession. We have physicians that are getting towards the end of their career. You have new physicians that may come in and take over that role. We also have the option of private equity that is becoming more and more popular in physician practice. It’s always been popular or has been for a long time in dental. But even in cardiology, orthopedics or oncology, we’re beginning to see private equity firms heavily move into that space, and they’ve been successful. It’s been popular because it often offers a way to monetize a practice for a senior physician that may otherwise not receive much of anything other than trailing AR after they retire. So managing those challenges and those opportunities is what I see as a big task and a critical thing for a practice that wants to remain independent going forward.
Maddox Casey (17:43): I would say, you know, as we continue to adapt, part of that is just paying attention. I know, that seems really easy to do. But there was a time where we would just show up, see patients and everything would run smoothly. That’s not really the environment that we’re in right now. First of all, you’re dealing with groups that have sophistication, consolidation in the market has been around for a while, and it’s continuing to show up. So our competition is increasingly increasing their resources. If we’re going to continue to compete against those groups, we’ve got to pay attention. We’ve got to make strategic moves in order to stay successful. If it’s not you and if it’s not the provider, you can find the right people, whether that’s a manager, an advisor or someone that’s giving you the ear to the ground of what’s happening in the environment, so that you can pivot. It happens so fast. I think we all agree that the speed of decision-making is increasing and happening faster. I mean, whether it’s AI, technology, people, staffing, insurance, we’ve got to make quicker, faster and more efficient decisions, whether you’re doing it yourself or whether you’re making sure you’ve got the right people in place to make them.
Paul Perry (18:59): So, gentleman, here on The Wrap, we like to wrap it up in 60 seconds or less. You’ve given a lot of good advice, a lot of good takeaways. What’s that one thing you want our listeners to remember, above all else, that we’ve talked about related to physician practices in the healthcare industry?
Sae Evans (19:14): Yeah, I think my takeaway would be to pay attention and adapt. I probably stole this from Maddox and from what he mentioned earlier but paying attention to what’s going on in your practice. You don’t need to be looking at your information once a year, it needs to be monthly or quarterly. That’s what we do with our clients. So pay attention and then adapt to the things that are happening with other physician practices, so you can stay competitive and grow your practice.
Maddox Casey (19:44): Yeah, I would say the things that we need to do—we use the word adapt, but I really say that’s nothing less than being willing to change. Adaptation is the ability to, you know, adapting is adapting to the environment around us. I would say that we actually need to be willing to change as the environment changes around us. That may not mean that we’re going to do what everybody else does. Each practice is very different. Medicine and healthcare is still an awesome industry. We are very strong, and we will continue to be strong. The needs for our services will be around, hopefully forever. It’s no secret that we’re having baby boomers retire by the droves at 10,000 per day. The need for healthcare will continue to be there. How we, as practices, adapt and change to those are going to be important to the viability and how well we thrive going forward.
Cindy Warren (20:39): Gentlemen, you clearly are experts in this industry, and we appreciate you being here with us today. It’s been very enlightening. I would say anyone who is fortunate enough to have you as their advisors is in a great position. So thank you for being with us today.
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