A neurosurgical practice is more than the practice of neurosurgery. The craft of surgery is only the beginning. Whether managing a large, single-specialty practice or employed by a hospital, a neurosurgeon cannot afford to ignore the complexities of revenue generation, expense payment and economic forces that either threaten or strengthen the bottom line.
The daily routine of neurosurgery—patient visits, surgery and other billable services-generates the core revenue engine that drives the practice. But the basic practice of neurosurgery alone is not enough for a practice to thrive in the changing environment of healthcare. A practice needs a vision—and a visionary: someone who sees the big picture, and looks beyond the practice of today to the possibilities of tomorrow; who has the discipline and common sense to run a practice like a business but constantly pursues a clear vision of the future; who sees where the puck is, but skates where it’s going; who can communicate not only today’s plan, but tomorrow’s promise; who snares success by risking change. A practice needs a CEO.
Driving an Economic Machine
Whether two neurosurgeons or 20, a neurosurgical practice is a multimillion-dollar
business, and more than that, an economic machine that generates exponentially
more millions of dollars in revenue for the institutions and facilities with
which it is affiliated. To manage that kind of revenue, the practice must plan,
invest, manage, and perform like any successful corporation. It must understand
how finance, operational efficiency, research and development, marketing, and
strategic planning are as integral to success in neurosurgical practice as
are diagnostic accuracy and surgical precision.
For a neurosurgical practice to function as a successful business, there is a need to look beyond day-to-day operations: beyond the basics of correct coding, efficient scheduling, prompt billing and collection, and even the technical aspects of clinical neurosurgery. Although they come in many designs and models, neurosurgical practices, like cars, operate in similar ways; the roads, fuel, and destinations are similar, regardless of the design of the vehicle. And curiously enough, the same forces threaten and the same strategies protect practices across the entire spectrum.
Cornering Competitive Advantage
Neurosurgery, and indeed every medical practice, is in transition to a more
consumer-driven market. Patients are consumers in this market-oriented world,
and they increasingly shop for their preferences and look for information,
convenience, top performance and value. The practice that embodies these qualities
will pull away from the pack to wear the wreath in the winner’s circle.
Practices, like businesses, need a competitive advantage. General neurosurgical practices with an undifferentiated service, no matter how competent, personable, or historically successful, offer no distinctive advantage in a competitive market. Each neurosurgeon must have a subspecialty focus which makes that individual unique and the practice more distinguished and valuable than other competitors in the region. Group practices should aggregate distinctive and complementary neurosurgical subspecialties that offer a broad range of highly specialized services unmatched for expertise and unexcelled in value by any competitor.
Developing Alternative Revenue Sources
The traditional model of reimbursement for professional services is decreasing,
either directly through fee cuts or more subtly by failure to keep pace with
cost-of-living or practice expense increases. There are ways to deal with shrinking
reimbursement driven by rising costs and falling prices. One way is to see
more patients, do more cases and charge more fees—turn up the speed on the
treadmill. And for neurosurgeons working at less than capacity and ready to
work longer hours, that is an easy option. But when a practice or a neurosurgeon
is already working at capacity, when there are no hours to spare, a fresh idea
is needed. In summary, to compensate for the decrease in professional service
revenue, practices can employ two strategies: either increase the volume and
improve the efficiency of traditional neurosurgical services, or expand the
practice into new ventures and incorporate nontraditional revenue sources.
Fees for surgical services are limited by federal and private fee schedules. Furthermore, no matter how complex the surgery or efficient the surgical practice, the potential for revenue is limited by the number of hours the surgeon can work. Alternative revenue sources expand that potential considerably, without requiring additional surgeon work time.
Two alternative revenue sources are ancillary services and a share of facility payments. Both are a byproduct of neurosurgical service, but they traditionally have been separate from the neurosurgeon’s practice. Integrated services, joint ventures, and hospital contracting are the portals to these parallel revenue streams, which are created by neurosurgical decisions and actions but which flow away from the practice in the customary independent, disconnected, nonintegrated medical market.
Ancillary services available to a practice span the range of services a neurosurgeon utilizes in treating a patient. Imaging services such as MRI and CT, electrodiagnostic and monitoring services, physical and occupational therapy, pain management and neuropsychological services, and a half dozen others can form the core of an integrated care package that benefits both the patient by convenience and higher levels of expertise, and the practice by the addition of revenue sources.
Ambulatory surgery center revenue is perhaps the most accessible of facility revenue streams, as minimally invasive surgery transforms more and more neurosurgical operations into outpatient procedures. Investment in independently owned ASCs offers the greatest return but also the greatest financial risk. Joint venture ASC ownership is an alternative strategy that lessens the financial risk, whether undertaken with a hospital or with other surgeons, who would be viewed as competitors from a strictly professional service perspective. State certificate-of-need regulations often determine whether independent facility investment is possible. Practices that included facility profits in their alternative practice revenues have found that, with time, they could generate as much as 40 percent to 60 percent of take-home income from sources other than personal professional services. Alternative income can fully buffer the decline in professional service revenue.
Mastering the Art of Negotiation
Today, perhaps more than ever, neurosurgeons must be practiced in the art
of negotiation. Familiar to neurosurgeons is the process of gathering and analyzing
data before making a surgical decision. Foreign to many neurosurgeons is the
art of negotiation and compromise, searching for deals that benefit the interests
of both parties and reaching agreement by persuasion, rather than threat and
demand. One of the most challenging responsibilities for the practice leader
is negotiating with hospitals: breaking down the traditional barriers of separate
power and influence, adding value for both by increasing service volume and
type, and sharing in the added revenue.
Mastering the art of negotiation is particularly relevant because neurosurgeon-hospital relationships are changing. The traditional relationship between the hospital and medical staff members is more and more often supplemented by additional financial contractual arrangements such as compensation for emergency and trauma coverage, compensated administrative directorships, and joint venture ASCs or even joint venture specialty hospital ownership. Hospital employment is becoming increasingly more frequent, allowing professional service collections to be supplemented by hospital revenue while eliminating legal risks of private inurement or Medicare inducement to refer. The new hospital-employed neurosurgeon must balance guaranteed income granted as loans against the potential payback when revenue fails to meet targets.
If this all sounds foreign and complex, it is. Running a practice is not part of medical training, and little in the culture and practice of neurosurgery prepares one for the process of initiating a business venture or negotiating a joint ownership or administrative services contract. Some neurosurgeons are uninterested in this area of neurosurgery, others are ill-equipped, and still others simply are unsuited for business development and management. Like any corporation, each specializes, and one must lead. That one is the CEO.
James R. Bean, MD, is president and managing director of Neurosurgical Associates PSC, a private neurosurgical group practice in Lexington, Ky. He is AANS 2007-2008 president-elect.
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Neurosurgeons looking for advanced business management direction need advice from colleagues who have climbed similar peaks successfully. For that reason the AANS developed the Neurosurgeon as CEO course. Following a successful debut in 2004, the second course was conducted in Chicago on June 9. The faculty of 12 neurosurgeons represented some of the most accomplished practices in America as well as the full neurosurgical practice spectra, encompassing small and large, academic and private, subspecialized and generalized practices, and both hospital and private employment. With the course filled to capacity, the faculty members, using their own unique and varied experiences, unfolded a tapestry of real life stories, illustrating the nuts and bolts of how to build a practice and succeed in the changing technical, political, financial, and legal milieu of medicine. The goals for the course were to:
The next Neurosurgeon as CEO course is scheduled for July 2008. Details will be published at www.aans.org/educationwhen they become available. |