In the not-too-distant, but receding past, the establishment of a neurosurgical practice in virtually any urban area practically guaranteed a stable and substantial practice income. Competition was limited, payment was generous and growing, health plans were passive payment conduits, fees could be raised with impunity, and most practice income was leveraged off global surgical payments.
In the 1990s, however, the unthinkable occurred: neurosurgeons saw incomes fall, some alarmingly, and managed care struck with remorseless “take it or leave it” indifference. Areas of high managed care concentration saw neurosurgeons pack up and leave. Some decided to retire to escape the hassle of practice, liability threats and diminishing returns. Newly trained neurosurgeons faced the disturbing prospect of a financially insecure future.
No practice anywhere, whether private or academic, urban or rural, general or subspecialty, solo or group, can escape the financial vise of falling reimbursements and rising practice costs. Medicare rates, rather than being lower-end outlier fees, have become the benchmark toward which commercial payers aim. Business expenses, for scheduling battles, billing resubmissions, pre-authorizations, paper processing, and case management communications, among others, have grown exponentially.
Like most doctors, neurosurgeons are working harder for less. And, most find they are now interested in their HMO/PPO contracts, billing and business expenses, where they didn’t want to be bothered before.
Cost Reduction Imperative
There is often a feeling of resignation and fatality that follows the resentment, fear or anger of seeing income declines. But for those who continue to practice, and cannot flee to friendlier economic climates, a change in the way a practice is managed is often the only alternative. Fee reductions are difficult to control; they are externally imposed. But, the other half of the revenue/expense equation is not. Expenses of practice are internal and within the control of the practice manager. There is more reason than ever before to find ways to reduce costs of neurosurgical practice.
Recognizing the importance of expense levels to the success of neurosurgical practice, Edward R. Laws, Jr., MD, 1997-98 AANS President, appointed a Cost Containment Task Force to examine ways of reducing costs in neurosurgical practice. The Task Force, with John Kusske, MD, as Chair, met on several occasions to examine cost containment strategies from three perspectives: 1) Reducing office expenses by making processes more efficient, 2) developing cost-effective clinical pathways to make treatment effective and package pricing profitable, and 3) initiating new clinical and business ventures to expand competitive market share.
Most of the discussion focused on new Medicare resource-based practice expense values and the collection of practice data using Activity-Based Cost Analysis or using an American Medical Association Socioeconomic Monitoring Survey model to challenge low Health Care Financing Administration Medicare Fee Schedule values.
Theoretically, the parallel benefit of this collective practice expense database is a benchmark against which participating practices can compare themselves, looking for ways to cut costs. The data includes the range and average costs for standard processes in the pool of surveyed practices, such as billing and collections, record keeping, management, and so forth. It also would include the minimum costs that some practices attain, serving as an achievable target toward which to aspire.
The problem with the idea is how to translate comparative cost data into management planning. For instance, Practice A may spend $30,000/physician/year on medical records, while Practice B spends only $15,000. Clearly Practice B is better off. Or is it? The unanswered questions are: 1) What does Practice B do differently that makes it more efficient, and 2) are all the cossts accurately accounted?
Responding to the Challenge
The AANS is considering several ideas for programs that will help our members respond to these challenges. Two strategies come to mind. First, is to offer, or sponsor, a unique quantitative practice analysis that itemizes internal office processes and assigns an accurate cost to each. When costs exceed expectations, or benchmark goals, the processes can be analyzed in detail, the reasons for cost excess explained, and the process modified. One such method is Activity-Based Cost Management, which uses a computer program to diagram office processes, assign costs, and model alternative designs.
The second strategy is to create comprehensive practice management educational programs for neurosurgeons. This includes basic business theory and practical skills. It encompasses accounting and financial statements, tax issues, integrated operational and financial analysis, human resource management, marketing, contracting, and strategic business planning.
The future success of neurosurgical practice depends upon efficient management and detailed business acumen. These two strategies, if implemented, should help provide the missing link in neurosurgical training and practice. Further, it should do for neurosurgical business management what plenary sessions and practical courses do for professional practice.
James R. Bean, MD, is a neurosurgeon in private practice in Lexington, Kentucky. Dr. Bean is a 10-year AANS member, Associate Editor of the Bulletin, and Chairman of the Council of State Neurosurgical Societies (CSNS).