Better Performing Practices More Efficient with IT Spending According to MGMA

Posted on October 23, 2017 I Written By

Colin Hung is the co-founder of the #hcldr (healthcare leadership) tweetchat one of the most popular and active healthcare social media communities on Twitter. Colin speaks, tweets and blogs regularly about healthcare, technology, marketing and leadership. He is currently an independent marketing consultant working with leading healthIT companies. Colin is a member of #TheWalkingGallery. His Twitter handle is: @Colin_Hung.

The Medical Group Management Association (MGMA) recently released its 2017 MGMA DataDive Better Performers data, a report that provided a glimpse into the health of US medical practices across four key performance categories:

  1. Operations
  2. Profitability
  3. Productivity
  4. Value

Of the 2,941 physician practices that provided their performance data for the report, only 32 were found to be “better-performing” than their peers in three of the four categories. No practice was considered better-performing on all four categories.

For a deeper dive into the report, check out this post from Anne Zieger.

The report’s most surprising results were in the Operations – Information Technology category:

  • Physician-owned practices spent more than 2x on IT Per FTE Physician than their hospital-owned practices
  • Better performing physician-owned practices spent LESS on IT than their peers
  • Better performing hospital-owned practices spent MORE on IT than their peers

At first glance these results run counter to what many would expect. How could independent physician practices be spending more than 2x hospital-owned practices on IT – especially when you consider that a hospital has many more IT systems and applications.

To help make sense of the results, we sat down with David N Gans, MSHA, FACMPE – Senior Fellow, Industry Affairs at MGMA.

Why are hospital-owned practices spending less overall on HealthIT?

Gans: The raw numbers that we received from the practices was a bit deceiving. What we found was that not all IT costs borne by the hospital are filtering down to the practices owned by that hospital. Server costs, IT department salaries, support costs and network infrastructure costs, for example, did not appear as line item costs for the practices. Only equipment and the EHR licenses used by the practice’s staff were considered IT costs. Independently owned practices, however, bear all the costs associated with IT including licensing, servers, support and ongoing maintenance. Thus, it only appears that hospital owned practices are spending less than their counterparts. It is a quirk of the way costs are allocated in a hospital setting.

Why are better performing physician-owned practices spending less on HealthIT than their peers?

Gans: The scoring system we used for this report rewards efficiency. The more efficient you are in any category, the higher you will score. Using that lens, practices that were more judicious with their IT spending achieved higher efficiency scores. What you are seeing in the report results is an associative effect – the more effective you are with IT, the more efficient your practice is considered.

Gans was quick to point out that the survey did not measure the impact of or the outcomes achieved from the implementation of HealthIT. There was also not linkage between overall IT spend and practice profitability.

Why is it important that practices strive to be efficient. Isn’t that an antiquated notion?

Gans: It’s actually more important than ever for practices to focus on being efficient. If you go back to 2001 and look at three key economic indices it becomes painfully obvious why efficiency is the key to practice survival. Just look at this chart we have compiled:

The red line is the % increase in practice operating costs per FTE Physician relative to what it was in 2001. By 2020, costs will be 116.7% of what they were in 2001. The blue line is the consumer price index. The green line is the rise in Medicare reimbursements. There is no way a physician practice can stay in the black without taking a serious look at their operational efficiency. If you do nothing, costs will eat up your practice.

Gans is hopeful that new technologies and changes to the reimbursement mechanisms will help reduce the performance gap for practices. According to Gans, Artificial Intelligence, like IBM’s Watson, could make practices exponentially more efficient. It can crunch numbers much faster than a human ever could, which would allow physicians to offer more personalized care or care via less expensive channels (ie: telehealth).

“One thing is clear,” says Todd Evenson, Chief Operating Officer at MGMA. “As we change from volume to value, the financial metrics we track in this report will have to change. We will need to de-emphasize the production-style metrics we have used in the past to more value based ones. We will also need to find a way to measure the quality of care provided by practices. This will make this report even more important and relevant in the years to come.”