Farm out Practice Work? It's Making More Sense

By Marcille, John A. | Medical Economics, August 8, 1994 | Go to article overview

Farm out Practice Work? It's Making More Sense


Marcille, John A., Medical Economics


Not long ago, practice management consultants encouraged doctors to keep as many business and clinical functions as possible in-house. Now that's changing.

"I think we're seeing more 'outsourcing' today than we've ever seen," says Paul L. King of RCFA Physician Managers in Knoxville, Tenn. "It's most popular with small practices. The large groups have streamlined many functions."

On Long Island, Gregory H. Nizich of R.L. Hirsh Associates in Bay Shore, N.Y., says, "I can't say we've seen a huge wave, but it is occurring more and more."

And in Cincinnati, David C. Scroggins of Clayton L. Scroggins Associates notes, "It may be illogical not to use a payroll service, not to use an accounting firm, not to use a consultant to come in and do a personal review of each employee."

There's no doubt that outsourcing can save money for certain functions in certain practices. But for many practices, it can also permit wiser use of staff time.

"Groups of five to 10 doctors often want to hire an administrator with an M.B.A. and bring all the business functions in-house," Scroggins says. "There's some merit to that, because you'll eliminate the expense of hiring outside services. But two or three years down the line, this person can become so ingrained in the practice that the physicians start to dump stuff on him that's below his capability--getting their cars fixed, for example.

"Why should the administrator spend three hours every two weeks to do payroll when the doctors could spend $50 to get the payroll processed out of house? The administrator could use those three hours to look over delinquency reports on insurance carriers, get on the phone with them, and make $1,000--or work on negotiating a better capitation contract.

"I was at a two-doctor practice, very busy, very profitable, no excess staff," Scroggins continues. "The office manager has a business degree, and she handles the retirement plan, does all the books, and acts as the marketing coordinator and computer network manager. And that's a mistake. She's too valuable to have to try to keep current with pension details. These doctors think they're saving money, but they're really setting themselves up for an accident. In three or four years, as tax laws change, she might make a miscalculation."

But outsourcing involves tradeoffs. Even if you can save time or money or gain expertise, you'll lose a degree of control over the functions you farm out. If patient records are involved, their confidentiality may be compromised. You could be held liable for the outside company's mistakes. And if you refer patients elsewhere for testing, you may not be able to bill for it.

Here are the issues you need to think about--in addition to cost--for the most commonly outsourced medical-office functions.

RETIREMENT-PLAN ADMINISTRATION

"I'm quite sure the average doctor's office hasn't a clue about the complexities of pension administration," says Kenneth E. Bowden of Berkshire Professional Management in Pittsfield, Mass. "In addition, the government won't let it alone. As soon as we get a good handle on what we're supposed to be doing, Congress changes the law all over again. It's a full-time job just to keep up to date with what's transpiring in the field."

But like any outsourcing decision, it matters who does the work. "Our attorney used to handle our pension plan," recalls FP Charles Davant III of Blowing Rock, N.C. "But every time the law changed, it cost us several thousand dollars to amend our plan. Actually, our attorney referred pension-plan revisions to another attorney, so we got billed by both of them! Merrill Lynch is handling that for us now, and just keeps the plan current as part of the administrative fees."

There's another advantage to outsourcing administration of your pension plan and other employee benefits. "If a doctor provides a benefit, that should be a plus in his relationship with his employees," notes Roger L. …

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