Development of an activity-based costing model to evaluate physician office practice profitability.
OBJECTIVE
Newer treatment regimens for age-related macular degeneration have significantly affected traditional and non-traditional retinal services across all types of practice settings around the country as they seek to find a balance among delivering best patient care, keeping operating costs under control, and maintaining profitability.


METHODS
A systematic retrospective review of a multi-city, multi-physician retinal practice's accounting system to obtain data on revenues, expenses, and profit. Data reviewed were from practice management systems to obtain claims level data on clinical procedures across 7 primary activity centers: non-laser surgery, laser surgery, office visits, optical coherence tomography (OCT), non-OCT diagnostics, drugs and drug injections, and research.


METHODS
All treated patients from a retina practice from January 1, 2005, to December 31, 2007.


METHODS
Retrospective claims data review from a multi-physician retina practice detailing Current Procedural Terminology and Healthcare Common Procedure Coding System procedures performed and billed, submitted charges, allowed charges, and net collections. Analyses were performed by an outside firm and verified by a risk advisory firm.


METHODS
Identifying practice efficiencies/inefficiencies as they relate to patient care.


RESULTS
An elaborate analysis using activity-based costing (ABC) showed that increased office visits and OCT and non-OCT diagnostics had a significant negative impact on the practice's profit margins, whereas surgical procedures contributed to the majority of the practice's profit margins because of the lower operating costs associated with surgery.


CONCLUSIONS
The practice was able to accommodate the demand in patient volume, medical retina services, and medical imaging with the advent of anti-vascular endothelial growth factor therapy and realized a seismic shift in operating costs. The practice attempted to deliver state-of-the-art patient care in a cost-effective manner, yet underwent a significant decline in its financial health.
Dugel
Pravin U
PU
Managing Partner, Retinal Consultants of Arizona, Phoenix, AZ 85014, USA. pdugel@gmail.com
Tong
Kuo Bianchini
KB
D003362:Cost-Benefit Analysis; D003941:Diagnostic Techniques, Ophthalmological; D004470:Economics, Medical; D006123:Group Practice / Q000191:economics*; D017048:Health Care Costs; D006295:Health Resources / Q000191:economics; D006801:Humans; D007345:Insurance Claim Review; D009819:Office Visits / Q000191:economics; D013508:Ophthalmologic Surgical Procedures; D010824:Physicians' Offices / Q000191:economics*; D010818:Practice Patterns, Physicians' / Q000191:economics*; D012164:Retinal Diseases / Q000628:therapy*; D012189:Retrospective Studies