Fewer than half of working physicians remain in private practice, with most now choosing employment for various reasons, including the perception that large health systems have more leverage in negotiating with payers.
To support practices of all sizes, including those that are physician-owned, the AMA has developed a new resource (PDF) that offers pragmatic advice on navigating the complexities of revenue-cycle management (RCM) while delivering care and managing a business.
Physician private practice includes complex financial responsibilities. Unfortunately, medical schools rarely address the fact that running a physician practice means running a business too.
“The AMA recognized this gap,” said Taylor Johnson, manager of physician practice sustainability at the AMA. “Medicare reimbursement is down and constantly changing payer rules present unprecedented financial pressures. Rural and small practices are particularly vulnerable.”
Lower revenue threatens care services, staff retention and crucial investment in patient care.
“Access itself is at risk, and closures in underserved areas force people to travel farther and longer” to get physician care, Johnson said. “Increasing revenue can only help preserve access overall.”
Tracking the right numbers
The report, which is an additional supportive resource of the AMA Business of Medicine education program, helps physicians identify information applicable to their needs with icons that indicate guidance relevant to the needs of these practice settings:
- Solo or small-group physician practices (fewer than 10 doctors).
- Medium or large group physician practices (11–99 doctors).
- Small health systems (100–200 doctors).
- Medium or large health systems (200-plus doctors).
The new AMA resource highlights the importance of documenting processes to avoid disruption and the role that physicians themselves should play in revenue-cycle management.
“Tighter margins and lower patient volumes make every claim matter,” said Johnson. “Practices can't afford to leave money on the table through coding errors or missed charges.”
Johnson recommends tracking three measurable goals that have an outsized impact on a physician private practice’s cash flow.
“The target for first-pass resolution rates and coding accuracy should be 95%, and days in accounts receivable should be under 30,” she said. These numbers provide a clear framework for improving revenue performance without increasing patient volume, and tracking relative value units (RVUs) for every physician annually can help identify variations in billing patterns that warrant attention.
It takes astute clinical judgment as well as a commitment to collaboration and solving challenging problems to succeed in independent settings that are often fluid, and the AMA offers the resources and support physicians need to both start and sustain success in private practice.
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Avoiding easy-to-make missteps
Two common pitfalls can also stall revenue-cycle management for small practices. Many rely on one or two people for billing, coding and insurance follow up. When one of them is out for even a short time, RCM can come to a halt. Also, front desk, clinical and billing usually function separately.
“Blind spots occur when the billing teams don't understand how their work impacts the overall revenue cycle,” Johnson said. Those include not verifying insurance at every visit, taking too long to close charts, missing holiday or after-hours coding opportunities, and failing to appeal denied claims.
The AMA report identifies unique advantages that small practices have over large systems. “Strong patient relationships and cost transparency are powerful differentiators,” Johnson said. “Explaining confusing insurance terms, processes and the patient’s financial responsibilities also improves collections and strengthens trust.”
Immediate actions that small practices can take include tracking first pass resolution and denial rates and time in accounts receivable; verifying insurance before every appointment and collecting copays immediately; and facilitating communication between billing and clinical teams.
Johnson recommends starting with first pass resolution and denials. “Claims submitted cleanly and correctly in the first place get reimbursement right away,” she said. “Denials get put into a loop that adds days and weeks.” Clean claims also relieve staff of the administrative burden of repeated submissions and appeals.
Cost confusion can delay payment, jeopardize trust and increase patient anxiety. “Over half of Gen Z and millennial patients report being more stressed about medical bills than care quality,” Johnson said. “Directly addressing healthcare costs and payment builds trust and improves collections.”
Building resilience with patients and technology
Patients with limited financial literacy often provide incomplete information or misunderstand their own financial responsibilities, which can delay payment. Physician private practices can reduce billing disputes, strengthen relationships and help payment processes run more smoothly by giving patients easy-to-understand resources.
Fortunately, providing information does not have to be a time-consuming endeavor for busy physicians.
“The AMA’s own ‘Health Plan 101’ [PDF] lets physicians help patients understand insurance plans, relieving doctors and staff of some of that burden,” Johnson noted.
There are other ways that physician private practices can optimize RCM. Using simple automations that many practices already have and taking stock of existing tools before investing in new ones can improve efficiency without adding financial strain. Low cost or even no-cost automations such as scrubbing for eligibility verification can reduce denials, accelerate payment and free up staff time for more productive and higher-value tasks.
For physicians in private practice, mastering revenue-cycle management isn’t optional. By tracking the right metrics, documenting processes, engaging patients on costs and making use of existing automation, private practices can protect their financial stability and ensure they remain a trusted, accessible source of care in their communities.
Find out more about the AMA Private Practice Physicians Section, which seeks to preserve the freedom, independence and integrity of private practice.
