By REED TINSLEY, CPA, CVA, CFP, CHBC
December is a great time of year – not only because it’s the holiday season for most but because it’s a good time to evaluate and assess your medical practice. So what went right this year and how can you capitalize on those strengths moving in to next year? What went wrong and what needs to be done to fix your practice problems? Remember there is only one financial benchmarking statistic that matters – did the physician owner(s) make more money this year than last year? Ask yourself if not, why not? Why didn’t practice net income grow? If you do decide to evaluate your medical practice, here are a few areas I suggest you take a look at. Finances Take a look at charges, collections, and work RVUs for both the practice and by individual physician. Is the practice growing or are the doctors working harder to maintain the same income level?
Financial Percentages and Ratios Review the practice’s gross collection percentage, net collection percentage, and days in A/R. Assess whether all these statistics are reasonable for the practice’s particular medical specialty and compare to prior year performance.
Accounts Receivable Conduct an in-depth analysis of a current aging of the accounts receivable. Pay particular attention to A/R over 90 days old. Also take a look at denied charges that were written off – could any of these write offs been appealed and ultimately paid?
Financial Statements Taking your financial statements, look at actual revenue and expenses compared to the prior year. Why is a particular overhead category higher this year than last year? Are collected revenues lower or stagnant this year versus last year? Why?
Coding Analyze the coding patterns for evaluation and management services and well as the coding for all other services. Practices can lose significant amounts of revenue if services are not coded correctly. Also, are your billing and coding all services you are entitled to bill?
Managed Care Review all managed-care plans to evaluate their reimbursement rates and profitability. If the plan’s rates or profitability are not acceptable, assess the potential for renegotiation.
Front Desk Collections Make a critique of front-desk collections. Calculate the percentage of patients who actually made some form of payment at the time of service.
Billing and Collection Take a hard look at your billing and collection policies and processes. Flowchart these processes to identify and eliminate the inefficiencies.
Employees Create a formal organizational chart – are there too many employees? Too few employees? The goal is to make sure workforce is at the optium level to allow your practice to be successful. Also look at payroll costs, including overtime costs and employee benefit costs. Also, did you have excessive turnover and what was the cause of it?
Marketing Review your marketing activities and their successes or failures. Create a new marketing plan for the upcoming year.
Patients If I called a sample of your patients and asked them what they thought about your practice, what would they say? Postive things? A lot of negative comments? Physicians sometimes ignore the importance of patient satisfaction.