Make The Most Of Your Practice Financial Performance
By Judy Capko
Do you know how well you are performing financially? How do you compare to other practices in your specialty? How is your financial performance compared to the same time last year? What red flags have emerged and been corrected?
If you do not know, you will have problems setting your course, knowing where you are headed and getting to your destination. Monitoring and analyzing financial performance is the first step to getting you on course.
Begin by examining these four areas of your practice:
• Collection ratio
• Total accounts receivable
• Procedure production and revenue
• Income and expenses
Collection ratio
Analyze your collection ratio for the past three months. If it falls below 90 percent (after contractual adjustments) view this as an indicator that you do not have control of your billing department. Also, watch those adjustments to see if they are higher than normal. This might skew your accounts receivable performance.
The key to having an outstanding collections ratio is to hold your staff accountable, and educate them about the importance of collecting accurate patient data and not allowing accounts to age beyond 120 days.
Total accounts receivable
This should be no more than two to three times your monthly charges. For example, if your monthly charges amount to $50,000, your total accounts receivable should be less than $150,000. Review sudden or gradual changes in your accounts receivable and hold staff accountable to dig deeper for an explanation.
If you run a report of your accounts receivable categorized by payer class you will be able to identify which payers are not paying in a timely -- the poor performers. A poor performer puts the practice at risk for non-payment if the carrier's financial viability is questionable. By monitoring aged receivables, you can determine if the billing staff is on top of collections or if they need a nudge. Procedure production and revenue
Examine charges, receipts and adjustments year-to-date. You will quickly identify if your figures match the usual trend. Comparing this data to the prior year will help you understand the practice's current position.
In a group practice, analyze charges and services generated by individual doctors by comparing utilization of the top 20 CPT codes. Examine variables between the practitioners and the kinds of services they are performing. Are they in line with your practice standards? And if not, what actions should you take? Income and expense report
Analyze this on a monthly basis to detect trends and ascertain changes in your practice, i.e., what is going up or down. Compare your monthly figures to the same month the prior year and year to date compared to last year. If your expenses are rising, look at the itemized expenses, focusing on the larger expenses first. This includes a review of staffing, rent, supplies and insurance expenses. Before making any drastic changes, find out if these higher costs are justified.
Busy doctors may find this kind of investigative work time-consuming. That is why it is critical that you work in tandem with your office manager. One of the best ways a physician can navigate the turbulent waters of the managed care environment is by being pro-active rather than reactive.
You can go one-step further by comparing your performance and benchmarking against national standards. These statistics are available through the Society of Medical-Dental Management Consultants at www.smdmc.org, or for larger practices, Medical Group Management Association at www.mgma.com.
By monitoring practice finances and analyzing your performance, you will be aware of the state of the practice and make informed decisions. You will be in a position to take your practice into the future and be the captain of your own ship.
Judy Capko is a healthcare consultant with more than 20 years experience. Her focus is practice operations, staffing, finance and marketing. Judy is a national lecturer and has participated in ACOFP conferences. She is based in Thousand Oaks, CA and can be reached at (805) 499-9203 or e mail: judycapko@aol.com
