|
|
|
Moving the Chains: Measuring Practice Success
By Patricia A. Giura, CPA, Alpern, Rosenthal & Company
They do it on the football field — periodically dragging out the chains
to see if the ball really reached the first down marker. It's wise to
do this consistently in the medical field, as well — to drag out the
chains and measure the financial health of your practice. It's early
enough in 2001 for your practice to incorporate procedures and begin
regular monitoring to reduce or prevent these "fourth quarter"
surprises.
Managing Surprises
Successful football teams pay attention to the little things, details
that can impact winning or losing a game that weekend. For
physicians, these details are the financial information collected on a
daily, weekly and monthly basis.
Day-to-day financial activity includes receipts and disbursements,
patient deductibles and copays and managed care write-offs. Weekly
financial information should focus on patient payment activity and
cash balances. Monthly reports should review year-to-date income and
expenses (comparing to the same period the previous year) while also
examining accounts receivable.
Through constant attention to these details, a practice should
experience few fourth quarter surprises when it comes to managing cash
needs, identifying collection issues and providing timely appeals to
third party payers.
Monitor Managed Care
A number of reports monitor managed care activity. These include
monthly reports on:
- Gross charges billed by payer showing dollar amounts billed,
average charge per procedure and per visit;
- Cash receipts by payer showing gross collections, refunds and net
cash receipts;
- Allowances and other adjustments by type, including percentage of
adjustment by payer and by type of adjustment; and
- Practice analysis by posting date, payer and location showing the
volume of procedures and visits billed, charges posted, contractual
and other adjustments applied and net payment received.
These reports help you judge whether or not a managed care plan is
worth keeping financially. If not, you can use this information as
negotiation leverage when the time comes to keep or terminate that
contract.
Analyzing Financial Data
Gathering financial data is one thing; analyzing data to determine the
financial health of a medical practice is quite another.
Mature medical practices should reflect consistent numbers throughout
the year. Newer practices should have charges and collections growth
each month. If these numbers shoot up and down each month, a practice
has a problem.
Any number of situations can lead to these fluctuations, including the following:
- Patient Volumes. Has the practice signed the right managed
care contracts? Have physicians been deselected from a health plan?
Has a major employer switched health plans? Has a new physician come
on board, or has one retired or slowed down?
- Patient Collections. Many practices are outsourcing their
patient collections to outside agencies due to the large volume of
patient accounts and small individual balances. Practices are also
finding it cost effective to use mailing houses for the routine job of
sending monthly patient statements. Practices who are keeping the
patient collections in house many times find that moving the patient
collection responsibility task to the front office staff instead of
the billing office helps improve collections. This helps to focus the
attention of the front office staff on the importance of collecting
proper demographic information.
- Personnel and Procedures. Competent, well-trained staff,
need to be in place to ensure claims are filed and collections
received. Enough personnel should be in place to both bill and
collect. A recent survey shows that the better performing practices
have approximately the full time equivalent of 1.05 billing personnel
per $1,000,000 in collections. Physicians also need to support their
billing staff by communicating charges promptly. Proper controls also
need to be in place to reduce the risk of embezzlement.
Your financial analysis should include potential changes to improve
cash flow for the next year. This could include more staff, upgrading
your billing software or computer system, changing billing companies
if you currently employ one, or adding outside consultants to help
collect on old accounts.
Operational Issues
Practice success also means addressing a number of operational
issues.
Fraud and abuse investigations are still a high priority for the
federal government. As a result, you should review the latest
compliance guidance issued by the Office of Inspector General. At the
same time, you should review the OIG work plan for 2001. Both
documents can be obtained free of charge by accessing www.os.dhhs.gov. If your practice
doesn't have one, consider developing a compliance plan.
Personnel issues should also be reviewed. Policy manuals should be
checked to ensure they are up to date with current legal issues.
Employees should be evaluated against their job description and
performance to determine raises and bonuses.
In the rough and tumble game of football, the quarterback has to know
his play book; and in today's rough and tumble medical market, a
physician needs to know his ledger book. Consistent attention to the
numbers and other details can assure a winning season.
Patricia A. Giura, CPA, is Co-Director of the Medical Services Group
of Alpern, Rosenthal & Company. She has more than 15 years of
experience in public accounting and specializes in medical practice
assessments which monitor the financial health of practices.
Back
|
|
|