Over one-quarter of the calendar year of 2022 is completed.
At this point, if you analyze the three-month results of your practice operations, you have an opportunity to end this year more profitably. Take a look at areas of your practice such as strategic planning, billing and collections, cash flow, potential revenue sources, personnel salaries, operating expenses and equipment needs.
Let's review some of the most important planning matters.
The most profitable health care practices and facilities operate with a written operational plan, reset annually. A planning retreat, away from the office without interruption, with a specific agenda and an outsider to facilitate the meeting will allow your group to define goals, objectives and opportunities for your practice.
Determine who should attend from your practice--physicians, non-physician providers and the leadership team. Develop agendas for specific sessions where all attend, and some limited to only the group's physicians. Set two to three goals, along with timelines and expectations to be accomplished. Make them SMART goals--specific, measurable, achievable, relevant and time-bound.
Billing and Collections
It is important to review the month-end reports for billing and collections on a physician by physician basis. Also review any ancillary revenue by procedure. Make sure that each physician routinely receives data, especially if compensation is based on production because this provides a scorecard of performance.
Set production and collection goals and provide information on prior year comparative data, or include several years for an even better trend line. Remember to include both production and collection data and a collection percentage for gross and net collections. This will assist in tracking the efficiency of each producer. In today's environment of being paid using wRVUs, consider software to provide data as often as daily to providers to monitor actual work against projected work.
In addition to these operational issues, it's important to review the charges for each procedure your practice performs and the reimbursement being paid by major payers. Be sure that every procedure you perform is being billed at a level to adequately compensate the practice for that service.
Review your insurance company remittance forms. Make sure that your staff is satisfied with the explanation provided by the payers before writing off any rejected claim amounts. Making sure that the billing staff, the physicians and the payers are working towards the same goal means open communication regarding what services have been performed and reimbursement amounts expected.
Even if you are having a good year, you need to review your cash position. Schedule out major expenses to be paid before year end and be sure your group is informed of them. Keep surprises to a minimum with open communication.
Make a preliminary calculation of the practice's staff bonuses, retirement plan contribution and professional liability insurance premium payment dates. Also schedule out any note payments due, or payments for equipment you plan to purchase before year end.
Look at the practice's cash balance. If there is more cash than is needed for operations, invest a portion to generate some additional income, contribute funds to your retirement account or pay down some debt early.
Potential Revenue Sources
Always be on the lookout for additional revenue sources. This may come from hiring a new physician, or from providing additional ancillary services to your patients. Use your specialty group web site or national publications to determine what services your patients may be receiving in other practices, and consider providing them at your practice.
Review the number of procedures you are referring out, the cost of the equipment, personnel, other direct and indirect expenses to be sure the services will be profitable to you. Prepare a projection of anticipated revenue and expenses for any additional service you want to provide.
The largest expenditure of your practice is salaries and fringe benefits. Make sure you are on track with your costs. Use your specialty group data to determine if you have adequate personnel on staff. Review any personnel needs and hire only those at a level of expertise for the task they will perform. Make sure you plan for salary adjustments if necessary and spend time with personnel to provide positive feedback on their performance.
Hiring additional providers will help maintain continuity as people retire, and growing your practice can improve profitability as fixed costs are shared by more producers.
Keys to a successful practice include controlling expenses. Take time to review your year to date expenses by category and determine which of them have changed from last year. Don't just look at the account totals, but review them by vendor. Analyze variances and find why good or bad variances occurred. It could be an important bit of knowledge to help you end the year on the positive side.
Look around the office, talk to the physicians and staff to determine what equipment will need to be replaced or added before the end of the year. Having time to search for the best deals will allow you to save a few dollars. It will also give you the opportunity to contact multiple vendors and equipment manufacturers. Make sure the management team is agreeable with the purchases, and the method of payment. If you use cash in the bank to purchase equipment, it may make you cash short at year end. Do the math and understand the options before signing for the equipment. Check out your options to lease as it may be a good alternative to a purchase.
Practices that plan strategically and review financial issues are generally more profitable. Taking time to study and plan will provide other clues to areas of the practice that can be improved upon. By pulling together the various items, management will have information upon which to improve all aspects of the practice.
Gerard Kassouf, CPA CFP® is a director in the regional tax, accounting and advisory firm of Kassouf & Co., P.C.