epractis.com

List your practice

Practice website design

Healthcare Finance

Is Your Overhead Really Too High?

So often we as accountants and consultants are asked to review financial statements for healthcare practices and offer our comments and suggestions. The financial statements are just a starting point.  

In most new client engagements the emphasis by the client is to review overhead costs.  This area certainly deserves some amount of analysis.  

However, in most situations the opportunity to reduce overhead is minimal compared to the revenue side. Increasing practice revenues on an annual basis by 5% will equate to a 10% to 12% (depending practice overhead) increase in physician's compensation.

The billing to the patient and or the insurance company is the result of a service performed.  If the patient never comes to your office there is nothing to bill. Therefore, it is important to review the protocol that is used in answering the phone and actually making the appointment.  

You should track "cancellations" and "no shows."  A negative trend in this area maybe a problem with the person making the appointment or that the patient made an earlier appointment at another practice. 

The further a practice books appointments into the future the more likely there will be cancellations. Therefore, an important practice statistic is to know each month how far into the future you are making appointments. If this time period continually is increasing it may be time to consider adding another provider for the practice.

Once the services have been provided to the patient controls need to be in place to insure that the practice is paid. Most medical software packages today provide a daily "exception report " that compares the scheduled visits from the appointment book to the charges generated for the day and produces a list of patients who were not billed. 

Once there is reasonable certainty that all patients are being billed the next questions is whether the amount of the billing is accurate for all medical services and tests performed. This step requires some amount of time in comparing the billing to the actual medical records. Usually a large enough representative sampling of the records will be sufficient to insure that the proper amounts are being billed. This should be done on an ongoing basis but especially when reimbursement rules and / or rates change or when there is a change in billing personnel.

After the charge has been generated the collection process begins. Most practices compare, on an annual basis, the total billings versus collections. 

In addition to this "adjustments" and" write-offs" need to be reviewed. The most common medical software packages will track adjustments by type. By reviewing the adjustments you may find that the person doing the collections has not been overly aggressive or that a certain physician routinely will write-off co-payments.

In summary, subtle changes in the appointment process, billing, and collections could have a major impact on physician's compensation and make your overhead seem to be not much of a problem after all.

PLEASE NOTE: Information is provided as a service to our visitors. Practis takes no responsibility for it's content.  It is provided with the understanding that Practis is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Links and information are provided as a service to our visitors. Practis takes no responsibility for their content nor connectivity.