Over one-half of 2006 has passed. Analyzing the six month results of operations will provide an opportunity to make midyear modifications to end the year profitably. Take a look into areas of your practice such as billing and collections, cash flow, potential revenue sources, personnel salaries, operating expenses and equipment needs. In this article we will review some of the most important midyear review and planning matters.
Billing and Collections
It's important to review the month end reports for billing and collections on a physician by physician basis. Don't forget to review the ancillary income revenue by procedure. Make sure that each physician receives data routinely, especially if compensation is in part based on production or collection. Why? Because it provides a scorecard of how the group is doing. Spice it up by setting production and collection goals, and provide information on where each physician numbers were at the same time last year. Include several years for an even better trend line. Remember to include both production and collection data and a collection percentage. This will assist in tracking the efficiency of the producer.
In addition to these operational issues, it's important to review the charges for each procedure your practice performs. 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 rejected claims before writing off any 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.
Cash Flow
Even if you are having a good year, you need to review your cash flow. 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 expect to purchase before year end.
Also 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. It only takes a little time, and the additional cash flow will be appreciated.
Potential Revenue Sources
Always be on the lookout for additional sources of revenue. This may come from hiring a new physician, or it may come from providing additional ancillary services to your patients. Use your specialty group Web site or national publications to determine what services your patients are receiving in other practices. Review the number of procedures you are referring out, the cost of the equipment and personnel, and other direct and indirect expenses to be sure the services will be profitable to you.
Personnel Salaries
The largest expenditure of your practice is personnel salaries and fringe benefits. Make sure you are on track with your costs. Use your specialty group data to determine if you have adequate (not too many and not too few) personnel on staff. Review the personnel and hire only those you need 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 about how they perform their tasks.
Operating Expenses
One of the keys to a successful practice is controlling expenses. Take time to review your year-to-date expenses by category, and determine which of them has changed from last year. Don't just look at the totals where you have a chance to review them by vendor. Analyze variances and seek to 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.
Equipment Needs
Look around the office and talk to your 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 in agreement with the purchases, and, as importantly, 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.
Conclusion
Practices that take the time to review these issues are generally better prepared when financial situations occur. Why? Because taking care of these items 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 is the managing partner of L. Paul Kassouf & Co PC.
