Many practices feel powerless when it comes to sustaining their practice revenue. Anecdotally, physicians will tell you that payer reimbursements are barely keeping pace with practice expenses and there are many new demands to contend with, such as high-deductible health plans, the new ICD-10 coding system, and pressure to meet new federal quality-care mandates. With such tight margins, small, independent medical practices can find themselves struggling to stay afloat.
But there are strategies that practices can implement to improve their operating margins. One important way to maximize revenue is accurate and timely financial reporting. According to practice management consultant Ken Hertz, principal with the Medical Group Management Association (MGMA) Healthcare Consulting Group, practices that don't track their financial data are skirting a dangerous precipice. "You know the saying goes, 'If you don't track it, you can't manage it,'" says Hertz. He points out as operating margins shrink, costs rise, and new regulatory requirements place a greater financial burden on practices, physicians must watch every penny. "It is absolutely imperative that practices operate as efficiently and as effectively as they ever did in the past," he says.
So if you find yourself wondering how you will meet payroll next week, read on. There are relatively simple ways to track and analyze payer reimbursements and patient collections. We talked to financial experts and practice consultants to find out the best ways for practices to manage their revenue. Here's what they said.
* Each year Physicians Practice polls physicians across the country on how much they are being paid for their services. If you'd like to know what your colleagues are being reimbursed by payers, check out our annual Fee Schedule Survey results.
THE REASONS BEHIND REPORTING
Regardless of the size of your practice, the sophistication of your practice management system, or even your decision to remain "on paper" and eschew digital records, every practice should track and report on its financial status. Reed Tinsley, a Houston-based CPA and practice management consultant, puts it simply. " … The numbers don't lie," he says. "You can look at the metrics of a medical practice and see pretty clearly, this practice is doing pretty good, this practice is doing pretty average, and this practice needs a lot of improvement."
Typically, in most practices, the practice manager or administrator takes on the responsibility for financial reporting. But ultimately the physician-owner is responsible for making sure it happens, says Hertz. In larger practices, there are more resources and staff members to help with administrative functions; taking much of the burden off physician shoulders. That's why it is so important that smaller practices make an extra effort to ensure financial reporting happens on a regular basis and to discuss it with the physician.
"The problem I see in smaller medical practices is there's not a forum created to discuss [revenue]," says Tinsley, "… for smaller, medium-sized practices there needs to be a monthly financial meeting. I mean every single month." He advises practice administrators to create a formal meeting agenda for managing physicians and to place finances at the top of the list. Practices should be reviewing the profit and loss statement, comparing financial metrics such as collection percentages to national benchmarks and evaluating current practice financial performance against the previous year.
Benchmarking the practice's performance against itself is important for several reasons. It is vital for practice sustainability to know if metrics such as new patient visits are growing or declining. Is your practice doing more procedures than last year? Are established patients remaining stable? What about referral patterns? If trending the numbers shows a decline in revenue or patients, Tinsley says the practice needs to investigate the problem immediately. Don't let it wait until it is a much bigger problem and more difficult to fix.