Operating a profitable medical practice is perhaps more challenging than ever.
Managing the financial aspects of a medical practice can be challenging, especially while navigating the increasing complexities of healthcare reimbursement systems. As a physician, you have little control over managed care and governmental oversights, but you can improve your financial stability and profitability with careful planning and strategic decision-making. Here are six specific areas you can control that will help enhance your practice finances, ensuring a healthier financial future.
Enhance coding and documentation practices
Evaluating coding and documentation mechanisms is a crucial first step toward maximizing reimbursement. Properly documenting patient encounters – including diagnoses, treatments, and procedures – is vital to ensure you are not overcoding or undercoding. Educate your clinical staff about proper documentation practices, emphasizing specificity and medical necessity. Regular audits and feedback sessions can help identify and rectify any coding or documentation deficiencies. Engaging certified coders or coding consultants can provide additional expertise, ensuring appropriate code selection and optimizing reimbursement. Remember, while management systems can help determine the proper code, it is ultimately your responsibility.
Ensure accurate billing
By controlling what and how patients are billed for services received, you can clearly communicate the complexity and extent of your patients' medical care and ensure fair and accurate charges. It is critical that the proper amount is billed for each code and that the correct insurance company is billed. Additionally, you can use your clinical judgment to determine the appropriate level of service and billing codes that align with the patient's condition and the resources utilized during the encounter. Accurate billing also helps promote transparency and trust in the healthcare system and reflects a high level of ethical standards for the practice.
Maintain bill collections
In addition to establishing accurate coding and billing practices, bill collecting is another critical area to be in control. Billing personnel must be well-trained in circumventing obstacles and hurdles presented by insurance companies. These obstacles include required pre-authorizations, paying less than your contract allows, and even flat-out ignoring claims. In addition, your billing staff must keep current with specific policies, coverage criteria, and billing requirements of many different insurance companies. By staying on top of the latest changes and regulations, they are better equipped to submit accurate claims and avoid potential denials or delays.
Properly manage cash flow
One significant error we often see is allowing idle cash to build up in a practice. Avoid this issue by regularly working with your practice consultant to determine appropriate reserve levels and accurately forecast expenses so that excess cash flow can be distributed to the owners at regular intervals. While 401K plans with profit sharing can certainly help accelerate retirement savings and tax deductions, don't get caught off-guard by high year-end profit-sharing calculations. Be sure to coordinate with your plan advisor to estimate the total amount needed to contribute for the practice and escrow money each month in anticipation.
Structure consistent income
In the long run, establishing structured and consistent income is a more practical and manageable compensation plan, rather than relying on periodic large bonuses. While some physicians set low salaries to be conservative and then receive large bonuses or "true-ups," this system makes it very challenging to maintain regular personal savings or investments. Not to mention those pesky surprise expenses that always seem to rear their heads right about the time bonuses are paid, interfering with savings intentions. A better strategy is to set your salary at 70-80% of anticipated production so you can automate saving toward personal goals. Then utilize smaller bonuses toward one-time expenses and paying down debt.
Create a healthy culture
An important last step is building and maintaining a positive and healthy workplace culture. Recognize that you are not just a medical provider but also a leader and the person who sets the tone and controls the culture. Be intentional about developing yourself as a leader. Read books, attend leadership conferences, and even invest the time and money to work with a qualified coach. Finally – be selective about who joins your team. Hire people who will do more than just complete the task at hand. You want strong individuals who will personify the culture and brand you've created, and who want to present that culture to your patients and colleagues.
Operating a profitable medical practice is perhaps more challenging than ever. A constantly changing healthcare and insurance landscape, rising expenses, new competition, and increasing regulatory compliance are all issues where we have little or no control. By redirecting your focus to the areas where you have complete control, you become empowered and enable yourself to take proactive steps to significantly improve your practice's financial well-being and establish strategies for long-term sustainability.
Thomas R. Loeblein, CHBC, CFP®, is President and CEO at Healthcare Management Consultants.
Shane Tenny, CFP®, is the managing partner and a financial planner at Spaugh Dameron Tenny, LLC.
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