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Management: Is It Time for a Checkup?<
by: Shelly K. Schwartz
Like your patients, your practice could really benefit from a year-end exam Where patient care is concerned, annual checkups are widely considered the most powerful weapon in the battle to prevent and treat illness. By comparing individual test results with national averages, physicians can identify those at risk for developing disease, catch small problems before they become life threatening, and reduce the cost of care by encouraging patients to maintain healthy lifestyles. It's much the same with the business of medicine. Practice managers who take the time to conduct a year-end analysis are far better positioned to remain on budget in the coming year, identify cost-saving opportunities, and chart a course for sustainable growth. "It's the one time of the year where everyone is closing the books, so you've got all the records, financial reports, and data in front of you to help you make decisions," says Michael La Penna, principal of The La Penna Group in Grand Rapids, Mich., a healthcare finance consulting firm. "It's the only chance you get to compare your numbers against previous years." Here's what industry experts agree should be on your checklist as the calendar year draws to a close: Productivity For starters, says Betsy Nicoletti, owner of Medical Practice Consulting in Springfield, Vt., take a look at productivity metrics and compare them with benchmarks, including your own budget, year-ago figures, and any industry norms you're able to obtain from trade organizations such as the Medical Group Management Association, the American Medical Group Association, or specialty groups. Such metrics will likely include revenue, work relative value units (RVUs) per encounter, number of new patient visits, and total charges per full-time equivalent physician. "If you're on the low end of productivity, it's too late to do anything about it for this year, but it will help you plan for next year," she says. Performance Next, you'll want to review your gross collections rate to determine how much your practice actually collected from third-party payers. "You should watch those numbers, ideally monthly, and compare them with year-ago figures and national averages," says Nicoletti. Aging reports are equally critical, telling you what percentage of accounts receivable are older than 60 days, 90 days, and 120 days. "Generally you're doing good if you've kept your accounts receivable under 60 days," says Nicoletti. Finally, practices should look beyond basic revenue to determine how much of their income comes from specific services - lab tests, ancillaries, etc. Such data can help shape your clinical agenda for 2008. Cash flow Though you'll likely project your cash position (along with expected income and expenses) at the start of each year, it's wise to double check your cash flow during October to determine what, if anything, will be left for physician bonuses and pension/profit-sharing contributions at the end of the year. "Some physician practices that aren't paying attention find this out the hard way," says Nicoletti. Minimize taxes From a tax perspective, of course, the way your practice is structured makes a big difference in how you'll need to manage any shortage of cash versus income, says Lloyd Froelich, a Minneapolis attorney for the WIPFLI CPAs and Consultants healthcare office. With C corporations, for example, any income not distributed by the end of the year is taxed at a flat 35 percent rate at the federal level. "If you're a clinic manager of a C corporation, you need to be sure you have enough cash available at the end of the year to pay out all of your income," he says. If you purchased assets during the year, for example, including furniture, equipment, and/or leasehold improvements, the annual depreciation expense that current t< |
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