Don’t worry about capturing every last financial detail
“I always caution physicians to keep it as simple as possible,” says Nick Fabrizio, Ph.D., FACMPE, principal at the Medical Group Management Association. “Come up with a simple process you can use that monitors revenue and expenses. It’s OK to forget things when you start. It’s better to do that than to create an elaborate budget with 50 line items that is too difficult to understand and becomes this big, scary thing that no one wants to touch.” Detail may be great, but keep in mind that more detail also requires more staff time to track, he adds.
Lucarelli’s strategy for budgeting illustrates the best approach—find what works, experts say. “There’s not one model you must use,” says Nyberg. “The budget has to serve the business.”
The first step in creating a budget is to look at revenue and payer mix, Nyberg says. This will not only establish a starting point, but offer insight into creating growth. “You can’t just say you’re going to increase revenue 10% next year,” she says. “If you are 50% Medicare, revenue is pretty much flat.”
Once revenue is established in the budget, Nyberg suggests organizing and dividing expenses into categories like supporting staff compensation and benefits, occupancy expense, furniture and equipment expense, medical expenses, miscellaneous expense, midlevel-provider expense and physicians expense. These broad categories make a budget much easier to understand, and if variances occur, information can be gathered at that time to provide more detail to give the physician a better idea of what is driving the change.
“If you aren’t making financial decisions off every office and medical supply purchase, then put them together,” says Gundling. “If you need to go deeper, then do it.”
Communicate to the staff which expenses go in each category, because they may not always be obvious, Nyberg says. Some staff members may be involved in the budget-creation process, but who is included is largely a level of job function and physician comfort with sharing financial details.
“Getting input is great, but it depends on how much the owners want to share with the staff,” says Nyberg. “Eventually though, someone will be held responsible for trying to move the needle on budget goals and they should have some input into the creation process.”