Make your practice more efficient

October 3, 2007

Is your medical practice everything it can be? Probably not, according to L. Michael Fleischman, FAAHC, consultant with Gates, Moore & Co. in Atlanta. However, when armed with a few simple financial tools, almost any practice can become more efficient and profitable.

Is your medical practice everything it can be? Probably not, according to L. Michael Fleischman, FAAHC, consultant with Gates, Moore & Co. in Atlanta. However, when armed with a few simple financial tools, almost any practice can become more efficient and profitable.

"Things can be done to improve your lot in life. You need to continually monitor the health of your practice in order to do them," he said during the opening day of the 2007 American Academy of Family Physicians Scientific Assembly in Chicago.

The basic problem, he explained, is that too few physicians approach their practice as a business. The reality is that a three-physician practice is a million-dollar business that needs business management skills.

Business management starts with long-term planning for the practice. How will the practice handle growth-or does it even want to grow? How will the practice deal with ancillary services? How will the practice deal with a changing business environment where Medicare seeks to cut reimbursement by 5% while staff salaries increase by 3%?

Fleischman also recommended that practice physicians, managers, accountants, and consultants regularly review standard accounting reports covering income, expenses, and overhead percentage. Those three areas are key indicators to the financial health of the practice.

A particularly useful tool is what's called the Monday morning report, or dashboard report. The report shows cash balances in all accounts compared with the prior week, cash collected and dispensed during the week, expenses paid last week and expenses owed over the next two weeks, gross charges last week, and pending third-party claims.

Other important areas to evaluate include accounts receivable, payments due, billings, managed care contract terms, and patient perceptions of the practice.

Billings are particularly important, he said. The typical practice has a 97% chance of collecting all billings at the time of service, but only if the front desk staff asks for payment. "The longer that bill ages, the lower the chance that you will ever collect," Fleischman warned. You've got to be aggressive. And if the patient won't pay, you need to dismiss him from the practice."

Payment expectations must be communicated to patients when the appointment is made, he continued. In addition, front office staff must verify third-party payment eligibility before the visit. That means an Internet connection at every workstation, including the front desk. He also suggested that copays be collected before the patient is seen.

Overhead is another key for every practice. Overhead for the typical family practice is 62.41% of revenues, which is one of the highest in medicine.

"As a people-intensive specialty," Fleischman said, "this is one time when you definitely want to be below average."