Financial Reports Physician Owners Should See Monthly
The most common statements made by physicians are… my expenses are increasing and my revenue is decreasing. Are these comments made from reviewing hard data, or just a gut feeling? It is difficult to make decisions affecting the medical practice and strategic planning without having objective, current, and correct, data. Whether the reports are prepared by the accountant, the practice manager, and/or the billing staff, the physician owners must ensure they are provided reports on a monthly basis to determine the financial health of their practice.
While there are numerous reports the physician’s accountant and/or practice manager can prepare, we have compiled a short list of reports that we think are important, and provide a snapshot of the practice’s revenue and expenses.
Reports from the accountant may include their Profit and Loss (P&L) Statement, which will report revenue and expenses from the most recent month, as well as the previous months in the calendar year. Many accountants may show trends from the same time period as the previous year. The P&L shows key financial indicators regarding gross revenue, net revenue, and overhead expenses.
If the Practice developed a budget for the current year, the physician owners, practice manager, and accountant can determine if the Practice is on track with their original projections, or if any corrections are needed. Interestingly, many Practices fail to develop an annual budget to help the anticipate their revenue and expense. If this is true of your Practice, now is the time to prepare one, and then track the Practice’s projected revenue and expenses versus actual revenue and expenses throughout the year.
The practice management system will be the source of information to determine the Practice’s productivity. The overall Aged (or Aging) Accounts Receivable (A/R) report will provide a snapshot of where pending revenue is during the billing process based on various 30-day periods of time, often referred to as “buckets”. In Texas, most of the Practice’s insurance/third party payer A/R should be in the 0-60 day buckets since Texas has a “prompt pay” law. Any insurance/third party payer A/R in the 61-90 day bucket should be reviewed by the practice manager and billing staff to determine why the claim has not been paid, and then pursue action to secure payment. Once the insurance/third party payer A/R hits the 91+ day buckets, the likelihood of being paid for these services decrease. When the insurance/third party payer A/R hits the 121+ day bucket, the practice manager should make recommendations to the physician owners to write off these accounts after all efforts have been exhausted to get the claim paid. If the payer is categorized as self-pay, private pay, or patient responsibility depending on the term used by the practice, any A/R in the 121+ day bucket should be considered for turnover to a collection agency.
Your practice management system should allow you to prepare an Aging A/R Report by Payer, which will help the Practice identify those payers who are responsible for the majority of A/R in each bucket. Researching the status of the claim should tell your staff why they were not paid.
The physician owners should also review the “adjustments” report, which includes the contractual adjustments between the Practice’s fee and the amount the insurance/third party payer agreed to pay, as well as claim denials and write-offs. The Practice should have a financial policy that includes how the Practice handles claims that are not paid based on reasons the claim cannot be paid. This report will tell the physician owners if there are large claim amounts not being paid, such as the claim did not have proper documentation, or perhaps that the billing staff did not properly work the claim as an appeal.
Credit balances are another set of data the physician owners should review. This report will tell the physician owners those payments that must be refunded to either the insurance/third party payer or to the patient. This report should have a total as close to zero as possible.
If your practice management system does not allow you to determine specific time period data during a report query, it will be useful to save the reports each month for comparison and trending.
The reports mentioned in this article will provide the physician owners important information regarding the continued financial health of their Practice. These reports can help identify problems early to avoid a loss of revenue in the future. Concordis Practice Management, LLC can assist the Practice with reviewing and analyzing these reports, performing a revenue cycle review, or an operational assessment. Contact Concordis Practice Management, LLC today to discuss our services.