If we talk of the businesses, the number of business types that subsist on the planet earth is truly astonishing. Although these businesses differ greatly in their specializations, they do arrive together at a common platform, which is of finance and accounting. The medical business is no different as, without efficient financial management, it will not be able to execute its day-to-day operations successfully. So, let us just brief you on the importance of medical accounting and tips to manage the same.
1. Separating business and personal expenses
This rule is not just meant for the medical business but every business. It is important to keep the business and personal expenses separate as combining the two not only disrupts the business finances but also makes you a victim of IRS along with lowering your image in the eyes of your partners.
Management staff solicitation for person expenses payments hampers the overall productivity and the ambitions set by the business. Keeping the expenses separate helps in strengthening the bond amongst partners along with better financial record maintenance and reporting.
2. Review your monthly financial statements
- Profit & Loss Statement (P&L) – The benefits of your practice can be tracked down in the form of expenses and revenues with the help of a P&L statement. Important performance indicators include the number of procedures, total collection, charges, and encounters. An immediate collection drop is witnessed by red flags.
It is important to look for any possible explanation concerning the warning signs before taking action. For example, a drop in this month’s collections must have arrived before a drop in last month’s charges.
- Claim Denials – A cash flow problem will be born if the claims are denied. When a business does not put in more efforts in trying to get the rejected claim processed, it is actually giving out that amount of money which it owns.
Denied claims can have multiple reasons like different Medicare as well as payers using dissimilar codes and explanations. Keeping a log will help the health firms to understand the current trends and react at the earliest.
- Balance Sheet – When you do accounting for healthcare, the balance sheet tells you about the items you own and the items which are under debt. For example, it will let you know if your payments are going through for your bank loan or not.
It tells a lot as to where you need to invest your money to improve your capital on the whole. Apart from this, it also helps you during the planning of the taxes considerably.
- Account Receivable Aging Report – In Account Receivable Aging Reconciliation, the balance amount which is unpaid by the patients is categorized uniformly along with the time included of the non-payment of the amount.
Rejection or denial of a claim is possible if the amount is unpaid for more than 45 days and one definitely needs to verify the same with immediate action required for unpaid claims for more than 90 days. Higher than 120 days, collecting the claims is almost impossible.
3. Efficient ‘income distribution formula’ adoption
The way you are paying your partners and yourself should be exactly like revenue generation, similar to the way you compete with your peers. It is important to know the revenue generated per physician if you wish to equally split the income.
An income distribution formula should be used if procedures and their revenues do not match. Fixed costs like utilities and rent should have an allowance.
However, when it comes to the variable costs, medical and staffing supplies, they should be assigned by the way work is performed which includes RVUs, charges, or cash revenues. The main motive is to match the costs and revenues along with a focus on the rewards for the clinical results.
4. Benchmarking physician and staff salaries
Any experienced person in the medical line will agree to the fact that the initial offerings to the physicians have risen to quite an extent. However, knowing the salaries of receptionists, nurses, lab techs is not something which every owner knows.
Benchmarking information regarding salaries helps you in knowing your current position irrespective of whether you are going to retain or hire a nurse, receptionist, or physician. The benchmarking information can be obtained for support staff and physician from the Medical Group Managers Association (MGMA) and also from your experienced medical accounting professional.
5. Bring together the right team of professionals
It is the right team of professionals who make all the difference between a successful medical business and an unsuccessful one. The role of your banker, attorney, and CPA is vital towards achieving the goal set by you.
To manage the complex issues, the need for specialized medical practice accountants may arise. These advisors should be industry experienced, keeping a tap on the industry changes, along with the ability to keep data security at its top priority.
6. Maintain internal production reports
- Provider productivity report – Performance provider and reports that measure the productivity of each physician to the practice helps in evaluating their strengths and weaknesses. This provides an opportunity to work around the activities that produce benefits while holding the costs down.
- Appointment analysis report – This report might not be directly related to the finances but the number of patients who do not show up after appointment fixtures affects business in certain ways. It also lets you know the fill rate along with the busiest day reports for your business, eventually helping you decide on the required changes if any.
- Reporting based on the value – With value-based refunds coming into the picture for practices, certain quality measures related to the clinic needs to be submitted to the Merit-based Incentive Payments System along with others. Physician quality scores and practice can be viewed by clinicians through clinic registries along with benchmarking against the peers.
7. In-depth analysis of accounts receivable stats
The custom receivables or accounts receivable represent the money which is expected from the clients by a business and is mostly linked to credit transactions as compared to the cash deals. As per finance experts, overstated accounts receivable means a business has outshined the amount customers owe with the recorded receivables.
For accounts receivable understatements, the opposite definition comes into play. Both of these terms are conceived under the ‘misstatement concept’ which may call for regulators’ scrutiny including the Treasury Department, Internal Revenue Service, and the Securities and Exchange Commission.
8. Review inventory reports accurately
Inventory reports hold a lot of significance when it comes to assessing the financial position of a company. Missing out on an inventory means incorrect financial figures in the balance sheet. The cost of goods sold for a particular period is the inventory value. An overestimation or underestimation of the cost of goods sold means errors in the balance sheet.
Whether it is the journal entry for correcting the balance sheet and purchasing errors or restatements, it is important to take the necessary steps after you have witnessed a wrong inventory count. So, it is highly recommended to monitor your inventory monthly and keep a track of every item to perform an error-free accounting for healthcare.
With these practices coming into play, a medical business can improve its financial management ability, eventually leading to overall financial stability. However, it is recommended to include professional expertise when evaluating and executing any of the above practices. If you have the best people on board, it is definitely a blessing. Else, outsourcing for the same is the most viable option.